10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
or
o	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: 000-31635

Endwave Corporation

(Exact name of registrant as specified in its charter)

Delaware	95-4333817
(State of incorporation)	(I.R.S. Employer Identification No.)
776 Palomar Avenue Sunnyvale, CA (Address of principal executive offices)	94085 (Zip code)

(408) 522-3100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file requires pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o     No þ

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 þ     No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2005 was approximately $329 million. Shares of voting common stock held by directors, executive officers, and by each person who was known to us to beneficially own 10% or more of the outstanding common stock as of such date have been excluded as such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The foregoing calculation does not exclude the shares of common stock that were held by the Wood River group of funds as of June 30, 2005, as such information has not been made available to the registrant. The aggregate market value has been computed based on a price of $47.60, which was the closing sale on June 30, 2005 as reported by the Nasdaq National Market.

The number of shares outstanding of the registrant’s common stock as of February 17, 2006 was 11,363,475.

ENDWAVE CORPORATION

FORM 10-K
Year Ended December 31, 2005

TABLE OF CONTENTS

		Page No.
PART I
Item 1.	Business		2
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments		28
Item 2.	Properties		28
Item 3.	Legal Proceedings		28
Item 4.	Submission of Matters to a Vote of Security Holders		28
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		29
Item 6.	Selected Consolidated Financial Data		29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		45
Item 8.	Financial Statements and Supplementary Data		46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		73
Item 9A.	Controls and Procedures		73
Item 9B.	Other Information		75
PART III
Item 10.	Directors and Executive Officers of the Registrant		75
Item 11.	Executive Compensation		79
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		83
Item 13.	Certain Relationships and Related Transactions		84
Item 14.	Principal Accounting Fees and Services		85
PART IV
Item 15.	Exhibits and Financial Statement Schedules		86
SIGNATURES			90
EXHIBIT 10.9
EXHIBIT 10.24
EXHIBIT 10.25
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of Section 17A of the Securities Act of 1933 (the “Securities Act”) and within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), that are subject to the “safe harbor” created by those sections. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “plan,” “potential,” “predict” or “will,” the negative of these words or words of similar import. Similarly, statements that describe our future plans, strategies, intentions, expectations, objectives, goals or prospects are also forward-looking statements. Discussions containing these forward-looking statements may be found, among other places, in the sections of this report entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These forward-looking statements are or will be, as applicable, based largely on our expectations and projections about future events and future trends affecting our business, and so are or will be, as applicable, subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. The risks and uncertainties are attributable to, among other things: our ability to achieve and maintain profitability; our customer and market concentration; our ability to penetrate new markets; fluctuations in our operating results from quarter to quarter; our reliance on third-party manufacturers and semiconductor foundries; acquiring businesses and integrating them with our own; component, design or manufacturing defects in our products; and our dependence on key personnel. Because of the risks and uncertainties referred to above, actual results or outcomes could differ materially from those expressed in any forward-looking statements made by us or on our behalf and you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except as required by law, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this report or the date of documents incorporated by reference in this report that include forward-looking statements.

PART I

Item 1.   Business

Introduction

We design, manufacture and market radio frequency, or RF, modules that enable the transmission, reception and processing of high frequency signals in telecommunication networks, defense electronics and homeland security systems. Our high-frequency RF module designs can accommodate a wide range of component performance and assembly process variations, resulting in ease of manufacture and high test yields. These attributes, coupled with our automated test systems, allow us to use cost-effective, offshore contract manufacturers to assemble and test the majority of our products. Our RF modules are typically used in high-frequency applications and include integrated transceivers, amplifiers, synthesizers, oscillators, up and down converters, frequency multipliers and microwave switch arrays. As used in this report, “we,” “us,” “our,” “Endwave” and words of similar import refer to Endwave Corporation and, except where the context otherwise requires, its consolidated subsidiary, Endwave Defense Systems Incorporated (formerly JCA Technology, Inc.).

Most of our RF modules are deployed in telecommunication networks, including current and next-generation cellular networks, carrier class trunking networks and point-to-point transmission networks. Our target customers for these applications are telecommunication network original equipment manufacturers and systems integrators, collectively referred to in this report as telecom OEMs. Telecom OEMs provide the wireless equipment used by service providers to deliver voice, data and video services to businesses and consumers. Telecom OEMs that purchased our products accounted for approximately 80% of our total revenues during 2005 and included Ceragon, Nera ASA, Nokia, Powerwave Technologies, Inc. (formerly LGP Allgon), Siemens AG and Stratex Networks, Inc.

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Our RF modules are also designed into various applications outside of the telecommunication network market, including defense electronics and homeland security systems. Our target customers in the defense electronics market include defense systems integrators and their subcontractors that design aerospace systems, defense systems, weapons and electronics platforms for domestic and foreign defense customers. Our target customers in the homeland security market include those customers that are utilizing the properties of high-frequency RF to create new capabilities designed to detect security threats. In this report, we refer to our target customers in the defense electronics and homeland security markets as defense and homeland security systems integrators. Revenues from this group of customers, including BAE Systems, The Boeing Company, Lockheed Martin Corporation, Raytheon Company, and SafeView, Inc., accounted for approximately 20% of our total revenues in 2005.

We were originally incorporated in California in 1991 and reincorporated in Delaware in 1995. In March 2000, we merged with TRW Milliwave Inc., a RF subsystem supplier that was a wholly-owned subsidiary of TRW Inc. In connection with the merger, we changed our name from Endgate Corporation to Endwave Corporation. On October 17, 2000, we successfully completed the initial public offering of our common stock.

Industry Background and Markets

High-Frequency RF Technology

The applications of RF technology are broad, extending from terrestrial AM radio at the low end of the frequency spectrum, which is less than 1 MHz (megahertz, or million cycles per second), to atmospheric monitoring applications at the high end of the frequency spectrum, which is around 100 GHz (gigahertz, or billion cycles per second). Our products employ microwave and millimeterwave technology. Microwave technology refers to technology for the transmission of signals at high frequencies, from approximately 1 GHz to approximately 20 GHz. Millimeterwave technology refers to technology for the transmission of signals at very high frequencies, from approximately 20 GHz to beyond 100 GHz. The term microwave, however, is commonly understood in the industries we serve, and we use that term in this report, as meaning both microwave and millimeterwave.

Our RF modules are typically designed to operate at frequencies between 5 GHz and 100 GHz, which we refer to in this report as high-frequency RF. Due to their physical attributes, high-frequency RF signals are well-suited for applications in telecommunication networks requiring high data throughput, defense systems demanding advanced radar and communication capabilities and homeland security systems requiring detection, measurement and imaging capabilities not available by conventional means.

Telecommunication Networks

Applications of High-Frequency RF Technologies in Telecommunication Networks.  High-frequency transceiver modules are an integral part of microwave radios, which in turn play a key role in many telecommunication networks. Microwave radio links have a number of applications:

Cellular Backhaul.  The communication link between the cellular base station site and a mobile telephone switching office, or MTSO, is referred to as cellular backhaul. This is currently the largest use of microwave radios. In most parts of the world, cellular backhaul is typically accomplished through the use of microwave radios either because of their ease of deployment and low overall cost relative to available wireline options or because adequate wireline facilities are not available. In the United States and Canada, cellular backhaul has been accomplished typically through the use of high-speed telephone lines because low-cost wireline facilities are readily available.

Carrier Class Trunking.  Communications carriers require high capacity links between major voice and data switching centers, referred to as trunk circuits, to deploy their networks. While fiber optic cables are the most common type of trunk circuit facility, microwave radios are often used for portions of these circuits when the intervening terrain, such as mountains or bodies of water, is difficult to traverse or as redundant backup for the fiber optic network.

Private Voice and Data Networks.  When private users, such as companies and universities, deploy stand-alone campus area or metropolitan area voice and data networks, they often encounter situations where it is not possible to access a direct physical path between their facilities due to distance or intervening structures

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and roads. If third-party wireline facilities are not available or cost-effective, a microwave radio link is often used to provide the network connection. In addition, companies often implement microwave facilities as redundant backup for their wireline facilities.

Increased Demand for Microwave Radios in Telecommunication Networks.  The demand for microwave radios and the transceiver modules used to build them is increasing. As service providers deploy more cellular base stations to serve their growing subscriber base and upgrade existing facilities, they will require more microwave radio links for cellular backhaul. We believe this projected increased demand is driven by several trends within the telecommunications industry:

Growth of Wireless Telephony in Developing Nations.  Developing nations, such as Brazil, Russia, India and China, have experienced a dramatic increase in wireless cellular telephony over the past few years. For example, in February 2005, Nokia publicly announced that its sales in China grew 44% from 2003 to 2004 and that China could become its largest market within three years. Nokia attributed its growth in China to both increased deployment in rural areas and a strong replacement market in urban areas. We believe this growth in cellular telephony will continue in China and other developing nations. We expect that this growth will result in increased demand for microwave backhaul radios because these countries lack well-established wireline infrastructures.

Increase in Data-Intensive Cellular Traffic.  Data-intensive “2.5G” applications, such as sending email, transmitting digital images from camera-equipped cellular telephones and downloading music and ring tones, are gaining popularity. The increased use of these data-intensive applications is dramatically increasing the volume of backhaul traffic as compared to voice-only services, necessitating additional high-speed backhaul capacity. In locations where microwave radios currently fulfill the backhaul requirements, this increased demand will necessitate equipment upgrades or replacements. Where cellular backhaul is currently provided by wireline solutions, such as in the United States and Canada, these higher capacity requirements can make microwave radio backhaul solutions more cost-effective than wireline solutions because the incremental cost of added wireline capacity will, in some deployments, exceed the amortization cost of wireless solutions. In addition, adequate wireline solutions may not be available due to their technical limitations.

Deployment of Third-Generation Networks.  Telecom OEMs and service providers are deploying new cellular systems known as third generation, or “3G,” networks. We believe the deployment of these 3G networks will require a proportionately larger number of microwave radios. These networks support many data-intensive services, such as internet access via cellular phone or personal digital assistant, which require an even greater backhaul capacity than the current 2.5G applications noted above. We believe 3G networks will have a compounding effect on cellular backhaul needs because more base stations and more backhaul capacity per base station must be deployed in order to provide the required bandwidth and maintain quality of service. As the density of base stations increases, we expect there will be a shift to higher frequency backhaul to support more efficient re-use of the available wireless spectrum.

Introduction of Other High Capacity Data-Only Telecommunication Networks.  We believe the introduction of fixed wireless access data networks will also increase demand for microwave radios. Various approaches are being considered for the widespread implementation of fixed wireless access networks, including the IEEE 802.16 WiMAX standard. WiMAX is supported by a large industry consortium, which includes market leaders such as Alcatel, Cisco Systems, Inc., Ericsson, Intel Corporation, Microsoft Corporation, Motorola, Inc., Nera ASA, Nokia, Siemens AG, Stratex Networks, Inc. and ZTE Corporation. Such fixed wireless access networks will, like cellular telephone networks, face the technological and cost issues associated with connecting individual access points to the wireline network infrastructure. This need for backhaul represents an opportunity for microwave radios, particularly because the anticipated high bandwidth requirements of fixed wireless access networks are served more cost-effectively by microwave radios than wireline alternatives.

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Defense Electronics

High-frequency RF modules are an integral part of various defense electronics systems. Key applications in this market include:

Electronic Warfare Systems.  Most military aircraft are equipped with systems designed to detect if they have been targeted by an opposing force’s weapons system, and are often equipped with electronic countermeasures that jam the targeting radar. These systems employ a variety of high-frequency RF modules.

Radar Systems.  RF modules are used in traditional radar systems to detect large objects at significant distances. In addition, many new weapons systems employ complementary sophisticated radar systems designed to detect small vehicles and combat personnel. These new systems often use higher frequencies in order to provide greater resolution. A further use of high frequency radar is airborne vision equipment that allows pilots to see through low lying haze and dust much in the same way night vision goggles permit one to see in the dark.

Intelligent Battlefield Systems.  The United States military has initiated an effort called the “intelligent battlefield” with the goal of providing the military with comprehensive, real-time information about the situation on the battlefield. Intelligent battlefield systems aggregate data from multiple radar and video sources that survey the battlefield and relay information nearly instantaneously to battlefield commanders. In the recent Quadrennial Defense Review published in February 2006, these systems are referred to as the “unblinking eye” over the battlespace. Such systems require high-bandwidth communication capabilities similar to those found in commercial telecommunication systems.

High Capacity Communications.  A modern, widely dispersed military force requires communication systems for voice, video and data wherever and whenever it is needed. Many military communication systems, whether terrestrial, airborne or satellite, employ wireless technology to meet these requirements. As the data rates in these systems increase, the systems must be able to operate at higher frequencies to take advantage of the bandwidth that is available in those frequencies.

For these reasons, as well as the United States military’s concentration on upgrading existing electronic platforms rather than building new platforms, demand for high-frequency RF modules in the defense electronics market is growing.

Homeland Security Systems

The global escalation of terrorist and insurgency threats is resulting in increased governmental and private concern over providing adequate security measures. Many existing security systems and personnel screening techniques are inadequate to address these increasing concerns. The need for new, more capable systems has accelerated security system development. Because of their physical properties, high-frequency RF signals can be used in various detection and imaging systems applied to threats of violence. For example:

Advanced Personnel Screening Portals.  The human body reflects certain high-frequency RF signals. As a result, high-frequency RF signals can be used in advanced personnel screening portals that generate images showing weapons, including plastic explosives or ceramic knives, which are not detectable with conventional metal detection portals. These systems can operate very quickly, permitting a highly efficient and low-cost screening operation.

Long Distance Personnel Detection.  High-frequency RF signals can be used to detect the presence of humans at significant distances, much in the same way lower frequency radar systems can detect metal objects at a distance. This phenomenon can be employed as a radar fence to detect intrusion along lengthy security perimeters such as airport runways, military bases and international borders.

We believe that the growth of these new security markets for RF modules may prove significant. The United States government’s spending on homeland security has more than doubled from $17 billion in government fiscal year 2001 to over $40 billion in government fiscal year 2006.

Our Opportunity

Historically, when telecom OEMs and defense electronics and homeland security systems integrators incorporated high-frequency RF modules into their products, they designed and manufactured them internally.

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However, faced with the need to generate greater cost efficiencies and technological innovations with fewer resources, we believe these telecom OEMs and systems integrators are increasingly looking to merchant suppliers for these items.

We have observed a trend of increasing use of merchant suppliers in the telecommunication network market. Of the top 15 microwave radio manufacturers that collectively represent over 95% of the microwave radio unit volume worldwide, 12 use merchant suppliers for all or some of their transceiver modules, with the use of merchant suppliers increasing. We believe the same dynamic will also occur in the defense electronics and homeland security markets.

We believe there are several key characteristics that telecom OEMs and defense and homeland security systems integrators value in a potential supply partner of high-frequency RF modules:

Low Cost.  Telecom OEMs and defense and homeland security systems integrators are under increasing pricing pressure from their customers so they expect effective cost-reduction programs from their merchant suppliers. These cost-reduction programs require merchant suppliers to make a comprehensive effort at multiple levels, including the integration of multiple functions, efficient manufacturing, effective supply chain management and use of low-cost sub-contractors, as appropriate.

Technical Depth.  Telecom OEMs and systems integrators seek merchant suppliers of RF modules that have significant experience in and understanding of the overall system design. This depth and breadth of understanding is crucial to determining appropriate overall system level tradeoffs and in providing advice to the telecom OEM or system integrator, thereby enabling the OEM or system integrator to design and deploy its systems more cost-effectively.

Flexible Production.  Volatility of demand is common in the market for RF modules, especially in the telecommunication network market. Therefore, these OEMs and systems integrators need merchant suppliers that can accommodate fluctuations in the demand, whether in mix or quantity, in the normal course of business and can flexibly scale their manufacturing to match the fluctuating demands of the OEM or systems integrator.

Innovative Technology.  New technology is the key to providing enhanced performance and continued cost reduction. These OEMs and systems integrators value this capability and therefore prefer partners that create new technologies offering additional functionality, higher reliability, lower cost and better performance.

We believe that few merchant suppliers comprehensively address all of these requirements. Many of the merchant suppliers that populate the industry are small and lack the requisite operational strength and technical capability. Many merchant suppliers use labor-intensive circuit manufacturing and test methods that limit their ability to produce high-frequency RF modules in high volume and at a low cost. Others have limited in-house RF design expertise and rely on third parties for their circuit designs. Fewer yet provide new technologies to the industry.

Our Strengths

We are a provider of high-frequency RF modules to telecom OEMs and defense and homeland security systems integrators. We believe we possess several key strengths that enable us to provide our customers with superior products and services. These strengths include:

Cost-Effective Volume Manufacturing.  Our high unit volumes enable us to achieve lower manufacturing costs than many of our competitors as we increase our materials purchasing power, amortize our overhead expenses over a larger number of units and gain labor efficiencies. The combination of our proprietary semiconductor components and technology, our ability to design highly-manufacturable products and our automated testing capability differentiate us from the labor-intensive methods often used in our industry. We contract with third-party, offshore manufacturers for added cost savings.

Depth and Breadth of Technical Expertise.  We have extensive experience in the design and manufacture of high-frequency RF modules for a broad range of products. Our intellectual property and highly-skilled technical team are critical when dealing with the higher frequencies required by emerging applications. Our technical team has broad expertise in device physics, semiconductor device and circuit design, system engineering, test engineering and other critical disciplines. In addition, our large library of proprietary circuit designs enables us to introduce new products rapidly and cost-effectively. We believe the depth and breadth of our technical expertise differentiates us from many of our competitors, enabling us to optimize our products for critical performance factors and to assist our customers in developing an optimal overall design.

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Scalable and Flexible Manufacturing.  Our use of third-party contract manufacturing and innovative supply chain management techniques enables us to adjust rapidly, efficiently and flexibly to our customers’ varying quantity and product mix requirements, which are often created by unexpected needs and seasonal variations in demand.

Next-Generation Technology.  We have invested in the development of next-generation circuit and packaging technologies that allow us to provide our customers with high-performance and low-cost solutions. Many of our competitors do not have the capability to produce proprietary circuit designs and therefore are limited to using standard, commercially-available semiconductor devices. We are able to develop new semiconductor devices on a custom basis to optimize the overall design. We have augmented our circuit design capabilities with advancements in circuit packaging that allow further enhancement of the design. This gives us the flexibility to optimize our product designs for our customers and their specific applications.

Our Strategy

Our objective is to be the leading merchant supplier of high-frequency RF modules. Our strategies to achieve that objective focus on revenue growth, manufacturing efficiency and flexibility and technical breadth and strength:

Accelerate Revenue Growth

Increase our Telecommunication Network Business.  We have long-standing customer relationships with many major telecom OEMs. We intend to use our customer base and track record, in conjunction with our low-cost manufacturing expertise, to increase our revenues. For a customer’s new designs, we intend to capture their business by designing and manufacturing new transceiver modules. However, if a customer is already producing a transceiver in-house, we intend to capture this additional business by taking over the production of their transceiver module designs and moving the production to our offshore contract manufacturing facilities where we can lower production costs by using our innovative supply chain management techniques. When economically justified, we also plan to redesign our customers’ existing transceivers to lower costs further. While some of these existing customer designs may have lower profit margins, we believe that capturing this added volume helps to absorb fixed manufacturing costs and will improve our position in the future. In this market, we also intend to generate additional revenues by offering both new product lines and frequencies. For example, in 2004, Nokia, Nera ASA and Siemens AG each expanded their relationship with us through purchasing new transceiver modules at different frequencies, Nera ASA chose to outsource most of its internal transceiver manufacturing to us and Siemens AG chose to outsource a portion of its internal transceiver manufacturing to us. In 2005, these relationships and associated sales volume expanded further.

Expand into New Growth Markets.  While our core market historically has been the telecommunication network market, we intend to leverage our high-frequency RF module expertise to expand in new growth markets, such as defense electronics and homeland security systems, to increase revenues and diversify our customer base. We are actively expanding our business in the defense electronics and homeland security markets with recent initiatives such as our acquisition of JCA Technology, Inc. and the formation of our Endwave Defense Systems division and our execution of a multi-year supply agreement with SafeView, Inc. In 2005, revenues from defense and homeland security systems integrators accounted for approximately 20% of our total revenues. We believe we are well positioned to take advantage of these markets as high-frequency RF modules become a more integral component of defense electronics and homeland security systems.

Grow through Acquisitions.  Since our initial public offering in October 2000, we have acquired and integrated five businesses or product lines. As a result of these transactions, we have increased our revenues and market share, broadened our product portfolio, diversified our customer base, gained expertise outside our core telecommunication network market and added key members to our staff. We believe the consolidation of high-frequency RF module suppliers will continue and will provide us additional opportunities for attractive acquisitions. It is our intent to continue to pursue strategic acquisitions that will further strengthen our competitive position and revenue growth as appropriate.

Offer the Highest Level of Manufacturing Efficiency and Flexibility

Continually Improve Manufacturing Efficiency.  The manufacturability of our designs, our automated test processes and our continuing improvement efforts have enabled us to bring labor-saving manufacturing

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technologies to an industry that has historically used labor-intensive manufacturing techniques. We intend to continue to improve our lean manufacturing methods and further enhance our manufacturing expertise. This will be particularly important for our high mix product line, primarily manufactured in our Diamond Springs facility.

Outsource to Low-Cost, Contract Manufacturers.  In 2002, we began moving most of our high-volume manufacturing to HANA Microelectronics Co., Ltd., or HANA, in Thailand, a low-cost, offshore contract manufacturer. We consign raw materials to HANA, as well as provide the specialized assembly and test equipment needed to manufacture our products. HANA provides the direct labor to assemble and test our products. Our readily manufacturable designs, which can tolerate a wide range of component performance and assembly process variations, and our automated production test systems enabled this transition to offshore contract manufacturing. The portion of our product revenues attributable to products manufactured offshore increased from approximately 8% in 2002 to over 80% in 2005. This transition significantly improved our product margins and converted many of our fixed costs into variable costs. This conversion of our cost structure enables us to adjust costs flexibly in response to changing customer demand and the seasonality of our telecommunication network business. We intend to continue to use contract manufacturers to enable us to respond flexibly to changing customer demands and the seasonality of our business.

Reduce Raw Materials and Component Costs.  The costs of raw materials and components employed in high-frequency RF modules are a major part of the overall manufacturing cost. We have reduced the cost of these components by re-designing them, leveraging our purchasing power and selecting more cost-effective suppliers. As an outgrowth of our operational presence in Asia, we continue to identify low-cost, high-quality Asian-based suppliers for several of the raw materials and components used in our products.

Employ a Fabless Semiconductor Model.  Semiconductors are both a critical technical element and a major cost component of our products. Since our inception, we have focused on producing high-frequency RF modules based on internally-designed semiconductors processed by third-party semiconductor fabrication facilities, or foundries. Our use of third-party foundries gives us the flexibility to use the process technology and materials best suited for each application, allows us to leverage our purchasing power and eliminates the need for us to invest in and maintain our own foundries. We intend to continue to use third-party semiconductor foundries, particularly as we introduce new products incorporating more advanced semiconductor materials.

Leverage Technical Breadth and Strength

Broaden our Product Portfolio.  We are enlarging the scope of our product offerings both in the frequency ranges in which our products are designed to operate and in the type of functionalities we support. This allows us to address a broader range of applications in our customers’ systems and further expands our market opportunities.

Develop New Circuit and Packaging Technologies.  A key component of our value proposition is providing our customers with powerful and cost-effective technologies that offer them a major technical and economic advantage. We have developed and maintain a strong base of high-frequency RF technology supported by an experienced design team, a large library of circuit designs, extensive proprietary know-how and a large portfolio of patents. Our efforts to create new technology have led to 38 issued United States patents. We intend to continue to invest in research and development, maintain a team of talented engineers and scientists, and build on our manufacturing technologies. To that end, we recently introduced a proprietary circuit technology known as Multilithic Microsystems, or MLMS, and a proprietary circuit packaging technology called Epsilon, both of which reduce the cost of producing our products and improve technical performance.

Products and Technology

Products

Our RF modules are used typically in high-frequency applications and include integrated transceivers, amplifiers, synthesizers, oscillators, up and down converters, frequency multipliers and microwave switch arrays. Depending upon the requirements of our customers, we supply our products at the following levels of integration:

Single-Function Modules.  Single-function modules are simple, standardized products that perform a single function, such as amplification, frequency multiplication or signal mixing. We employ these modules in the design of prototype or low production volume systems that do not warrant the development of a custom, fully-integrated module.

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Multi-Function Modules.  Multi-function modules are customized, complex products that combine a number of individual functional elements into a single package. These modules are typically more cost-effective for higher-volume applications and provide greater reliability and performance than systems assembled by the customer using single-function RF modules.

Integrated Subsystem Modules.  Integrated subsystem modules combine several functional RF blocks, such as amplifiers, switches or oscillators, with various types of control and support circuitry, such as a microprocessor or a power supply, to form a stand-alone subsystem. These complex subsystem modules, such as those we supply to Nokia, combine RF capability with sophisticated analog and digital system interface capabilities.

The following diagram illustrates the varying levels of product integration available to our customers. The shaded area in the lower left portion of the diagram represents a single-function module used for intermediate frequency amplification. The shaded area on the right side of the diagram represents a multi-function RF module. The area enclosed by the box represents an integrated subsystem module.

Circuit Technologies

In high-frequency RF modules, the choice and implementation of the basic circuit technology determine the performance, cost and manufacturability of the product. Currently, most of our products employ one of two alternate technologies, either hybrid microwave integrated circuit, or HMIC, technology or monolithic microwave integrated circuit, or MMIC, technology. In each case, we apply our circuit design capabilities to develop custom circuits that are optimized for cost, performance and manufacturability. All of our products manufactured at HANA employ MMIC technology. We have advanced the design of our HMIC and MMIC circuits significantly and have benefited from those advancements in reduced costs and higher production yields. Multilithic Microsystem technology, or MLMS, is a proprietary next generation circuit technology, which we believe will significantly reduce costs and allow improved performance.

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The following table compares various characteristics and our assessment of the relative merits of these three distinct circuit technologies:

	Circuit Technologies
	Current Technology		Endwave Next-Generation Technology
Circuit Type	HMIC	MMIC	MLMS
Description	Individual devices bonded to a substrate and then interconnected with bond wires	Monolithic semiconductor substrate with patterned devices and interconnections	Individual devices flip chip attached using our patented flip chip assembly technology to a complex substrate
Module Design	Multiple circuits cascaded to form a functional block	Multiple circuits cascaded to form a functional block	Single substrate can form a complete “system on a chip” functional block
Substrate	Ceramic with single top layer metallization	Semiconductor material, typically gallium arsenide	Next generation, multi- layer substrate containing metal, capacitive and resistive layers
Active Devices	Individual RF devices attached to substrate	Devices patterned into various areas of the substrate; active device area is a small fraction of total substrate area	Individual RF devices especially designed for flip chip assembly
Application	Used for rapid prototyping and low volume production	Used for high volume automated or third-party assembly	Used for high volume automated or third-party assembly
Number of Bond Wires (which require manual tuning)	High — Often hundreds per module	Moderate — Often tens per module	Low — Often fewer than 10 per module
Performance	Variable — Units must be hand-tuned to required specifications and performance may be variable	Good — MMIC circuit designed for consistent performance, limited by substrate characteristics	Excellent — Very consistent performance due to lack of bond wires and improved substrate material
Design Difficulty	Moderate — The most flexible circuit technology for customizing RF performance; can be designed very quickly by us because of our large library of HMIC core elements	Difficult — Complete circuit and all interactions must be concurrently analyzed; complicated by sub- optimal substrate properties of semiconductor materials for interconnection and filter elements; single-substrate process must be used for all devices	Moderate — Multi-layer properties of substrate facilitate ease of design; layers optimized for their function
Relative Cost	High — Material costs are modest, but high assembly, test and rework labor costs	High — Material cost of large semiconductors is expensive	Moderate — Device and substrate costs are lower than MMICs; assembly process automated for lower labor costs than HMICs
Status	In production	In production	In the initial stages of commercial production

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Circuit Packaging Technologies

In high-frequency RF modules, the circuit packaging technology also significantly impacts cost and performance. The majority of our current products employ planar packaging technology, especially our high-volume commercial products. To improve the performance and reduce the cost of packaging, we have developed our proprietary Epsilon packaging technology.

The following table compares current RF packaging technology with our new Epsilon packaging technology and our assessment of the relative merits of these two distinct circuit packaging technologies:

	Circuit Packaging Technologies
	Current Technology	Endwave Next-Generation Technology
Package Type	Planar	Epsilon
Description	Circuit substrates mounted to metal carrier and then enclosed with metal cover; entire assembly mounted to conventional printed wiring board	Circuit substrates mounted directly to composite printed wiring board using ‘chip on board‘ approach and then enclosed with non-metallized plastic cover
Size and Weight	Metallic parts add significant thickness and weight	Significantly thinner and lighter than planar packages
Performance	Good — Good performance with adequate RF gasket seal	Excellent — RF cavity sealed better than planar packages
Design Difficulty	Moderate — Requires separate design effort for carrier and cover with interfaces to printed wiring board	Low — Fewer elements to design and fewer mechanical interfaces to manage than planar packages
Manufacturability	Eight major assembly steps	Four major assembly steps
Relative Cost	Moderate — Material costs are significant	Low — Metal carrier eliminated and plastic cover is more cost-effective
Status	In production	In the initial stages of commercial production

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Sales and Marketing

We focus on the global telecommunication network, defense electronics and homeland security markets. We sell our products through our direct sales efforts, which are supported by a network of domestic and international independent representatives. For each of our major customers, we assign a technical account manager, who has responsibility for developing and expanding our relationship with that customer. Our direct sales efforts are augmented by traditional marketing activities, including advertising, participation in industry associations and presence at major trade shows.

Our products are highly technical and the sales cycle can be long. Our sales efforts involve a collaborative and iterative process with our customers to determine their specific requirements either in order to design an appropriate solution or transfer efficiently the product to our offshore contract manufacturer. Depending on the product and market, the sales cycle can typically take anywhere from 2 to 24 months.

Customers

We sell our products primarily to telecom OEMs and defense and homeland security systems integrators. During 2005, we shipped products to more than 100 different customers. Our key customers, which accounted for approximately 89% of our total revenues in 2005, and the markets they served, were:

Telecommunication Network	Defense Electronics and Homeland Security
Ceragon	BAE Systems
Nera ASA	The Boeing Company
Nokia	Lockheed Martin Corporation
Powerwave Technologies, Inc.	Raytheon Company
Siemens AG Stratex Networks, Inc.	SafeView, Inc.

Revenues from all of our telecom OEM customers comprised approximately 80% of our total revenues in 2005. While we intend to increase our revenues in the defense electronics and homeland security markets, we expect that the majority of our revenues will be attributable to a limited number of telecom OEMs for the foreseeable future.

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Acquisitions

As part of our growth strategy, we have made acquisitions designed to increase revenues and gain market share. We have completed the following acquisitions since our initial public offering:

Acquisition	Structure	Key Benefits
JCA Technology, Inc., a wholly-owned subsidiary of New Focus, Inc., a subsidiary of Bookham Technology plc — July 2004	Purchased all of the outstanding capital stock of JCA, whose primary product line was microwave amplifiers serving the defense electronics industry	• Provided significant market position in RF amplifiers and modules for defense and related applications • Expanded relationships with existing customers, including Raytheon Company, Lockheed Martin Corporation and BAE Systems plc • Added new customers, including Thales Group SA, L-3 Communications Corp. and Xicom Technology • Formed core of Endwave Defense Systems division
Verticom, Inc. — May 2003	Purchased assets including customer contracts, equipment, inventory, product designs and other intellectual property required to manufacture and supply YIG-based frequency synthesizers	• Enhanced high-performance oscillator technology • Added new customer relationship in the defense electronics market • Added new product application in the defense communication satellite terminal market
Arcom Wireless Incorporated, a subsidiary of Dover Corporation — February 2003	Purchased assets including customer contracts, equipment, inventory, product designs and other intellectual property required to manufacture and supply a 58 GHz integrated transceiver	• Expanded relationship with an existing customer • Enhanced market position as a leading supplier of 58 GHz products
Signal Technology Corp. Fixed Wireless Division — September 2002	Purchased assets including customer contracts, equipment, inventory, product designs and other intellectual property required to manufacture and supply several transceiver products	• Expanded relationships with existing customers including Stratex Networks, Inc. and Nera ASA • Added new customers including Siemens AG and Ceragon Networks Ltd. • Significantly increased our product portfolio • Facilitated move to offshore production
M/A-Com Tech, Inc., a subsidiary of Tyco Electronics formerly known as Stellex Microwave Systems — April 2001	Purchased assets including customer contracts, equipment, inventory, product designs and other intellectual property required to manufacture and supply yttrium iron garnet-based frequency synthesizers	• Added new product capabilities in high performance oscillators • Added new customer relationship with Stratex Networks, Inc. • Added new application in high capacity microwave radios

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Competition

Among merchant suppliers in the telecommunication network market, we primarily compete with Eyal Microwave Industry, Filtronics plc, the Forem division of Andrew Corporation, Linkra Srl, Microelectronics Technology Inc., REMEC Broadband Wireless, Inc., Teledyne Technologies Incorporated, Thales Group SA and Xytrans Inc. In addition to these companies, there are telecom OEMs, such as Ericsson and NEC Corporation, that use their own captive resources for the design and manufacture of their own high-frequency RF transceiver modules, rather than use merchant suppliers like us. We believe that over one half of the high-frequency RF transceiver modules manufactured today are being produced by these captive resources. To the extent that telecom OEMs presently, or may in the future, produce their own RF transceiver modules, we lose the opportunity to gain a customer and related sales. Conversely, if they should decide to outsource their requirements, this may significantly expand the market available to us. In the defense electronics and homeland security markets, we primarily compete with Aeroflex Incorporated, AML Communications Inc., Chelton, Ltd., CTT Inc., Herley Industries, Inc., KMIC Technology, Inc., Miteq Inc. and Teledyne Technologies Incorporated.

We believe that the principal competitive factors in our industry are:

•  Product pricing and the ability to offer low-cost solutions;

•  Technical leadership and product performance;

•  Product breadth;

•  Time-to-market in the design and manufacturing of products; and

•  Logistical flexibility, manufacturing capability and scalable capacity.

Research and Development

Our research efforts focus on developing new proprietary circuit and packaging technologies, such as MLMS and Epsilon, and integrating our technology into new semiconductor materials, such as indium gallium phosphide. Our product development activities focus on designing products to meet specific customer and market needs and introducing these products to manufacturing. Our technical approach emphasizes the following capabilities:

Custom Semiconductor Design Capabilities.  Our ability to design custom semiconductors allows us to optimize and reduce the cost of designs beyond what is possible with standard, off-the-shelf semiconductors.

Breadth of Expertise.  We are experienced in a broad range of technical disciplines and possess the know-how to design products at multiple levels of integration.

Computer Modeling Capabilities.  Our extensive computer modeling capabilities allow us to create designs quickly and to minimize the number of iterations required to develop specification compliant, cost-effective designs.

Extensive Library of Circuit Designs.  Our extensive library of circuit, module and subsystem designs enables us to generate new designs and produce prototypes quickly to meet our customers’ time-to-market demands.

Automated Testing Processes.  High-frequency RF products require extensive testing after assembly to verify compliance with customer specifications. We use high speed, custom-designed, automated test sets that are capable of rapidly testing a complete RF module. This increases throughput in the manufacturing process and reduces the skill level required to conduct the tests. Concurrently with the development of these test methods, we develop data analysis and reporting tools to facilitate rapid communication of test data to our customers.

Our research and development and related engineering expenses were $4.5 million, $5.0 million and $6.5 million in 2003, 2004 and 2005, respectively. The increase in 2005 spending as compared to 2004 was attributable to the increase in personnel-related expenses of $815,000 primarily related to increases in our engineering personnel and a full year of JCA personnel-related expenses and increased project-related expenses of $307,000 to support increased development fee revenues. The increase in 2004 spending as compared to 2003 was primarily the result of research and development expenses incurred as a result of our ownership of JCA during the second half of 2004.

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Patents and Intellectual Property Rights

Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on a combination of patent, copyright, trademark and trade secret laws to protect our proprietary technologies and processes. As of December 31, 2005, we had 38 United States patents issued, many with associated foreign filings and patents. Our issued patents include those relating to basic circuit and device designs, semiconductors, MLMS technology and system designs. Our issued United States patents expire between 2007 and 2020. We also license technology from other companies, including Northrop Grumman Corporation. There are no limitations on our rights to make, use or sell products we may develop in the future using the technology licensed to us by Northrop Grumman Corporation, provided that the products are for commercial customers and non-satellite applications.

We maintain a vigorous technology development program that routinely generates potentially patentable intellectual property. Our decisions as to whether to seek formal patent protection and the countries in which to seek it are taken on a patent by patent basis and are based on the economic value of the intellectual property, the anticipated strength of the resulting patent, the cost of pursuing the patent and an assessment of using a patent as a strategy to protect the intellectual property. With regard to our pending patent applications, it is possible that no patents may be issued as a result of these or any future applications or the allowed patent claims may be of reduced value and importance. Further, any existing or future patents may be challenged, invalidated or circumvented thus reducing or eliminating their commercial value.

To protect our intellectual property, we enter into confidentiality and assignment of rights to inventions agreements with our employees, and confidentiality and non-disclosure agreements with our strategic partners, and generally control access to and distribution of our documentation and other proprietary information. These measures may not be adequate in all cases to safeguard the proprietary technology underlying our products. It may be possible for a third party to copy or otherwise obtain and use our products or technology without authorization, develop similar technology independently or design around our patents. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited outside of the United States, Europe and Japan.

Operations

We currently have our products manufactured in two locations. Domestically, we operate a plant in Diamond Springs, California for those products that are being produced in low volumes. Our domestic manufacturing operations are primarily for defense electronics applications, which must be manufactured within the United States due to government export control regulations. The majority of our products are manufactured in Thailand by HANA, a contract manufacturer. Under our manufacturing contract, HANA supplies the physical plant, direct labor, basic assembly equipment and warehousing functions. We supplement those activities with our own full-time, in-country staff consisting of one employee and twelve independent contractors who provide production planning, process engineering, test engineering and quality assurance support. We own certain assets held in HANA’s factory, including specialized test and assembly equipment and various raw material and product inventories. Our arrangement with HANA allows us to reduce our labor and facility expenses while maintaining tight control of process and quality. To reduce our costs further, we have identified lower cost Asian sources for various raw materials, especially basic metal and circuit board components. Our manufacturing agreement with HANA currently expires in July 2006, but will renew automatically for successive one-year periods unless either party notifies the other of its desire to terminate the agreement at least 90 days prior to the expiration of the term. In addition, either party may terminate the agreement without cause upon 120 days’ prior written notice to the other party, and either party may terminate the agreement if the non-terminating party is in breach and does not cure the breach within 30 days after notice of the breach is given by the terminating party. While our relations with HANA are good and we do not anticipate an interruption in our arrangement with HANA, there can be no assurance that HANA will not seek to terminate its agreement with us.

We design custom semiconductor devices. However, we do not own or operate a semiconductor foundry and rely on a limited number of third parties to produce these components. Our use of various third-party semiconductor foundries gives us the flexibility to use the process technology that is best suited for each application and eliminates the need for us to invest in and maintain our own semiconductor facilities. Our primary semiconductor foundry is

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Velocium, a business unit of Northrop Grumman Space Mission & Systems Corp. and a wholly-owned subsidiary of Northrop Grumman Corporation. In this report, we refer to the Northrop Grumman Space & Mission Systems Corp. foundry by its trade name, Velocium. Velocium produced over 65%, in economic value terms, of our semiconductors in 2005. We also use other suppliers for some of our products. The loss of our relationship with or our access to any of the semiconductor foundries we currently use, particularly Velocium, and any resulting delay or reduction in the supply of semiconductor devices to us, would severely impact our ability to fulfill customer orders and could damage our relationships with our customers. Our current supply agreement with Velocium would have expired by its terms in December 2005 but was extended by mutual agreement through March 31, 2006 while a new supply agreement is negotiated. While we believe we are a significant customer of and do not anticipate an interruption in our relationship with Velocium, there can be no assurance that Velocium will renew its agreement with us. We estimate that it may take up to six months to shift product of a given semiconductor circuit design to a new foundry.

All of the manufacturing facilities we use worldwide are registered under ISO 9001-2000, an international certification standard of quality for design, development and business practices. Additionally, we are certified under AS-9100 in support of our defense and homeland security activities. We maintain comprehensive quality systems at all of these facilities to ensure compliance with customer specifications, configuration control, documentation control and supplier quality conformance.

Backlog

Our order backlog consists of a combination of conventional purchase orders and formal forecasts given to us under annual and multi-year frame agreements. Typically, the forecast portion of the backlog is the significantly larger amount. The forecasts we receive normally have a firm commitment portion of one to three months in duration that obligate the customer to accept at least some portion of the amount forecasted for that period, with the remainder of the forecast including no such obligation. These forecasts are subject to change on a regular basis and we have experienced significant forecast variations in both unit volumes and product mix. As a result, we believe that backlog is not a reliable indicator of future revenues.

Our backlog at March 1, 2006 for shipments expected to occur through December 31, 2006 was approximately $56.6 million. By comparison, our backlog as of March 16, 2005 for shipments then expected to occur by December 31, 2005 was $29.8 million.

Governmental Regulation

Government regulations directly affect our business in two principal ways. In our telecommunication network market, the frequencies at which wireless systems transmit and receive data are dictated by government licensing agencies in the location where they are deployed. Unexpected difficulties in obtaining licenses or changes in the operating frequencies allowed can halt or delay microwave radio deployments and therefore halt or delay the need for our products. Both national and international regulatory bodies have set stringent standards on the performance of microwave radios, especially spurious emissions and their potential to cause interference in other systems. Meeting these regulations is technologically challenging and changes in the regulations could require a re-design of our products to achieve compliance.

In our defense electronics market, some of the products we supply to our foreign customers are controlled by United States government export regulations promulgated by the Departments of State, Commerce and Defense. Prior to shipment of these products, we must apply for various approvals and licenses. This application process can be lengthy and approval is not assured. If we do not receive approval or the approval is delayed, it can halt or delay our shipments. Further, our products for defense electronics applications must be manufactured within the United States due to government export control regulations.

Employees

As of December 31, 2005, we had 141 full-time employees, including 68 in manufacturing, 41 in product and process engineering, 16 in sales and marketing and 16 in general and administrative. Our employees are not subject to any collective bargaining agreement with us and we believe that our relations with our employees are good.

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Available Information

Our principal executive offices are located at 776 Palomar Avenue, Sunnyvale, California 94085, and our main telephone number is (408) 522-3100. The public may read and copy any material we file with the Securities and Exchange Commission, or SEC, at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C., 20549. The public may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Item 1A.   Risk Factors

You should consider carefully the following risk factors as well as other information in this report before investing in any of our securities. If any of the following risks actually occur, our business, operating results and financial condition could be adversely affected. This could cause the market price of our common stock to decline, and you may lose all or part of your investment.

Risks Relating to Our Business

We have had a history of losses and may not be profitable in the future.

We have had a history of losses. We had a net loss of $874,000 in 2005. We also had net losses of $7.9 million and $4.4 million for the years ended December 31, 2003 and 2004 respectively. There is no guarantee that we will achieve or maintain profitability in the future.

We depend on a small number of key customers in the telecommunications industry for a large portion of our revenues. If we lose any of our major customers, particularly Nera, Nokia or Siemens or there is any material reduction in orders for our products from any of these customers, our business, financial condition and results of operations would be adversely affected.

We depend, and expect to continue to depend, on a relatively small number of telecommunication network original equipment manufacturers and systems integrators, collectively referred to in this report as telecom OEMs, for a large portion of our revenues. The loss of any of our major customers, particularly Nera, Nokia or Siemens, or any material reduction in orders from any of such customers would have a material adverse effect on our business, financial condition and results of operations. In 2003, 2004 and 2005 revenues from Nokia accounted for 59%, 55% and 47% of our total revenues, respectively. Revenues from Siemens accounted for 16% of our total revenues for 2005. Revenues from Nera ASA accounted for 10% of our total revenues for 2004 and 2005. Revenues from Stratex Networks, Inc. accounted for 13% of our total revenues for 2003. We had no other customers individually representing more than 10% of our total revenues for 2003, 2004 or 2005. Most of our customer agreements are in the form of purchase orders and are not pursuant to a formal agreement. As a result, none of our major customers is under any long-term commitment to purchase products from us, and there is no guarantee that any of them will continue to do business with us.

We depend on the telecommunications industry for most of our revenues. If this industry suffers another downturn or fails to grow as anticipated, our revenues could decrease and our profitability could suffer. In addition, consolidation in this industry could result in delays or cancellations of orders for our products, adversely impacting our results of operations.

We depend, and expect to remain dependent, on the telecommunications industry for most of our revenues. Revenues from all of our telecom OEM customers comprised 86% of our total revenues in 2004 and 80% of our total revenues in 2005.

The telecommunications industry suffered a significant worldwide downturn beginning in 2000, and has only recently begun to grow again. In connection with this downturn, there were worldwide reductions in telecommunication network projects that resulted in the loss of some of our key customers and reduced revenues from our remaining customers. We also were forced to undertake significant cost reduction measures as a result. The telecommunications industry has only recently begun to grow again, but at a more measured rate than previously.

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Our revenues are dependent, in part, on growth of wireless telephony particularly in developing countries, increasing data-intensive cellular traffic, deployment of third-generation, or “3G”, networks and the introduction of other high capacity data-only telecommunication networks. If similar downturns reoccur, or if the telecommunications industry fails to grow as we anticipate, our revenues may remain flat or decrease. Significantly lower revenues would likely force us to make provisions for excess inventory and abandoned or obsolete equipment and reduce our operating expenses. To reduce our operating expenses, we could be required to reduce the size of our workforce and consolidate facilities. We cannot guarantee that we would be able to reduce operating expenses to a level commensurate with the lower revenues resulting from such an industry downturn.

The telecommunications industry has undergone significant consolidation in the past few years and we expect that consolidation to continue. The acquisition of one of our major customers in this market, or one of the communications service providers supplied by one of our major customers, could result in delays or cancellations of orders of our products and, accordingly, delays or reductions in our anticipated revenues and reduced profitability or increased net losses.

Our future success depends in part on our ability to further penetrate into new markets, such as defense electronics and homeland security, and we may be unable to do so.

Historically, all or a large majority of our revenues have been attributable to sales of our RF modules to telecom OEMs such as Nokia. Part of our growth strategy is to design and sell high-frequency RF modules for and to OEMs and systems integrators in new markets, particularly defense electronics and homeland security. To date, only a modest percentage of our revenues has been attributable to sales of RF modules to defense systems integrators. We have only recently begun to design and sell products for the recently emerging homeland security market. The potential size of this market is unclear and we cannot predict how the market will evolve. If increased demand for high-frequency RF modules in the defense electronics and homeland security markets does not materialize, we fail to secure new design wins in these markets or we are unable to design readily manufacturable products for these new markets, our growth and revenues could be adversely impacted, thereby decreasing our profitability or increasing our net losses.

Our operating results may fluctuate significantly based on seasonal factors in the telecommunication network market.

In the past, our operating results have reflected lower revenues in the first and third calendar quarters due to seasonality in the telecommunication network market. Revenues attributable to telecom OEMs typically have contracted in the first quarter due to delays in purchasing resulting from wireless carriers’ budgeting processes. The third quarter generally has been slow in our telecommunication network market as many of our European telecom OEM customers shut down their factories for a portion of the summer months. The fourth quarter historically has been our strongest quarter as the wireless carriers expend their remaining capital budgets for the year. However, we did not experience this seasonality in 2005, and we cannot be certain what seasonal factors, if any, will impact our revenues in the future or the extent of such potential fluctuations.

Because of the shortages of some components and our dependence on single source suppliers and custom components, we may be unable to obtain an adequate supply of components of sufficient quality in a timely fashion, or we may be required to pay higher prices or to purchase components of lesser quality.

Many of our products are customized and must be qualified with our customers. This means that we cannot change components in our products easily without the risks and delays associated with requalification. Accordingly, while a number of the components we use in our products are made by multiple suppliers, we may effectively have single source suppliers for some of these components.

In addition, we currently purchase a number of components, some from single source suppliers, including, but not limited to:

•  semiconductor devices;

•  application-specific monolithic microwave integrated circuits;

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•  voltage-controlled oscillators;

•  voltage regulators;

•  lead-free surface mount components;

•  high-frequency circuit boards;

•  custom connectors;

•  electromagnetic housings;

•  yttrium iron garnet components; and

•  magnetic components.

Any delay or interruption in the supply of these or other components could impair our ability to manufacture and deliver our products, harm our reputation and cause a reduction in our revenues. In addition, any increase in the cost of the components that we use in our products could make our products less competitive and lower our margins. During 2005, we suffered from shortages of and quality issues with various components, including voltage-controlled oscillators, voltage regulators, metal enclosures and certain high-frequency circuit boards. These shortages and quality issues adversely impacted our product revenues throughout the year and could continue to do so in the future. Our single source suppliers could enter into exclusive agreements with or be acquired by one of our competitors, increase their prices, refuse to sell their products to us, discontinue products or go out of business. Even to the extent alternative suppliers are available to us and their components are qualified with our customers on a timely basis, identifying them and entering into arrangements with them may be difficult and time consuming, and they may not meet our quality standards. We may not be able to obtain sufficient quantities of required components on the same or substantially the same terms.

Our cash requirements will be impacted by our need to increase inventories.

As part of our expansion in the telecommunications market and our increased emphasis on the defense electronics and homeland security markets, we have increased the number of our products by over three times during 2005. The products we manufacture require hundreds to thousands of components obtained from a wide variety of suppliers and we have faced component shortages and quality issues from our suppliers. In addition, in order to maintain and enhance our competitive position, we must be able to satisfy our customers’ rapidly-changing needs. As a result of these challenges, we have significantly increased our raw materials inventory and added more finished products to our key customers’ consignment stocks so that they will be better-positioned to meet their own customers’ demand. These increases in raw materials and finished goods have significantly increased our working capital needs and may further increase our capital needs in the future.

We rely heavily on a Thailand facility of HANA Microelectronics Co., Ltd., a contract manufacturer, to produce our RF modules. If HANA is unable to produce these modules in sufficient quantities or with adequate quality, or it chooses to terminate our manufacturing arrangement, we will be forced to find an alternative manufacturer and may not be able to fulfill our production commitments to our customers, which could cause sales to be delayed or lost and could harm our reputation.

We outsource the assembly and testing of most of our telecommunication related products to a Thailand facility of HANA Microelectronics Co., Ltd., or HANA, a contract manufacturer. We plan to continue this arrangement as a key element of our operating strategy. If HANA does not provide us with high quality products and services in a timely manner, or terminates its relationship with us, we may be unable to obtain a satisfactory replacement to fulfill customer orders on a timely basis. In the event of an interruption of supply from HANA, sales of our products could be delayed or lost and our reputation could be harmed. Our manufacturing agreement with HANA currently expires in July 2006 but will renew automatically for successive one-year periods unless either party notifies the other of its desire to terminate the agreement at least 90 days prior to the expiration of the term. In addition, either party may terminate the agreement without cause upon 120 days prior written notice to the other party, and either party may terminate the agreement if the non-terminating party is in breach and does not cure the

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breach within 30 days after notice of the breach is given by the terminating party. There can be no guarantee that HANA will not seek to terminate its agreement with us.

We rely on Velocium and other third-party semiconductor foundries to manufacture the semiconductors contained in our products. The loss of our relationship with any of these foundries, particularly Velocium, without adequate notice would adversely impact our ability to fill customer orders and could damage our customer relationships.

We design semiconductor devices. However, we do not own or operate a semiconductor fabrication facility, or foundry, and rely on a limited number of third parties to produce these components. Our largest semiconductor foundry supplier is Velocium, a business unit of Northrop Grumman Space & Mission Systems Corp. Velocium produced over 65 percent of our semiconductors in 2005, with the balance provided by other suppliers. The loss of our relationship with or our access to any of the semiconductor foundries we currently use, particularly Velocium, and any resulting delay or reduction in the supply of semiconductor devices to us, would severely impact our ability to fulfill customer orders and could damage our relationships with our customers.

Our current supply agreement with Velocium would have expired in December 2005 but was extended by mutual agreement through March 31, 2006. We are currently in contract renewal negotiations but may not be able to negotiate a new supply agreement on favorable terms, if at all. We also may not be successful in forming alternative supply arrangements that provide us with a sufficient supply of gallium arsenide devices. Because there are a limited number of semiconductor foundries that use the particular process technologies we select for our products and that have sufficient capacity to meet our needs, using alternative or additional semiconductor foundries would require an extensive qualification process that could prevent or delay product shipments and revenues. We estimate that it may take up to six months to shift production of a given semiconductor circuit design to a new foundry.

Implementing our acquisition strategy could result in dilution to our stockholders and operating difficulties leading to a decline in revenues and operating profit.

One of our strategies is to grow through acquisitions. To that end, we have completed five acquisitions since our initial public offering and intend to pursue attractive acquisitions in our market as appropriate. The process of investigating, acquiring and integrating any business into our business and operations is risky and may create unforeseen operating difficulties and expenditures. The areas in which we may face difficulties include:

•  diversion of our management from the operation of our core business;

•  assimilating the acquired operations and personnel;

•  integrating information technology and reporting systems;

•  retention of key personnel;

•  retention of acquired customers; and

•  implementation of controls, procedures and policies in the acquired business.

For example, it took us longer to integrate JCA Technology into our operations at our Diamond Springs facilities than we originally anticipated. Additionally, the JCA acquisition required us to devote efforts to standardize the product design and manufacturing process to reduce dependence on specific personnel. As a result of these difficulties, our ability to deliver our defense electronics products to our customers in a timely manner was temporarily adversely affected.

In addition to the factors set forth above, we may encounter other unforeseen problems with acquisitions that we may not be able to overcome. Future acquisitions may require us to issue shares of our stock or other securities that dilute our other stockholders, expend cash, incur debt, assume liabilities, including contingent or unknown liabilities, or create additional expenses related to write-offs or amortization of intangible assets with estimated useful lives, any of which could materially adversely affect our revenues and our operating profits.

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Our products may contain component, manufacturing or design defects or may not meet our customers’ performance criteria, which could cause us to incur significant repair expenses, harm our customer relationships and industry reputation, and reduce our revenues and profitability.

We have experienced manufacturing quality problems with our products in the past and may have similar problems in the future. As a result of these problems, we have replaced components in some products, or replaced the product, in accordance with our product warranties. Our product warranties typically last one to two years. As a result of component, manufacturing or design defects, we may be required to repair or replace a substantial number of products under our product warranties, incurring significant expenses as a result. Further, our customers may discover latent defects in our products that were not apparent when the warranty period expired. These defects may cause us to incur significant repair or replacement expenses beyond the normal warranty period. In addition, any component, manufacturing or design defect could cause us to lose customers or revenues or damage our customer relationships and industry reputation.

For example, some radios incorporating our transceivers that are manufactured and shipped by one of our customers have experienced degraded performance after installation in the field. The cause of the degradation was identified to be a faulty semiconductor component originally developed and supplied by TRW Inc. that was incorporated in the transceiver. TRW was later acquired by Northrop Grumman Corporation and renamed Northrop Grumman Space & Mission Systems Corp. Pursuant to a settlement agreement between TRW and us, we are responsible for the direct costs associated with the repair and replacement of the degraded transceivers produced under our supply agreement with the customer. Northrop Grumman Space & Mission Systems Corp., as successor to TRW, compensated our customer for the indirect costs associated with the repair and replacement of the degraded radios and transceivers. These indirect costs include the costs associated with removing and replacing the radios in the field as well as removing and replacing the transceiver module in each returned radio. During 2001, we reserved $4.6 million for warranty charges to cover the actual repair of the transceivers containing these faulty components, of which $2.4 million had been used or reversed through December 31, 2005.

Under an agreement we entered into with Northrop Grumman Space & Mission Systems Corp. in March 2005, we agreed to pay $300,000 to Northrop Grumman Space & Mission Systems Corp. as final reimbursement for these indirect costs and to assume sole responsibility for any future product failures attributable to the semiconductor component. In April 2005, Endwave paid the $300,000 settlement fee. We are in the process of qualifying a replacement component, which will be fabricated by an alternate supplier that we believe will eliminate the degradation of performance in future production units.

We depend on our key personnel. Skilled personnel in our industry can be in short supply. If we are unable to retain our current personnel or hire additional qualified personnel, our ability to develop and successfully market our products would be harmed.

We believe that our future success depends upon our ability to attract, integrate and retain highly skilled managerial, research and development, manufacturing and sales and marketing personnel. Skilled personnel in our industry can be in short supply. As a result, our employees are highly sought after by competing companies and our ability to attract skilled personnel is limited. To attract and retain qualified personnel, we may be required to grant large stock option or other stock-based incentive awards, which may harm our operating results or be dilutive to our other stockholders. We may also be required to pay significant base salaries and cash bonuses, which could harm our operating results.

Due to our relatively small number of employees and the limited number of individuals with the skill set needed to work in our industry, we are particularly dependent on the continued employment of our senior management team and other key personnel. If one or more members of our senior management team or other key personnel were unable or unwilling to continue in their present positions, these persons would be very difficult to replace, and our ability to conduct our business successfully could be seriously harmed. We do not maintain key person life insurance policies.

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Competitive conditions may require us to reduce prices in the future and, as a result, we may need to reduce our costs in order to be profitable.

Over the past year, we have reduced our prices by 10% to 15% in order to remain competitive and we expect market conditions will cause us to reduce our prices in the future. In order to reduce our per-unit cost of product revenues, we must continue to design and re-design products to require lower cost materials, improve our manufacturing efficiencies and successfully move production to low-cost, offshore locations. The combined effects of these actions may be insufficient to achieve the cost reductions needed to be profitable.

The length of our sales cycle requires us to invest substantial financial and technical resources in a potential sale before we know whether the sale will occur. There is no guarantee that the sale will ever occur and if we are unsuccessful in designing a high-frequency RF module for a particular generation of a customer’s products, we may need to wait until the next generation of that product to sell our products to that particular customer.

Our products are highly technical and the sales cycle can be long. Our sales efforts involve a collaborative and iterative process with our customers to determine their specific requirements either in order to design an appropriate solution or to transfer the product efficiently to our offshore contract manufacturer. Depending on the product and market, the sales cycle can take anywhere from 2 to 24 months, and we incur significant expenses as part of this process without any assurance of resulting revenues. We generate revenues only if our product is selected for incorporation into a customer’s system and that system is accepted in the marketplace. If our product is not selected, or the customer’s development program is discontinued, we generally will not have an opportunity to sell our product to that customer until that customer develops a new generation of its system. There is no guarantee that our product will be selected for that new generation of its system. In the past, we have had difficulty meeting some of our major customers’ stated volume and cost requirements. The length of our product development and sales cycle makes us particularly vulnerable to the loss of a significant customer or a significant reduction in orders by a customer because we may be unable to quickly replace the lost or reduced sales.

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

Existing and potential customers typically demand that we design products for them under difficult time constraints. In the current market environment, the need to respond quickly is particularly important. If we are unable to commit the necessary resources to complete a project for a potential customer within the requested timeframe, we may lose a potential sale. Our ability to design products within the time constraints demanded by a customer will depend on the number of product design professionals who are available to focus on that customer’s project and the availability of professionals with the requisite level of expertise is limited.

Each of our telecommunication network products is designed for a specific range of frequencies. Because different national governments license different portions of the frequency spectrum for the telecommunication network market, and because communications service providers license specific frequencies as they become available, in order to remain competitive we must adapt our products rapidly to use a wide range of different frequencies. This may require the design of products at a number of different frequencies simultaneously. This design process can be difficult and time consuming, could increase our costs and could cause delays in the delivery of products to our customers, which may harm our reputation and delay or cause us to lose revenues.

In our other markets, our customers have specific requirements that can be at the forefront of technological development and therefore difficult and expensive to develop. If we are not able to devote sufficient resources to these products, or we experience development difficulties or delays, we could lose sales and damage our reputation with those customers.

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

We may not be able to manufacture products and deliver them to our customers at the times and in the volumes they require. Manufacturing delays and interruptions can occur for many reasons, including, but not limited to:

•  the failure of a supplier to deliver needed components on a timely basis or with acceptable quality;

•  lack of sufficient capacity;

•  poor manufacturing yields;

•  equipment failures;

•  manufacturing personnel shortages;

•  labor disputes;

•  transportation disruptions;

•  changes in import/export regulations;

•  infrastructure failures at the facilities of our offshore contract manufacturer;

•  natural disasters;

•  acts of terrorism; and

•  political instability.

Manufacturing our products is complex. The yield, or percentage of products manufactured that conform to required specifications, can decrease for many reasons, including materials containing impurities, equipment not functioning in accordance with requirements or human error. If our yield is lower than we expect, we may not be able to deliver products on time. For example, in the past, we have on occasion experienced poor yields on certain products that have prevented us from delivering products on time and have resulted in lost sales. If we fail to manufacture and deliver products in a timely fashion, our reputation may be harmed, we may jeopardize existing orders and lose potential future sales, and we may be forced to pay penalties to our customers.

As part of our strategy, we may expand our domestic manufacturing capacity beyond the level required for our current sales in order to accommodate anticipated increases in our defense electronics business. As a result, our domestic manufacturing facilities may be underutilized from time to time. Conversely, if we do not maintain adequate manufacturing capacity to meet demand for our defense electronic products, we may lose opportunities for additional sales. Any failure to have sufficient manufacturing capacity to meet demand could cause us to lose revenues, thereby reducing our profitability, or increasing our net losses, and could harm our reputation with customers.

Because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could have negative effects on our inventory levels, revenues and results of operations.

Our sales are generally made on the basis of formal agreements and purchase orders, which may be later modified or canceled by the customer, rather than firm long-term purchase commitments. We have historically been required to place firm orders for products and manufacturing equipment with our suppliers up to six months prior to the anticipated delivery date and, on occasion, prior to receiving an order for the product, based on our forecasts of customer demands. Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce error into our estimates, causing excess inventory to accumulate or a lack of manufacturing capacity when needed. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect or at all. As a result, we would have excess inventory, which would harm our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity were available, we would lose revenue opportunities, market share and damage our customer relationships. On occasion, we have been unable to adequately respond to unexpected increases in customer purchase orders and were unable to

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benefit from this increased demand. There is no guarantee that we will be able to adequately respond to unexpected increases in customer purchase orders in the future, in which case we may lose the revenues associated with those additional purchase orders and our customer relationships and reputation may suffer.

Some of our customer contracts require us to manufacture products designed by our customers. While we intend to convert many of these products to products of our own design, such transitions may be difficult and/or expensive to implement and delays or difficulties in doing so could harm our operating results.

Some of our customer contracts are based on the transfer of product manufacturing from our customers’ factories to those of our contract manufacturer, HANA. Under these contracts, we may be required to manufacture the products in a manner similar to the way our customers previously manufactured them until we are able to convert these products to products of our own design. The objective of converting a product to one of our own design is to improve manufacturability and lower costs, thereby improving our gross margins. If we encounter difficulties or delays in transitioning a customer’s product to our manufacturing process, revenues attributable to that product could be delayed or lost. The cost of manufacturing a customer-designed product is typically higher than the cost of manufacturing a product of our own design. In the short term, while we are manufacturing a customer-designed product, our gross margins will be adversely impacted. Similarly, difficulties and delays in transitioning a product to a product of our own design will result in reduced profitability over the long-term.

Any failure to protect our intellectual property appropriately could reduce or eliminate any competitive advantage we have.

Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on a combination of patent, copyright, trademark and trade secret laws to protect our proprietary technologies and processes. As of December 31, 2005, we had 38 United States patents issued, many with associated foreign filings and patents. Our issued patents include those relating to basic circuit and device designs, semiconductors, MLMS technology and system designs. Our issued United States patents expire between 2007 and 2020. We maintain a vigorous technology development program that routinely generates potentially patentable intellectual property. Our decision as to whether to seek formal patent protection is done on a patent by patent basis and is based on the economic value of the intellectual property, the anticipated strength of the resulting patent, the cost of pursuing the patent and an assessment of using a patent as a strategy to protect the intellectual property.

To protect our intellectual property, we enter into confidentiality and assignment of rights to inventions agreements with our employees, and confidentiality and non-disclosure agreements with third parties, and generally control access to and distribution of our documentation and other proprietary information. These measures may not be adequate in all cases to safeguard the proprietary technology underlying our products. It may be possible for a third party to copy or otherwise obtain and use our products or technology without authorization, develop similar technology independently or design around our patents. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited outside of the United States, Europe and Japan. We may not be able to obtain any meaningful intellectual property protection in other countries and territories. Additionally, we may, for a variety of reasons, decide not to file for patent, copyright, or trademark protection outside of the United States. We occasionally agree to incorporate a customer’s or supplier’s intellectual property into our designs, in which case we have obligations with respect to the non-use and non-disclosure of that intellectual property. We also license technology from other companies, including Northrop Grumman Corporation. There are no limitations on our rights to make, use or sell products we may develop in the future using the technology licensed to us by Northrop Grumman Corporation, provided that the products are for commercial customers and non-satellite applications. Steps taken by us to prevent misappropriation or infringement of our intellectual property or the intellectual property of our customers may not be successful. Moreover, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others, including our customers. Litigation of this type could result in substantial costs and diversion of our resources.

We may receive in the future, notices of claims of infringement of other parties’ proprietary rights. In addition, the invalidity of our patents may be asserted or prosecuted against us. Furthermore, in a patent or trade secret action, we could be required to withdraw the product or products as to which infringement was claimed from the market or

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redesign products offered for sale or under development. We have also at times agreed to indemnification obligations in favor of our customers and other third parties that could be triggered upon an allegation or finding of our infringement of other parties’ proprietary rights. These indemnification obligations would be triggered for reasons including our sale or supply to a customer or other third parties of a product which was later discovered to infringe upon another party’s proprietary rights. Irrespective of the validity or successful assertion of such claims we would likely incur significant costs and diversion of our resources with respect to the defense of such claims. To address any potential claims or actions asserted against us, we may seek to obtain a license under a third party’s intellectual property rights. However, in such an instance, a license may not be available on commercially reasonable terms, if at all.

With regard to our pending patent applications, it is possible that no patents may be issued as a result of these or any future applications or the allowed patent claims may be of reduced value and importance. If they are issued, any patent claims allowed may not be sufficiently broad to protect our technology. Further, any existing or future patents may be challenged, invalidated or circumvented thus reducing or eliminating their commercial value. The failure of any patents to provide protection to our technology might make it easier for our competitors to offer similar products and use similar manufacturing techniques.

Risks Relating to Our Industry

Our acquisition of JCA Technology and our own marketing and sales efforts have increased the volume of our products used by the United States government. Our revenues in this market largely depend upon the funding and implementation decisions of Congress and United States government agencies. These decisions could change abruptly and without notice, unexpectedly reducing our current or future revenues in this market.

Our growth is partially dependent on growth in sales to defense electronics and homeland security prime contractors as a first-tier subcontractor. Government appropriations and prime contractor reactions to changing levels of contract funding availability can cause re-programming of first-tier subcontractor requirements by prime contractors in a way that reduces our current revenues or future revenue forecasts. These funding and implementation decisions are difficult to predict and may change abruptly. If they change in a manner unfavorable to us, we could find that previously expected and forecasted revenues do not materialize.

Our failure to compete effectively could reduce our revenues and margins.

Among merchant suppliers in the telecommunication network market, we primarily compete with Eyal Microwave Industry, Filtronics plc, the Forem division of Andrew Corporation, Linkra Srl, Microelectronics Technology Inc., Remec Broadband Wireless, Inc., Teledyne Technologies Incorporated, Thales Group SA and Xytrans Inc. In addition to these companies, there are telecom OEMs, such as Ericsson and NEC Corporation, that use their own captive resources for the design and manufacture of their high-frequency RF transceiver modules, rather than use merchant suppliers like us. We believe that approximately one half of the high-frequency RF transceiver modules manufactured today are being produced by these captive resources. To the extent that telecom OEMs presently, or may in the future, produce their own RF transceiver modules, we lose the opportunity to gain a customer and the potential related sales. Further, if a telecom OEM were to sell its captive operation to a competitor, we would lose the opportunity to acquire those potential sales. In the defense electronics and homeland security markets, we primarily compete with Aeroflex Incorporated, AML Communications Inc., Chelton, Ltd., CTT Inc., Herley Industries, Inc., KMIC Technology, Inc., Miteq, Inc. and Teledyne Technologies Incorporated.

Many of our current and potential competitors are substantially larger than us and have greater financial, technical, manufacturing and marketing resources. In addition, we have only recently begun to design and sell products for homeland security applications as the market for homeland security is only now emerging. If we were unable to compete successfully, our future operations and financial results would be harmed.

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Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations and criminal and civil liabilities.

Due to environmental concerns, the need for lead-free solutions in electronic components and systems is receiving increasing attention within the electronics industry as companies are moving towards becoming compliant with the Restriction of Hazardous Substances Directive, or RoHS Directive. The RoHS Directive is European legislation that restricts the use of a number of substances, including lead, effective July 2006. We believe that our products will be compliant with the RoHS Directive and that materials will be available to meet these emerging regulations. However, it is possible that unanticipated supply shortages or delays or excess non-compliant inventory may occur as a result of these new regulations. Failure to comply with any applicable environmental regulations could result in a range of consequences, including loss of sales, fines, suspension of production, excess inventory, and criminal and civil liabilities.

Government regulation of the communications industry could limit the growth of the markets that we serve or could require costly alterations of our current or future products.

The markets that we serve are highly regulated. Communications service providers must obtain regulatory approvals to operate broadband wireless access networks within specified licensed bands of the frequency spectrum. Further, the Federal Communications Commission and foreign regulatory agencies have adopted regulations that impose stringent RF emissions standards on the communications industry. In response to the new environmental regulations on health and safety in Europe and China, we are required to design and build a lead-free product. Changes to these regulations may require that we alter the performance of our products.

Risks Relating to Ownership of Our Stock

The assets of Wood River Capital Management, LLC and certain of its affiliates, the holders of 36.7% of our outstanding common stock as of December 31, 2005, have been placed into receivership by the Securities and Exchange Commission, and the receiver may dispose of such shares of our common stock. Such disposition may adversely affect the trading price of our common stock.

Based on filings made with the Securities and Exchange Commission, as of December 31, 2005, Wood River Capital Management, LLC and certain of its affiliated hedge funds, which we refer to collectively as Wood River, owned approximately 36.7% of our outstanding common stock. On October 13, 2005, the Securities and Exchange Commission filed an emergency action against Wood River and, concurrently with the filing of the action, an order was entered placing all assets of Wood River, including the Endwave shares owned by Wood River, into receivership. As a result, the receiver is also deemed to have beneficial ownership of such shares. The receiver will be required to liquidate the assets of Wood River or distribute such assets to the investors in the Wood River Funds. We currently do not know what the timing and manner of any liquidation or distribution of Endwave shares is likely to be, nor do we control any such liquidation or distribution. Such disposition of Endwave shares may have the effect of reducing the trading price of our common stock.

The market price of our common stock has historically fluctuated and is likely to fluctuate in the future.

The price of our common stock has fluctuated widely since our initial public offering in October 2000. For example, in 2005, the lowest bid price for our common stock was $9.46 and the highest bid price for our common stock was $55.41. The market price of our common stock can fluctuate significantly for many reasons, including, but not limited to:

•  our financial performance or the performance of our competitors;

•  the purchase or sale of common stock, or short-selling or other transactions involving our securities, particularly by Wood River or other large stockholders;

•  technological innovations or other trends or changes in the telecommunication network, defense electronics or homeland security markets;

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•  successes or failures at significant product evaluations or site demonstrations;

•  the introduction of new products by us or our competitors;

•  acquisitions, strategic alliances or joint ventures involving us or our competitors;

•  decisions by major participants in the communications industry not to purchase products from us or to pursue alternative technologies;

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

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

•  the low trading volume of our common stock.

It is likely that our operating results in one or more future quarters may be below the expectations of security analysts and investors. In that event, the trading price of our common stock would likely decline. In addition, the stock market has experienced extreme price and volume fluctuations. These market fluctuations can be unrelated to the operating performance of particular companies and the market prices for securities of technology companies have been especially volatile. Future sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock. Additionally, future stock price volatility for our common stock could provoke the initiation of securities litigation, which may divert substantial management resources and have an adverse effect on our business, operating results and financial condition. Our existing insurance coverage may not sufficiently cover all costs and claims that could arise out of any such securities litigation. We anticipate that prices for our common stock will continue to be volatile.

Wood River and the receiver of the Wood River assets control a large percentage of our common stock and are able to affect significantly the outcome of matters requiring stockholder approval.

As of December 31, 2005, Wood River and the receiver of the Wood River assets beneficially owned 36.7% of our outstanding common stock. Because most matters requiring approval of our stockholders require the approval of the holders of a majority of the shares of our outstanding common stock present in person or by proxy at the meeting, the significant ownership interest of Wood River allows Wood River and the receiver of the Wood River assets to affect significantly the election of our directors and the outcome of corporate actions requiring stockholder approval. This concentration of ownership may also delay, deter or prevent a change in control and may make some transactions more difficult or impossible to complete without their support, even if the transaction is favorable to our stockholders as a whole.

Our certificate of incorporation, bylaws and arrangements with executive officers contain provisions that could delay or prevent a change in control.

We are subject to certain Delaware anti-takeover laws by virtue of our status as a Delaware corporation. These laws prevent us from engaging in a merger or sale of more than 10% of our assets with any stockholder, including all affiliates and associates of any stockholder, who owns 15% or more of our outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of our voting stock, unless the board of directors approved the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock of the corporation, or the business combination is approved by our board of directors and authorized by at least 662/3% of our outstanding voting stock not owned by the interested stockholder. A corporation may opt out of the Delaware anti-takeover laws in its charter documents, however we have not chosen to do so. Our certificate of incorporation and bylaws include a number of provisions that may deter or impede hostile takeovers or changes of control of management, including a staggered board of directors, the elimination of the ability of our stockholders to act by written consent, discretionary authority given to our board of directors as to the issuance of preferred stock, and indemnification rights for our directors and executive officers. Additionally, during 2005, our board of directors adopted a Stockholder Rights Plan, providing for the distribution of one preferred share purchase right for each outstanding share of common stock held as of

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December 12, 2005, that may lead to the delay or prevention of a change in control that is not approved by our board of directors. We have an Executive Officer Severance and Retention Plan and a Key Employee Severance and Retention Plan that provide for severance payments and the acceleration of vesting of a percentage of certain stock options granted to our executive officers and certain senior, non-executive employees under specified conditions. We also have a Transaction Incentive Plan for the benefit of our executive officers and certain senior, non-executive employees that provides for bonus payments to be made to them upon a change in control transaction. These plans may make us a less attractive acquisition target or may reduce the amount a potential acquirer may otherwise be willing to pay for our company.

Item 1B.   Unresolved Staff Comments

Not applicable.

Item 2.   Properties

Our principal executive offices are located in Sunnyvale, California, where we lease approximately 16,000 square feet, which encompasses our corporate headquarters and research and development facilities. This lease expires in August 2006. We lease approximately 6,000 square feet in Andover, Massachusetts for our Northeast operations under a lease expiring in November 2008. We lease approximately 20,000 square feet in Diamond Springs, California for our manufacturing facilities under a lease that expires in June 2009. In Chiang Mai, Thailand, near the facilities of our contract manufacturer, HANA Microelectronics Co., Ltd., we lease a small office for manufacturing support under a lease expiring in March 2007. We believe that our existing facilities are adequate to meet our current and near term future needs.

Item 3.   Legal Proceedings

We are not currently party to any material litigation.

Although we are not a party to the litigation now pending in the Southern District of New York entitled “Securities and Exchange Commission v. Wood River Capital Management, LLC et al.” filed as Civil Action 05-CV-8713, we have filed a proof of claim with the Court reserving our rights to pursue claims against the defendants in such action, including possible claims for disgorgement of profits pursuant to Section 16 of the Exchange Act. Because Wood River has not yet publicly disclosed its trading history in our common stock, we are unable to determine at this time what claims exist, or what the damages for any such claims may be. To the extent we have any valid claims against Wood River, we intend to pursue them vigorously.

Item 4.   Submission of Matters to a Vote of Security Holders

We held our 2005 Annual Meeting of Stockholders on October 20, 2005. The results of the voting were as follows:

1. To elect one director, John F. McGrath, to hold office until 2008 Annual Meeting of Stockholders.

 FOR:  8,984,001          WITHHELD: 2,265

To elect one director, Wade Meyercord, to hold office until 2008 Annual Meeting of Stockholders.

 FOR: 8,978,609          WITHHELD:  7,657

2. To ratify the selection by the Audit Committee of the Board of Directors of Burr, Pilger & Mayer LLP as the independent registered public accounting firm of Endwave for its fiscal year ending December 31, 2005.

 FOR: 8,985,116          WITHHELD: 1,015          ABSTAINED: 135

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PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the Nasdaq National Market under the symbol “ENWV.” The following table sets forth the high and low daily bid prices per share of our common stock, as reported by the Nasdaq National Market.

	High		Low
Fiscal Year Ended December 31, 2004
First Quarter	$	12.96	$	7.10
Second Quarter		10.20		5.50
Third Quarter		14.60		6.83
Fourth Quarter		19.20		12.70
Fiscal Year Ended December 31, 2005
First Quarter		25.83		16.63
Second Quarter		49.75		23.66
Third Quarter		55.41		12.30
Fourth Quarter		15.34		9.46

The last reported sale price of our common stock on the Nasdaq National Market on February 17, 2006 was $9.30 per share. As of February 17, 2006, there were approximately 109 holders of record of our common stock.

We have never paid any cash dividends on our common stock. Because we currently intend to retain any future earnings to fund the development and growth of our business, we do not anticipate paying any cash dividends in the near future.

Item 6.   Selected Consolidated Financial Data

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included elsewhere in this report. The selected consolidated statements of operations data for the fiscal years ended December 31, 2003, 2004 and 2005 and the selected consolidated balance sheet data as of December 31, 2004 and 2005 are derived from the audited consolidated financial statements that are included elsewhere in this report. The selected consolidated statements of operations data for the fiscal years ended December 31, 2001 and 2002 and the selected consolidated balance sheet data as of December 31, 2001, 2002 and 2003 are derived from our audited consolidated financial statements not included in this report. The historical results are not necessarily indicative of the results of operations to be expected in any future periods. All per-share amounts for all periods presented have been restated to reflect the 1-for-4 reverse stock split that became effective after the close of business on June 28, 2002.

	Year Ended December 31,
	2005			2004			2003			2002			2001
	(In thousands, except per share data)
Consolidated Statements of Operations Data:
Revenues	$	48,735		$	33,162		$	33,847		$	22,572		$	34,125
Cost of product revenues		33,586			22,576			24,830			29,777			57,233
Other operating expenses		16,799			16,115			17,568			27,995			136,463
Loss from operations		(1,650	)		(5,529	)		(8,551	)		(35,200	)		(159,571	)
Net loss	$	(874	)	$	(4,404	)	$	(7,910	)	$	(31,002	)	$	(156,746	)
Basic and diluted net loss per share	$	(0.08	)	$	(0.45	)	$	(0.87	)	$	(3.47	)	$	(17.90	)

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	December 31,
	2005		2004		2003		2002		2001
	(In thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	22,415	$	25,137	$	29,298	$	29,025	$	57,163
Total assets		53,149		50,094		53,074		60,049		99,037
Long-term obligations, less current portion		385		559		363		1,075		3,841
Total stockholders’ equity		43,083		39,064		41,043		47,506		77,129

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report, as well as the information set forth in the “Risk Factors” section of this report. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including statements regarding our expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. In the past, our operating results have fluctuated and are likely to continue to fluctuate in the future.

Overview

We design, manufacture and market radio frequency, or RF, modules that enable the transmission, reception and processing of high frequency signals in telecommunication networks, defense electronics and homeland security systems. Our RF modules are typically used in high-frequency applications and include integrated transceivers, amplifiers, synthesizers, oscillators, up and down converters, frequency multipliers and microwave switch arrays.

Markets and Growth Strategy

Telecommunication network market.  Most of our RF modules are deployed in telecommunication networks. Our target customers for these applications are telecommunication network original equipment manufacturers and systems integrators, collectively referred to in this report as telecom OEMs. Telecom OEMs provide the wireless equipment used by service providers to deliver voice, data and video services to businesses and consumers.

From 2004 to 2005, we experienced growth of 38% in our telecommunications-related-revenues. We benefited both from increased demand experienced by our customers and by capturing a greater share of our customers’ overall high-frequency RF transceiver business. Telecom OEMs that purchased our products accounted for 80% of our total revenues during 2005.

Additionally, we believe the demand for microwave radios and the transceiver modules used to build them is increasing. As service providers deploy more cellular base stations to serve their growing subscriber base and upgrade existing facilities, they will require more microwave radio links for cellular backhaul. We believe this projected increased demand is also driven by growth of wireless telephony in developing nations, increase in data-sensitive cellular traffic, deployment of third-generation, or “3G,” networks and the introduction of other high capacity data only telecommunication networks.

Defense electronics and homeland security system markets.  Our RF modules are also designed into various applications outside of the telecommunication network market, including defense electronics and homeland security systems. Our target customers in the defense electronics market include defense systems integrators and their subcontractors that design aerospace systems, defense systems, weapons and electronics platforms for domestic and foreign defense customers. Our target customers in the homeland security market include those customers that are taking advantage of the properties of high-frequency RF to create new capabilities designed to detect security threats.

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From 2004 to 2005, we experienced growth of over 100% in our defense and homeland security-related revenue as the defense related market demand continued to be strong, we aggressively pursued opportunities and we benefited from a full year of revenue from JCA Technology, Inc. (“JCA”), which we acquired in July 2004. Revenues from our defense and homeland security business accounted for approximately 20% of our total revenues in 2005.

We also believe the demand for high-frequency RF modules within various defense electronics and homeland security systems is increasing. We are seeing increased demand in defense electronics systems as high frequency RF modules are being used in sophisticated radar systems, electronic warfare systems, intelligent battlefield systems and high-capacity communication systems. Due to the need for greater resolution, more comprehensive real-time information and better communication on the battlefield the United States military’s demand for high-frequency RF modules in the defense electronics market is growing. Similarly, the global escalation of terrorist and insurgency threats is resulting in increased governmental and private concern over providing adequate security measures. Many new, more capable systems are utilizing high-frequency RF signals for various detection and imaging systems applied to threats of violence.

Growth through acquisitions.  Since our initial public offering in October 2000, we have acquired and integrated five businesses or product lines. As a result of these transactions, we have increased our revenues and market share, broadened our product portfolio, diversified our customer base, gained expertise outside our core telecommunication network market and added key members to our staff. We believe the consolidation of high-frequency RF module suppliers will continue and will provide us additional opportunities for attractive acquisitions. It is our intent to continue to pursue strategic acquisitions that will further strengthen our competitive position and revenue growth as appropriate.

Improvement in Cost Structure

Over the past five years, we have reduced our costs dramatically and shifted many of our remaining costs from fixed to variable costs by consolidating our manufacturing operations, redesigning our products for cost reductions and improved manufacturability, streamlining our inventory management processes and reducing headcount. In 2001, we consolidated our three domestic manufacturing facilities into a single manufacturing facility in Diamond Springs, California, resulting in lower personnel and facilities costs. In 2002, we began implementing a plan to move most of our high-volume manufacturing to a lower-cost offshore contract manufacturer. Since that time, we increased the proportion of our revenues attributable to products manufactured offshore from approximately 8% in 2002 to over 80% in 2005. As a result, our cost of product revenues as a percentage of revenue have gone from 132% in 2002 to 68% in 2005.

Our remaining domestic manufacturing operations are now used primarily for our defense electronics products, which are required to be produced in the United States, and telecommunications and homeland security products that are produced in low volumes or require a high degree of technical support during their initial production. We maintain the ability to manufacture products in high volumes in Diamond Springs, California as needed. To the extent sales of our defense electronics products increase, we intend to manufacture those products in our existing domestic manufacturing facility or to employ a qualified United States contract manufacturer.

Seasonality

In the past, our operating results have reflected lower revenues in the first and third calendar quarters due to seasonality in the telecommunication network market. Revenues attributable to telecom OEMs typically have contracted in the first quarter due to delays in purchasing resulting from wireless carriers’ budgeting processes. The third quarter generally has been slow in our telecommunication network market as many of our European telecom OEM customers shut down their factories for a portion of the summer months. The fourth quarter historically has been our strongest quarter as the wireless carriers expend their remaining capital budgets for the year. However, we did not experience this seasonality in 2005, and we cannot be certain what seasonal factors, if any, will impact our revenues in the future or the extent of such potential fluctuations.

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Critical Accounting Policies

General

Management’s discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, inventories, asset impairments, income taxes, warranty obligations, restructuring charges, and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions. We discuss these policies further, as well as the estimates and judgments involved, below.

Revenue Recognition

Our primary customers are telecom OEMs and defense and homeland security systems integrators that incorporate our products into their systems. We recognize product revenues at the time title passes, which is generally upon product shipment or when withdrawn from a consignment location, and persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. Revenues under development contracts are generally recorded on a percentage of completion basis, using project hours as the basis to measure progress toward completing the contract and recognizing revenues. Revenues attributable to development fees accounted for 5.1% of our total revenues in 2003, 2.5% of our total revenues in 2004 and 3.3% of our total revenues in 2005. The costs incurred under these development agreements are included in research and development expenses.

Allowance for Doubtful Accounts

We make ongoing assumptions relating to the collectibility of our accounts receivable in our calculation of the allowance for doubtful accounts. In determining the amount of the allowance, we make judgments about the creditworthiness of customers based on ongoing credit evaluations and assess current economic trends affecting our customers that might impact the level of credit losses in the future and result in different rates of bad debts than previously seen. We also consider our historical level of credit losses. Our reserves, which were $243,000 at December 31, 2004 and $296,000 at December 31, 2005, historically have been adequate to cover our actual credit losses. If actual credit losses were to be significantly greater than the reserves we have established, our selling, general and administrative expenses would increase.

Warranty Reserves

We generally offer a one-year to two-year warranty on all of our products. We record a liability based on estimates of the costs that may be incurred under our warranty obligations and charge to cost of product revenues the amount of such costs at the time revenues are recognized. Our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Our estimates of anticipated rates of warranty claims and costs per claim are primarily based on historical information and future forecasts. At December 31, 2004 and 2005 our warranty reserves were $4.5 million and $3.3 million, respectively. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary. If actual warranty claims are significantly higher than forecast, or if the actual costs incurred to provide the warranty is greater than the forecast, our gross margins could be adversely affected.

Inventory Valuation

We evaluate our ending inventories for excess quantities and obsolescence at each balance sheet date. This evaluation includes review of materials usage, market conditions and product life cycles and an analysis of sales levels by product and projections of future demand and market conditions. We reserve for inventories that are

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considered excess or obsolete. We adjust remaining inventory balances to approximate the lower of our standard manufacturing cost or market value. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required, and would be reflected in cost of product revenues in the period the revision is made. This would have a negative impact on our gross margins in that period. If in any period we are able to sell inventories that were not valued or that had been written off in a previous period, related revenues would be recorded without any offsetting charge to cost of product revenues, resulting in a net benefit to our gross margin in that period. To the extent these factors materially affect our gross margins, we would disclose them.

Deferred Taxes

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe to be more likely than not realizable. We have recorded a valuation allowance in an amount equal to the net deferred tax assets to reflect uncertainty regarding future realization of these assets based on past performance and the likelihood of realization of our deferred tax assets.

Long-Lived Assets

We periodically review our property and equipment and identifiable intangible assets for possible impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Significant assumptions and estimates include the projected cash flows based upon estimated revenues and expense growth rates, the estimated royalty rates used for the valuation of acquired tradenames, and the discount rate applied to expected cash flows. In addition, our depreciation and amortization policies reflect judgments on the estimated useful lives of assets.

Business Combinations

In accordance with the provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations,” the purchase price of an acquired company is allocated between the intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The valuation of the intangible assets is based on an income approach methodology that values the intangible assets based on the future cash flows that could potentially be generated by the asset over its estimated remaining life discounted to its present value utilizing an appropriate weighted average cost of capital.

At December 31, 2005, the carrying value of goodwill was $1.6 million and the carrying value of identifiable intangible assets was $3.2 million. In accordance with the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” we assess goodwill and intangible assets with indefinite lives for impairment at least annually, or more frequently if events and changes in circumstances suggest that the carrying amount may not be recoverable. To the extent the carrying amount exceeds its fair value, an impairment charge to income is recorded. This assessment is based upon a discounted cash flow analysis and analysis of our market capitalization. The estimate of cash flow is based upon, among other things, certain assumptions about expected future operating performance and an appropriate discount rate determined by our management. Our estimates of discounted cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to our business model or changes in operating performance. Significant differences between these estimates and actual cash flows could materially affect our future financial results. We completed our annual goodwill impairment test as of September 30, 2005 and determined that no adjustment to the carrying value of goodwill was required. We have determined that no events have occurred from that date through December 31, 2005 that would require anupdated analysis. Our future operating performance will be impacted by the future amortization of these acquired intangible assets and potential impairment charges related to goodwill if indicators of potential impairment exist. As a result of business acquisitions, the allocation of the purchase price to goodwill and intangible assets could have a significant impact on our future operating results.

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Results of Operations

The following tables set forth selected consolidated statements of operations data for each of the periods indicated in dollars and as a percentage of total revenues.

	Year Ended December 31,
	2005			2004			2003
	(In thousands)
Revenues:
Product revenues	$	47,119		$	32,330		$	32,135
Development fees		1,616			832			1,712
Total revenues		48,735			33,162			33,847
Costs and expenses:
Cost of product revenues		33,134			22,389			24,830
Cost of product revenues, amortization of intangible assets		452			187			—
Research and development		6,488			4,957			4,462
Selling, general and administrative		9,327			7,527			8,755
Transaction costs		851			—			—
In-process research and development		—			320			—
Amortization of intangible assets		179			182			—
Restructuring charges, net		(46	)		2,895			304
Impairment of long-lived assets		—			389			2,589
Loss (recovery) on building sublease		—			(359	)		662
Amortization of deferred stock compensation		—			204			796
Total costs and expenses		50,385			38,691			42,398
Loss from operations		(1,650	)		(5,529	)		(8,551	)
Interest and other income, net		776			1,125			641
Net loss	$	(874	)	$	(4,404	)	$	(7,910	)

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	Year Ended December 31,
	2005			2004			2003
	(As a percentage of total revenues)
Revenues:
Product revenues		96.7	%		97.5	%		94.9	%
Development fees		3.3			2.5			5.1
Total revenues		100.0	%		100.0	%		100.0	%
Costs and expenses:
Cost of product revenues		68.0			67.5			73.4
Cost of product revenues, amortization of intangible assets		0.9			0.6			—
Research and development		13.3			14.9			13.2
Selling, general and administrative		19.1			22.7			25.9
Transaction costs		1.7			—			—
In-process research and development		—			1.0			—
Amortization of intangible assets		0.5			0.5			—
Restructuring charges, net		(0.1	)		8.7			0.9
Impairment of long-lived assets		—			1.2			7.6
Loss (recovery) on building sublease		—			(1.1	)		2.0
Amortization of deferred stock compensation		—			0.7			2.3
Total costs and expenses		103.4			116.7			125.3
Loss from operations		(3.4	)		(16.7	)		(25.3	)
Interest and other income, net		1.6			3.4			1.9
Net loss		(1.8	)%		(13.3	)%		(23.4	)%

Results of Operations

Year ended December 31, 2005 compared to year ended December 31, 2004

Total revenues

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Total revenues	$	48,735	$	33,162		47.0	%
Product revenues	$	47,119	$	32,330		45.7	%
Development fees	$	1,616	$	832		94.2	%

Total revenues consists of product revenues and development fees. Product revenues are attributable to sales of our RF modules. We generate development fees by developing product prototypes and custom products pursuant to development agreements that provide for payment of a portion of our research and development or other expenses. We typically enter into a development contract only if we perceive it to generate a significant opportunity for substantial sales of our RF modules. We expect to enter into more development contracts in the future as we seek to further penetrate the defense electronics market, where development contracts are customary, but we do not expect development fees to represent a significant percentage of our total revenues for the foreseeable future.

Product revenues increased substantially from 2004 to 2005 as a result of increased demand from both our telecommunications customers and our defense and homeland security system customers, despite pricing pressure resulting in a 10-15% average unit price reduction for our telecommunication products in 2005 compared to 2004. During 2005 revenues from our telecom OEM customers comprised 80% of our total revenues compared with 86%

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in 2004. Revenues from our defense and homeland security and other customers were 20% of our total revenues compared with 14% in 2004. Telecommunications-related revenues increased 38% from 2004 as a result of increased demand experienced by our customers and by capturing a greater share of our customers’ overall transceiver business. During 2005, we increased our penetration at Siemens and Nera as they began outsourcing more of their transceiver production. Our defense and homeland security and other revenues increased over 100% from 2004 as the defense related market demand continued to be strong, we aggressively pursued opportunities and we benefited from a full year of revenues from JCA, which we acquired in July 2004.

The increase in development fees from 2004 to 2005 was attributable to increased development of custom designed products for new and existing customers for both our telecommunications customers and our defense and homeland security customers.

Based on our knowledge of our customers and overall market trends, we anticipate increased demand for our products during 2006. We will also continue to emphasize a strategy of growth and diversification in non-telecommunication network markets. However, because the markets we serve are difficult to predict and the economic recovery has been inconsistent, we cannot assure you that a similar revenue growth rate will be realized during 2006. The electronic component industry is experiencing pressure to reduce prices and we believe that we will continue to face similar pressure from our customers during 2006.

Cost of product revenues

	Year Ended December 31,
	2005			2004			% Change
	(In thousands)
Cost of product revenues	$	33,134		$	22,389			48.0	%
Percentage of revenues		68.0	%		67.5	%

Cost of product revenues consists primarily of: costs of direct materials and labor used to assemble and test our products; equipment depreciation; costs associated with procurement, production control, quality assurance, and manufacturing engineering; costs associated with maintaining our manufacturing facilities; fees paid to our offshore manufacturer; expenses associated with excess or obsolete inventory; and costs associated with warranty returns offset by the benefit of usage of materials that were previously written off.

During 2005, the cost of product revenues as a percentage of revenues remained relatively consistent with the prior year as an increase in our direct materials cost as a percentage of revenue was offset by the benefit of increased absorption of our overhead costs due to increased overall revenue during the year. The increase in our direct materials cost as a greater portion of our revenues during 2005 was related to transceiver modules that we produced based on our customers’ designs. Our plan is to redesign our customers’ existing transceivers to lower material costs in the future.

The cost of product revenues was favorably impacted by the utilization of inventory that was previously written off amounting to approximately $295,000 during 2005 as compared to $292,000 during 2004.

We intend to continue to focus on reducing the cost of product revenues as a percentage of total revenues through the introduction of new designs and technology and further improvements to our offshore manufacturing processes. Our product costs are also impacted by the mix of products sold. We will incur additional costs of product revenues associated with our adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) during 2006, resulting in a lower gross margin on our products.

Research and development expenses

	Year Ended December 31,
	2005			2004			% Change
	(In thousands)
Research and development expenses	$	6,488		$	4,957			30.9	%
Percentage of revenues		13.3	%		14.9	%

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Research and development expenses consist primarily of salaries and related expenses for research and development personnel, outside professional services, prototype materials, supplies and labor, depreciation for related equipment and allocated facilities costs. The increase in research and development expenses in absolute dollars was attributable to the increase in personnel-related expenses of $815,000 primarily related to increases in our engineering personnel and a full year of JCA personnel expenses and increased project-related expenses of $307,000 to support increased development fee revenues.

In 2006, we expect research and development expenses to increase in absolute dollar terms as we continue to work on certain development programs and increase our defense electronics and homeland security related business. Additionally, we will incur additional costs associated with our adoption of SFAS 123(R) during 2006.

Selling, general and administrative expenses

	Year Ended December 31,
	2005			2004			% Change
	(In thousands)
Selling, general and administrative expenses	$	9,327		$	7,527			23.9	%
Percentage of revenues		19.1	%		22.7	%

Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales, marketing, finance, accounting, information technology, and human resources personnel, professional fees, promotional activities and allocated facilities costs. The increase in selling, general and administrative expenses in absolute dollars was attributable to the increase in personnel-related expenses of $969,000 primarily related to increases in personnel related to our defense electronics and homeland security business and a full year of JCA personnel expenses. Additionally, we incurred non-payroll related expenses attributable to our compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, of approximately $800,000 during 2005.

In 2006, we expect selling, general and administrative expenses to increase in absolute dollar terms as increased personnel and marketing related expenses will be partially offset by decreased consulting costs related to Section 404. Additionally, we will incur additional costs associated with our adoption of SFAS 123(R) during 2006.

Transaction costs

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Transaction costs	$	851	$	—		—

As part of a planned public offering of common stock we incurred $851,000 of transaction costs. During 2005, we postponed our proposed public offering indefinitely and expensed the $851,000 as a period expense. There were no similar costs in 2004.

In-process research and development

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
In-process research and development	$	—	$	320		—

As part of our acquisition of JCA in July 2004, we acquired $320,000 of in-process research and development, or IPRD. The value of the IPRD was determined based on a valuation analysis. The amount of the purchase price for JCA allocated to IPRD was determined through established valuation techniques generally accepted in the technology industry. The $320,000 allocated to the acquired IPRD was immediately expensed in the period the acquisition was completed because the projects associated with the IPRD had not yet reached technological feasibility and no future alternative uses existed for the technology. We had no IPRD in 2005.

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Amortization of intangible assets

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Cost of product revenues, amortization of intangible assets	$	452	$	187		141.7	%
Amortization of intangible assets	$	179	$	182		(1.6	)%

As part of our acquisition of JCA, we acquired $4.2 million of identifiable intangible assets, including approximately $2.3 million of developed technology, approximately $1.1 million for the JCA tradename, approximately $780,000 for customer relationships and approximately $140,000 for customer backlog. These assets are subject to amortization and have estimated useful lives as follows: developed technology, five years; customer backlog, six months; customer relationships, five years. The tradename is not subject to amortization and will be evaluated for impairment at least annually commencing one year after the acquisition or more frequently if events and changes in circumstances suggest that the carrying amount may not be recoverable.

The amortization associated with the developed technology is a charge to cost of product revenues. During 2005, $452,000 of amortization of developed technology was charged to cost of product revenues as we incurred a full year of the amortization. In 2004, we only incurred 5 months of amortization as JCA was purchased in July 2004. The amortization associated with the customer relationships and customer backlog is a charge to operating expenses. During 2005, $179,000 of amortization of customer relationships and customer backlog was charged to operating expenses. In 2004, we only incurred 5 months of amortization, however customer backlog was fully amortized during the first quarter of 2005.

Restructuring charges, net

	Year Ended December 31,
	2005			2004		% Change
	(In thousands)
Restructuring charges, net	$	(46	)	$	2,895		—

During 2005, we incurred a net benefit to restructuring expense related to the reversal of $46,000 of charges from the restructuring plan in connection with the acquisition of JCA. The original estimates of the charges related to the restructuring plan were higher than the final payouts resulting in the $46,000 benefit in 2005.

During 2004, we incurred a net lease termination fee of $2.9 million related to the termination of the lease agreement for our corporate headquarters in Sunnyvale, California. We also entered into a new lease for our corporate headquarters at a lower market rate. In addition, we reversed $4,000 associated with our restructuring plan for the third quarter of 2003, as we had overestimated the related charges at that time.

Impairment of long-lived assets

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Impairment of long-lived assets	$	—	$	389		—

During 2004, we recorded a charge of $389,000 to write off the remaining carrying value of equipment held-for-sale and to write off sales tax capitalized as part of our acquisition of Stellex Broadband Wireless in April 2001. The equipment held-for-sale was determined to have no value based on a current market review of similar assets and our inability to sell the assets despite our marketing efforts. The sales tax was assessed in the third quarter of 2004 and was related to equipment that had been fully depreciated or impaired. There were no similar charges during 2005.

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Loss (recovery) on building sublease

	Year Ended December 31,
	2005		2004			% Change
	(In thousands)
Loss (recovery) on building sublease	$	—	$	(359	)		—

During 2003, we recorded a charge of $662,000 associated with the sublease of our Sunnyvale, California headquarters building for the excess of the remaining lease obligations over the anticipated sublease income. During 2004, $359,000 of this loss was reversed as the sublease was terminated prior to its expiration date, as a part of the lease termination described above. There were no similar charges during 2005.

Amortization of deferred stock compensation

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Amortization of deferred stock compensation	$	—	$	204		—

Deferred stock compensation charges consist primarily of charges related to the difference between deemed fair market values for financial reporting purposes on the date of employee option grants and the exercise price for option awards prior to our initial public offering, as well as expenses attributable to the acceleration of options. Deferred stock compensation is represented as a reduction of stockholders’ equity. As of June 2004, we fully amortized all deferred stock compensation and, consequently, did not have any deferred stock compensation charges in 2005 arising from these option awards.

Interest and other income, net

	Year Ended December 31,
	2005		2004		% Change
	(In thousands)
Interest expense	$	—	$	19		—
Interest and other income, net	$	776	$	1,144		(32.2	)%

Interest and other income, net consists primarily of interest income earned on our cash, cash equivalents and short-term investments and gains and losses on the sale of fixed assets, partially offset by interest expense on a note payable and capital equipment leases.

The decrease in interest expense was attributable to paying off the remaining balance on the note payable during 2004.

Interest and other income, net consists of interest income, contract termination fees and gains and losses on sale or abandonment of fixed assets. During 2005, we earned $648,000 of interest income compared with $430,000 in 2004 as interest rate increases in 2005 led to increased earnings on our investment portfolio. During 2005, we recognized $128,000 of other income primarily from the amortization of the deferred gain from our sale of the Diamond Springs, California location in 2004 partially offset by banking charges. During 2004, we recognized $714,000, primarily from the sale of land, fixed assets and assets held-for-sale and sublease income.

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Year ended December 31, 2004 compared to year ended December 31, 2003

Total revenues

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Total revenues	$	33,162	$	33,847		(2.0	)%
Product revenues	$	32,330	$	32,135		0.6	%
Development fees	$	832	$	1,712		(51.4	)%

Product revenues in 2004 remained consistent with the prior year despite pricing decreases of 10-15% for some of our larger customers based on committed price reductions arising from increased volumes and competitive market demands, which we estimate reduced revenues by approximately $1.0 million in the fourth quarter of 2004 due to parts shortages from a few key suppliers. These pricing decreases were offset by increased product volumes from some of our larger customers, sales of new products for existing customers, the addition of new customers and the addition of product revenues attributable to JCA, which we acquired in July 2004.

The decrease in development fees is attributable to fewer customers reimbursing us for the development of their customized products.

Cost of product revenues

	Year Ended December 31,
	2004			2003			% Change
	(In thousands)
Cost of product revenues	$	22,389		$	24,830			(9.8	)%
Percentage of revenues		67.5	%		73.4	%

The decrease in cost of product revenues was primarily attributable to: the reversal of $1.3 million in excess warranty accrual; the reversal of a $793,000 charge to cost of product revenues for a liability that was settled during the first quarter of 2004; the use of redesigned products and semiconductors, resulting in reduced use of expensive semiconductor materials such as gallium arsenide; lower prices we negotiated with Velocium for semiconductor processing; and increased offshore manufacturing at a lower cost. The cost of product revenues was also reduced by the use of $292,000 of inventory that was previously written off.

Research and development expenses

	Year Ended December 31,
	2004			2003			% Change
	(In thousands)
Research and development expenses	$	4,957		$	4,462			11.0	%
Percentage of revenues		14.9	%		13.2	%

The increase in research and development expenses was primarily attributable to the research and development expenses incurred by added headcount from JCA, which we acquired in the third quarter of 2004, of $470,000 and increased project and consulting expenses for development programs of $427,000, offset in part by $430,000 of decreased depreciation and facilities costs resulting from the sale and leaseback of our Diamond Springs, California manufacturing facility and the relocation of our Sunnyvale, California headquarters.

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Selling, general and administrative expenses

	Year Ended December 31,
	2004			2003			% Change
	(In thousands)
Selling, general and administrative expenses	$	7,527		$	8,755			(14.0	)%
Percentage of revenues		22.7	%		25.9	%

The decrease in selling, general and administrative expenses was primarily attributable to reduced facilities expenses attributable to the relocation of our Sunnyvale headquarters of approximately $1.0 million, a reduction in bad debt and other selling expenses of $577,000 and lower depreciation expense due to the write-off of certain equipment in 2003 of $127,000, partially offset by increased personnel related expenses of $276,000 resulting from our acquisition of JCA in July 2004 and increased consulting and service fees of $223,000 attributable to our efforts to comply with Section 404.

In-process research and development

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
In-process research and development	$	320	$	—		—

As part of our acquisition of JCA in July 2004, we acquired $320,000 of in-process research and development, or IPRD. The value of the IPRD was determined based on a valuation analysis from an independent appraiser. The amount of the purchase price for JCA allocated to IPRD was determined through established valuation techniques generally accepted in the technology industry. The $320,000 allocated to the acquired IPRD was immediately expensed in the period the acquisition was completed because the projects associated with the IPRD had not yet reached technological feasibility and no future alternative uses existed for the technology. We had no IPRD in 2003.

Amortization of intangible assets

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Cost of product revenues, amortization of intangible assets	$	187	$	—		—
Amortization of intangible assets	$	182	$	—		—

During 2004, $187,000 of amortization of developed technology was charged to cost of product revenues and $182,000 of amortization of customer relationships and customer backlog was charged to operating expenses. We had no such amortization expenses in 2003.

Restructuring charges, net

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Restructuring charges, net	$	2,895	$	304		852.3	%

During 2004, we incurred a net lease termination fee of $2.9 million related to the termination of the lease agreement for our corporate headquarters in Sunnyvale, California. We also entered into a new lease for our corporate headquarters at a lower market rate. In addition, we reversed $4,000 associated with our restructuring plan for the third quarter of 2003, as we had overestimated the related charges at that time.

During 2003, we recorded a restructuring charge of $490,000 under the third quarter 2003 restructuring plan, all of which was for severance payments. We eliminated 18 positions and made cash payments of $486,000 under

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the plan. In addition, during the fourth quarter of2003, we revised estimates of the number of positions to be eliminated pursuant to the third quarter 2002 restructuring plan and reversed $186,000 of the severance accrual.

Impairment of long-lived assets

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Impairment of long-lived assets	$	389	$	2,589		(85.0	)%

During 2004, we recorded a charge of $389,000 to write off the remaining carrying value of equipment held-for-sale and to write off sales tax capitalized as part of our acquisition of Stellex Broadband Wireless in April 2001. The equipment held-for-sale was determined to have no value based on a current market review of similar assets and our inability to sell the assets despite our marketing efforts. The sales tax was assessed in the third quarter of 2004 and was related to equipment that had been fully depreciated or impaired.

During 2003, we evaluated the carrying value of the long-lived assets used in our manufacturing process. As we moved more of our production to our offshore contract manufacturer, we did not need as much manufacturing equipment, and took an impairment charge of $2.4 million for excess manufacturing equipment. The impairment charge was calculated as the difference between the carrying value and the estimated salvage value of the equipment.

In 2003, we also recorded an additional charge of $139,000 to reduce the carrying value of engineering equipment based on the amounts by which the carrying value of these assets exceeded their fair value. Our estimate of the fair value of the assets was based on sales prices of similar equipment.

Amortization of deferred stock compensation

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Amortization of deferred stock compensation	$	204	$	796		(74.4	)%

The decrease in amortization of deferred stock compensation was related to the timing of the termination of employees with deferred compensation associated with their stock options and the effects of the graded vested method of amortization, which accelerates the amortization of deferred compensation.

Loss (recovery) on building sublease

	Year Ended December 31,
	2004			2003		% Change
	(In thousands)
Loss (recovery) on building sublease	$	(359	)	$	662		—

During 2003, we recorded a charge of $662,000 associated with the sublease of our Sunnyvale, California headquarters building for the excess of the remaining lease obligations over the anticipated sublease income. During the first quarter of 2004, $359,000 of this loss was reversed as the sublease was terminated prior to its expiration date, as a part of the lease termination described above.

Interest and other income, net

	Year Ended December 31,
	2004		2003		% Change
	(In thousands)
Interest expense	$	19	$	112		(83.0	)%
Interest and other income, net	$	1,144	$	753		51.9	%

42

The increase in interest income was due to increasing interest rates and increasing levels of cash available for investment.

Other income, net consists of contract termination fees and gains and losses on sale or abandonment of fixed assets. During 2004, we realized a net gain of $714,000, primarily from the sale of land, fixed assets and assets held-for-sale and sublease income. During 2003, we realized other income of $496,000 primarily due to $272,000 from the gain on sale of fixed assets and $182,000 from sublease income.

The decrease in interest expense was primarily attributable to paying off the remaining balance on a note payable during the second quarter of 2004.

Liquidity and Capital Resources

At December 31, 2005 we had $8.5 million of cash and cash equivalents and $14.0 million in short-term investments, working capital of $37.3 million, and no long-term or short-term debt outstanding. The following table sets forth selected consolidated statement of cash flows data for our three most recent fiscal years.

	Year Ended December 31,
	2005			2004			2003
	(In thousands)
Net cash provided by (used in) operating activities	$	(7,184	)	$	(4,970	)	$	221
Net cash provided by investing activities		5,906			1,899			1,332
Net cash provided by (used in) financing activities		4,926			1,471			(1,169	)
Cash, cash equivalents, restricted cash and short-term investments at end of period	$	22,440		$	25,137		$	30,076

During 2005, we used $7.2 million of cash in operating activities as compared to using $5.0 million in 2004. Our net loss adjusted for depreciation and other non-cash items, was income of $1.0 million as compared to a net loss adjusted for depreciation and other non-cash items of $2.4 million in 2004. The decreased net loss in 2005 was primarily due to a 2004 related settlement fee payment of $3.0 million in consideration for the cancellation of an above-market lease on our previous Sunnyvale, California corporate headquarters. No similar amount was paid in 2005. The remaining use of $8.2 million in cash in 2005 was primarily due to a $5.6 million increase in inventories, a $1.8 million increase to accounts receivable, a decrease of $1.2 million in accrued warranty and a decrease in accounts payable of $633,000 partially offset by a $1.1 million increase in accrued compensation and other accrued liabilities.

During 2004, we used $5.0 million of cash in operating activities, as compared to generating $221,000 in 2003. The use of cash in operating activities in 2004 was attributable to a $2.4 million net loss, excluding depreciation and other non-cash items, and net changes in 2004 operating assets and liabilities that used an additional $2.6 million in cash. Our net loss for 2004, excluding depreciation and other non-cash items, was $2.4 million, as compared to a net loss for 2003, excluding depreciation and other non-cash items, of $1.4 million. The increased net loss in 2004 was primarily due to a $3.0 million settlement fee paid in consideration for the cancellation of an above-market lease on our previous Sunnyvale, California corporate headquarters. The use of $2.6 million in cash was primarily due to a $1.5 million increase to accounts receivable, a $1.5 million decrease in accrued warranty and a $390,000 net decrease in accounts payable and accrued compensation and other current and long-term liabilities, partially offset by a $610,000 decrease in inventory and a $160,000 decrease in other assets.

Investing activities provided cash of $5.9 million in 2005 compared to $1.9 million in 2004. The $5.9 million provided by investing activities in 2005 was primarily due to net maturity of short-term investments of $6.3 million partially offset by purchases of equipment of $416,000.

Investing activities provided cash of $1.9 million in 2004 compared to $1.3 million in 2003. The $1.9 million provided by investing activities in 2004 was primarily due to $5.1 million generated by the sale of assets, including $4.6 million from the sale of land and buildings at our Diamond Springs, California location, the net maturity of $2.5 million of short-term investments and a $778,000 decrease in restricted cash resulting from our repayment in the same amount of a note payable in 2004. This was partially offset by the use of $6.1 million for the purchase of

43

JCA and $460,000 of capital expenditures for additional leasehold improvements and computer hardware and software.

Financing activities provided cash of $4.9 million in 2005, as compared to $1.5 million in 2004. The $4.9 million provided by financing activities in 2005 was due to the proceeds from the exercise of employee stock options and stock issuances under our employee stock purchase plan.

Financing activities provided cash of $1.5 million in 2004, as compared to a use of $1.2 million in 2003. The $1.5 million provided by financing activities in 2004 was due to the $2.2 million of proceeds from the exercise of employee stock options and stock issuances under our employee stock purchase plan, partially offset by the $778,000 payment in satisfaction of a note payable for equipment purchases.

We believe that our existing cash and investment balances will be sufficient to meet our operating and capital requirements for the next 12 months and the foreseeable future thereafter. However, additional financing may be required to fund acquisitions. As a result, we may need to raise additional capital in the future. Additional capital may not be available at all, or may only be available on terms unfavorable to us. With the exception of operating leases discussed in the notes to the consolidated financial statements included in this report, we have not entered into any off-balance sheet financing arrangements, we have not established or invested in any variable interest entities, we do not have any unconditional purchase obligations, nor do we have non-cancelable commitments for capital expenditures. We have not guaranteed the debt or obligations of other entities or entered into options on non-financial assets. The following table summarizes our future cash obligations for operating leases, excluding interest:

Years Ending December 31,	Operating Leases
	(In thousands)
2006	$	456
2007		308
2008		300
2009		105
Total minimum payments required	$	1,169

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151, “Inventory Costs — An Amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight and re-handling costs must be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted in the first quarter of 2006, beginning on January 1, 2006. We do not expect SFAS 151 to have a material financial statement impact.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Non-monetary Assets — An Amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 eliminates the exception from fair value measurement for non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, “Accounting for Non-monetary Transactions,” and replaces it with the exception for exchanges that do not have commercial substance. SFAS 153 specifies that a non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for the fiscal periods beginning after June 15, 2005 and is required to be adopted in the first quarter of fiscal 2006, beginning on January 1, 2006. We do not expect it to have a material financial statement impact.

In December 2004, the FASB issued SFAS 123(R), which requires the measurement of all share-based payments to employees, including grants of stock options, using a fair-value-based method and the recording of

44

such expense in the consolidated statements of operations. The accounting provisions of SFAS 123(R) were originally effective for all reporting periods beginning after June 15, 2005. The proforma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition.

In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, providing supplemental implementation guidance for SFAS 123(R). In April 2005, the Securities and Exchange Commission approved a rule that delayed the effective date of SFAS 123(R) to the first annual reporting period beginning after June 15, 2005. Although we have not yet determined whether the adoption of SFAS 123(R) will result in amounts that are similar to the current pro forma disclosures under SFAS 123, we are evaluating the requirements under SFAS 123(R) and SAB No. 107 and expect the adoption to have a significant adverse impact on our consolidated statements of operations and net loss per share. SFAS 123(R) became effective beginning with the first quarter of 2006.

In May 2005, the FASB issued Statement of Financial Accounting Standards 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. We do not expect the adoption of this statement will have a material impact on our results of operations or financial condition.

In November 2005, the FASB issued FASB Staff Position FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP FAS 115-1”), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP FAS 115-1 also includes accounting considerations subsequent to the recognition of an other-than temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP FAS 115-1 is required to be applied to reporting periods beginning after December 15, 2005. We are required to adopt FSP FAS 115-1 in the first quarter of fiscal 2006. We do not expect the adoption of this statement will have a material impact on our results of operations or financial condition.

Item 7A.   Qualitative and Quantitative Disclosures about Market Risk

Qualitative and Quantitative Disclosures about Market Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. In order to reduce this interest rate risk, we usually invest our cash in investments with short maturities. As of December 31, 2005, all of our investments in our portfolio were classified as cash equivalents or short-term investments and consisted primarily of commercial paper and government securities. Due to the generally short duration of these investments, a change 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 interest income.

Currently, all sales to international customers are denominated in United States dollars and, accordingly we are not exposed to foreign currency rate risks in connection with these sales. However, a strengthening dollar could make our products less competitive in foreign markets and thereby lead to a decrease in revenues attributable to international customers.

45

Item 8.   Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
	Number
Reports of Independent Registered Public Accounting Firms		47
Consolidated Balance Sheets		49
Consolidated Statements of Operations		50
Consolidated Statements of Changes in Stockholders’ Equity		51
Consolidated Statements of Cash Flows		52
Notes to Consolidated Financial Statements		53

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Endwave Corporation

We have audited the accompanying consolidated balance sheets of Endwave Corporation and its subsidiary (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in Item 15(a)(2) as of and for the years ended December 31, 2005 and 2004. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Endwave Corporation and its subsidiary as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule as of and for the years ended December 31, 2005 and 2004, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/  Burr, Pilger, & Mayer LLP

Palo Alto, California

March 14, 2006

47

ERNST & YOUNG LLP, INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Endwave Corporation

We have audited the accompanying statements of operations, stockholders’ equity and cash flows of Endwave Corporation as of December 31, 2003, and for the year ended December 31, 2003. Our audit also included the financial statement schedule listed in the Index at Item 15(a). These statements of operations, stockholders’ equity and cash flows and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these statements of operations, stockholders’ equity and cash flows and schedule based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of operations, stockholders’ equity and cash flows are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statements of operations, stockholders’ equity and cash flows. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statements of operations, stockholders’ equity and cash flows presentation. We believe that our audit of the statements of operations, stockholders’ equity and cash flows provides a reasonable basis for our opinion.

In our opinion, the statements of operations, stockholders’ equity and cash flows referred to above present fairly, in all material respects, the results of operations and cash flows of Endwave Corporation for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic statements of operations, stockholders’ equity and cash flows taken as a whole, presents fairly in all material respects the information set forth therein.

/s/  Ernst & Young LLP

Palo Alto, California

February 3, 2004

48

ENDWAVE CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,
	2005			2004
	(In thousands, except
	share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	8,456		$	4,808
Restricted cash		25			—
Short-term investments		13,959			20,329
Accounts receivable, net of allowance for doubtful accounts of $296 in 2005 and $243 in 2004		10,487			8,673
Accounts receivable, from affiliate		—			15
Inventories		13,448			7,866
Other current assets		560			477
Total current assets		46,935			42,168
Property and equipment, net		1,321			2,394
Other assets		97			125
Goodwill and intangible assets		4,796			5,407
Total assets	$	53,149		$	50,094
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,954		$	2,308
Accounts payable to affiliate		—			1,279
Accrued warranty		3,257			4,488
Accrued compensation		2,494			1,370
Restructuring liabilities, current		20			274
Other current liabilities		956			752
Total current liabilities		9,681			10,471
Other long-term liabilities		385			559
Total liabilities		10,066			11,030
Commitments and contingencies (Note 9)
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized and none issued and outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 11,358,816 and 10,499,944 shares issued and outstanding in 2005 and 2004, respectively		11			10
Additional paid-in capital		309,583			304,658
Treasury stock, at cost (39,150 shares in 2005 and 2004)		(79	)		(79	)
Accumulated other comprehensive loss		(63	)		(30	)
Accumulated deficit		(266,369	)		(265,495	)
Total stockholders’ equity		43,083			39,064
Total liabilities and stockholders’ equity	$	53,149		$	50,094

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

49

ENDWAVE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2005			2004			2003
	(In thousands, except share
	and per share data)
Revenues:
Product revenues ($61, $86, and $345 from affiliate, respectively)	$	47,119		$	32,330		$	32,135
Development fees		1,616			832			1,712
Total revenues		48,735			33,162			33,847
Costs and expenses:
Cost of product revenues ($39, $51, and $124 related to revenues from affiliate, respectively)		33,134			22,389			24,830
Cost of product revenues, amortization of intangible assets		452			187			—
Research and development		6,488			4,957			4,462
Selling, general and administrative		9,327			7,527			8,755
Transaction costs		851			—			—
In-process research and development		—			320			—
Amortization of intangible assets		179			182			—
Restructuring charges, net		(46	)		2,895			304
Impairment of long-lived assets		—			389			2,589
Loss (recovery) on building sublease		—			(359	)		662
Amortization of deferred stock compensation*		—			204			796
Total costs and expenses		50,385			38,691			42,398
Loss from operations		(1,650	)		(5,529	)		(8,551	)
Interest and other income, net		776			1,144			753
Interest expense		—			(19	)		(112	)
Net loss	$	(874	)	$	(4,404	)	$	(7,910	)
Basic and diluted net loss per share	$	(0.08	)	$	(0.45	)	$	(0.87	)
Shares used in computing basic and diluted net loss per share		10,891,431			9,824,633			9,134,626
* Amortization of deferred stock compensation:
Cost of product revenues	$	—		$	109		$	193
Research and development		—			44			225
Selling, general and administrative		—			51			378
	$	—		$	204		$	796

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

50

ENDWAVE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

														Accumulated
					Additional						Deferred			Other
	Shares of		Common		Paid-In			Treasury			Stock			Comprehensive			Accumulated
	Common Stock		Stock		Capital			Stock			Compensation			Income (Loss)			Deficit			Total
	(In thousands, except share data)
Balance as of December 31, 2002		9,014,661	$	9	$	302,116		$	(79	)	$	(1,292	)	$	(67	)	$	(253,181	)	$	47,506
Unrealized gain on short-term investments		—		—		—			—			—			65			—			65
Net loss		—		—		—			—			—			—			(7,910	)		(7,910	)
Comprehensive loss																					(7,845	)
Exercise of stock options		211,776		—		493			—			—			—			—			493
Compensation recognized under employee stock plans		—		—		124			—			—			—			—			124
Amortization of deferred stock compensation		—		—		—			—			672			—			—			672
Reversal of deferred stock compensation due to forfeited options		—		—		(399	)		—			399			—			—			—
Issuance of common stock under employee stock purchase plan		121,148		—		93			—			—			—			—			93
Balance as of December 31, 2003		9,347,585		9		302,427			(79	)		(221	)		(2	)		(261,091	)		41,043
Unrealized loss on short-term investments		—		—		—			—			—			(28	)		—			(28	)
Net loss		—		—		—			—			—			—			(4,404	)		(4,404	)
Comprehensive loss																					(4,432	)
Exercise of stock options		936,991		1		2,047			—			—			—			—			2,048
Amortization of deferred stock compensation		—		—		—			—			204			—			—			204
Reversal of deferred stock compensation due to forfeited options		—		—		(17	)		—			17			—			—			—
Issuance of common stock under employee stock purchase plan		215,368		—		201			—			—			—			—			201
Balance as of December 31, 2004		10,499,944		10		304,658			(79	)		—			(30	)		(265,495	)		39,064
Unrealized loss on short-term investments		—		—		—			—			—			(33	)		—			(33	)
Net loss		—		—		—			—			—			—			(874	)		(874	)
Comprehensive loss																					(907	)
Exercise of stock options		793,444		1		4,339			—			—			—			—			4,340
Issuance of common stock under employee stock purchase plan and other		65,428		—		586			—			—			—			—			586
Balance as of December 31, 2005		11,358,816	$	11	$	309,583		$	(79	)	$	—		$	(63	)	$	(266,369	)	$	43,083

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

51

ENDWAVE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2005			2004			2003
	(In thousands)
Operating activities:
Net loss	$	(874	)	$	(4,404	)	$	(7,910	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
In-process research and development		—			320			—
Depreciation		1,465			1,619			2,444
Restructuring charge, net		(46	)		(4	)		304
Loss (recovery) on building sublease		—			(359	)		662
Impairment of long-lived assets and other		—			389			2,589
Amortization of intangible assets		631			369			—
Compensation recognized under employee stock plans		—			—			124
Amortization of deferred stock compensation		—			204			672
Gain on the sale of land and equipment		(159	)		(535	)		(260	)
Changes in operating assets and liabilities:
Accounts receivable		(1,799	)		(1,493	)		(2,480	)
Inventories		(5,582	)		610			3,665
Other assets		(55	)		160			134
Accounts payable		(633	)		400			1,050
Accrued warranty		(1,231	)		(1,456	)		252
Accrued compensation, restructuring and other current and long term liabilities		1,099			(790	)		(1,025	)
Net cash provided by (used in) operating activities		(7,184	)		(4,970	)		221
Investing activities:
Cash paid in business combinations		(20	)		(6,067	)		—
Purchases of equipment		(416	)		(460	)		(8	)
Proceeds on sale of property and equipment		30			5,115			382
Decrease (increase) in restricted cash		(25	)		778			782
Purchases of short term investments		(14,380	)		(15,387	)		(31,080	)
Proceeds on maturities of short-term investments		20,717			17,920			31,256
Net cash provided by investing activities		5,906			1,899			1,332
Financing activities:
Payments on capital lease obligations		—			—			(1,259	)
Payments on notes payable		—			(778	)		(496	)
Proceeds from exercises of stock options		4,340			2,048			493
Proceeds from issuance of stock		586			201			93
Net cash provided by (used in) financing activities		4,926			1,471			(1,169	)
Net increase (decrease) in cash and cash equivalents		3,648			(1,600	)		384
Cash and cash equivalents at beginning of year		4,808			6,408			6,024
Cash and cash equivalents at end of year	$	8,456		$	4,808		$	6,408
Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$	19		$	112

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

52

ENDWAVE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   The Company

Endwave Corporation and its wholly-owned subsidiary, Endwave Defense Systems Incorporated (together referred to as “Endwave” or the “Company”), design, manufacture and market radio frequency (“RF”) modules that enable the transmission, reception and processing of high frequency signals in telecommunication networks, defense electronics and homeland security systems. The Company’s RF modules are typically used in high-frequency applications and include:

•  integrated transceivers — combinations of electronic devices that combine both the transmit and receive functions necessary for a bi-directional radio link;

•  amplifiers — electronic devices used to increase the amplitude and power of an electronic signal;

•  synthesizers — electronic devices that can be used to generate several different radio frequency signals from a single source;

•  oscillators — electronic devices that generate alternating increasing and decreasing signals at specific intervals;

•  up and down converters — electronic devices that shift the center frequency of a radio signal without altering the signal’s data modulation;

•  frequency multipliers — electronic devices that increase the frequency of a radio signal in integer multiples; and

•  microwave switch arrays — electronic devices that can switch the routing of a radio signal.

2.   Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements of Endwave include the financial results of Endwave Defense Systems Incorporated (formerly JCA Technologies, Inc.) from the date of its purchase, July 21, 2004, and have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany accounts and transactions have been eliminated.

Reclassification

In fiscal 2005, we classified all auction rate securities and variable rate demand obligations to short-term investments pursuant to an interpretation of Statement of Financial Accounting Standards No. 95 (“SFAS 95”), “Statement of Cash Flows,” relating to the definition of cash equivalents. Auction rate securities in the amount of $9.4 million have been reclassified from cash and cash equivalents to short-term investments in the December 31, 2004 consolidated balance sheet to conform to the December 31, 2005 financial statement presentation. Accordingly, the consolidated statements of cash flows for the years ended December 31, 2004 and 2003 reflect the gross purchases and sales of these securities as investing activities rather than a component of cash and cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

The Company’s primary customers are telecom original equipment manufacturers (“OEM”) and defense electronics and homeland security systems integrators that integrate the Company’s products into their systems. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company recognizes product revenues at the time title passes, which is generally upon product shipment or when withdrawn from a consignment location and when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectibility is reasonably assured. After title passes, there are no customer acceptance requirements or other remaining obligations and customers do not have a right of return. Revenues under development contracts are generally recorded on a percentage of completion basis, using project hours as the basis to measure progress toward completing the contract and recognizing revenues. The costs incurred under these development agreements are expensed as incurred and included in research and development expenses.

Warranty

The warranty periods for the Company’s products are between one and two years from date of shipment. The Company provides for estimated warranty expense at the time of shipment. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.

In March 2005, the Company entered into a settlement and release agreement with Northrop Grumman Space & Mission Systems Corp. (“Northrop Grumman”) to settle all matters related to direct and indirect costs associated with a degraded semiconductor component originally provided by their foundry. Northrop Grumman reimbursed the Company’s customer for indirect costs associated with a recall of the product incorporating the degraded semiconductor component. Under the settlement and release agreement, the Company obtained the right to make a final purchase of additional wafers at preferable pricing, agreed to pay $300,000 for final reimbursement of such indirect costs, and assumed sole responsibility for any future product failures attributable to the semiconductor component. In April 2005, Endwave paid the $300,000 settlement fee and relieved the related warranty accrual. The amount is included in “warranties settled or reversed” in the table below.

During the second quarter of 2004, the Company determined that approximately $1.3 million of warranty accrual related to a possible pattern defect on a specific customer issue was no longer necessary. The amount is included in “warranties settled or reversed” in the table below.

Changes in the Company’s accrued warranty during the years ended December 31, 2005 and 2004 are as follows:

	2005			2004
	(In thousands)
Balance at January 1	$	4,488		$	5,835
Warranties accrued		700			707
Warranties settled or reversed		(1,931	)		(2,054	)
Balance at December 31	$	3,257		$	4,488

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company provides an allowance for specific customer accounts where collection is doubtful and also provides an allowance for other accounts based on historical collection and write-off experience. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash Equivalents and Short-Term Investments

The Company invests its excess cash primarily in highly liquid investment grade commercial paper and money market accounts with four United States banks.

The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents. Management has classified the Company’s short-term investments as available-for-sale securities in the accompanying consolidated financial statements. Available-for-sale securities are carried at fair value based on quoted market prices, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss) in stockholders’ equity. Interest income is recorded using an effective interest rate, with the associated premium or discount amortized to interest income. Realized gains and losses and declines in the value of securities determined to be other-than-temporary are included in other income (expense). The cost of securities sold is based on the specific identification method.

Restricted Cash

Restricted cash represents a certificate of deposit held by a financial institution as collateral for a letter of credit in connection with the Company’s building lease in Andover, Massachusetts. The restricted cash balance will be maintained by the Company for the term of the lease that terminates on November 30, 2008.

Inventory Valuation

Inventories are stated at the lower of standard cost (determined on a first-in, first-out basis) or market (net realizable value). Standard costs approximate average actual costs. The Company makes inventory provisions for estimated excess and obsolete inventory based on management’s assessment of future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the useful lives of the assets, ranging from three to seven years. Leasehold improvements are amortized using the straight-line method based upon the shorter of the estimated useful lives or the lease term of the respective assets. Repairs and maintenance costs are charged to expense as incurred.

	Depreciable
	Life
Software		3 years
Leasehold improvements		3 years
Machinery and equipment		5 to 7 years

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. Identifiable intangible assets are comprised of developed technologies, tradenames, customer relationships, and customer backlog. Identifiable intangible assets are being amortized using the straight-line method over the estimated useful lives ranging from six months to five years. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer subject to amortization. Rather, the Company evaluates goodwill and intangible assets with indefinite lives for impairment at least annually in the third quarter, or more frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Impairment of Long-Lived Assets

The Company reviews long-lived assets and identifiable intangible assets for impairment, whenever certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Such events or circumstances include, but are not limited to, a prolonged industry downturn, or a significant reduction in projected future cash flows.

For long-lived assets used in operations, the Company records impairment losses when events and circumstances indicate that these assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. If less, the impairment losses are based on the excess of the carrying amounts over their respective fair values. Their fair values would then become the new cost basis. Fair value is determined by discounted future cash flows, appraisals, or other methods. For assets to be disposed of other than by sale, impairment losses are measured as the excess of their carrying amount over the salvage value, if any, at the time the assets cease to be used.

During 2003, the Company recorded a charge of $2.6 million to reduce equipment based on the amounts by which the carrying value of these assets exceeded their fair value.

During the third quarter of 2004, the Company recorded a charge of $389,000 to write off the remaining carrying value of equipment held-for-sale and to write off sales tax assessed as part of the Company’s acquisition of Stellex Broadband Wireless in 2001.

Income Taxes

Income taxes have been provided using the liability method. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Restructuring Charges

The Company accounted for restructuring charges in accordance with Emerging Issues Tax Force No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”) for exit and disposal activities initiated prior to January 1, 2003. Under EITF 94-3 restructuring charges are recorded upon approval of a formal management plan and are included in the operating results of the period in which such plans have been approved. The Company reviews remaining restructuring accruals on a quarterly basis and adjusts these accruals when changes in facts and circumstances suggest actual amounts will differ from the initial estimates. Changes in estimates occur when it is apparent that exit and other costs accrued will be more or less than originally estimated.

In July 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs associated with Exit or Disposal Activities” (“SFAS 146”). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3. The principal difference between SFAS 146 and EITF 94-3 relates to the timing for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for an exit cost associated with an exit or disposal activity be recognized when the liability is incurred. The Company adopted SFAS 146 prospectively as of January 1, 2003, and the adoption did not have a material impact on the Company’s operating results.

Stock-Based Compensation

The Company has elected to use the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employee” (“APB 25”), as permitted by Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), subsequently amended by

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Statement of Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” to account for stock-based awards issued to its employees under its stock option plans and employee stock purchase plans, which are described more fully in Note 8. Deferred stock compensation is amortized using the graded vesting method over the vesting period of the related options, generally four years.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS 123, Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and Financial Accounting Standards Board Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.”

For purposes of pro forma disclosures, the Company estimates the fair value of its stock options to employees on the date of grant using the Black-Scholes option pricing model, with the following weighted average assumptions:

	Year Ended December 31,
	2005			2004			2003
Stock Option Plans
Expected dividend yield		0.0	%		0.0	%		0.0	%
Expected stock price volatility		78	%		82	%		116	%
Risk free interest rate		4.04	%		3.36	%		4.02	%
Expected life of options in years		5 years			5 years			7 years

The weighted average grant date fair value for stock-based awards during 2005, 2004 and 2003 was $13.05, $8.06 and $1.53, per share, respectively. The effects of applying SFAS 123 on pro forma disclosures are not likely to be representative of the effects on disclosures of future years.

The pro forma net loss and net loss per share listed below include expense related to the Company’s employee stock purchase plan. The fair value of issuances under the employee stock purchase plan is estimated on the date of issuance using the Black-Scholes option-pricing model, with the following weighted average assumptions for issuances made in 2005, 2004 and 2003:

	Year Ended December 31,
	2005			2004			2003
Employee Stock Purchase Plan
Expected dividend yield		0.0	%		0.0	%		0.0	%
Expected stock price volatility		72	%		79	%		112	%
Risk free interest rate		3.58	%		1.57	%		1.16	%
Expected life of options in years		0.5 years			0.5 years			0.5 years

The weighted average grant date fair value of purchase rights granted during the year was $7.62, $2.75 and $0.56 for 2005, 2004 and 2003, respectively.

Following is the pro forma effect on net loss and net loss per share for all periods presented had the Company applied SFAS 123’s fair value method of accounting for stock-based awards issued to its employees under its stock

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

option plans and employee stock purchase plans. The effects of applying SFAS 123 on pro forma disclosures are not likely to be representative of the effects on disclosures of future years.

	Year Ended December 31,
	2005			2004			2003
	(In millions, except per share data)
Net loss, as reported	$	(0.9	)	$	(4.4	)	$	(7.9	)
Add: Stock-based employee compensation expense included in reported net loss		0.0			0.2			0.8
Deduct: Total stock-based employee compensation expense determined under fair value based method for stock option awards and employee stock purchase rights		(8.0	)		(2.9	)		(3.9	)
Net loss, pro forma	$	(8.9	)	$	(7.1	)	$	(11.0	)
Basic and diluted net loss per share, as reported	$	(0.08	)	$	(0.45	)	$	(0.87	)
Basic and diluted net loss per share, pro forma	$	(0.81	)	$	(0.72	)	$	(1.20	)

On December 30, 2005, the Board of Directors unanimously approved accelerating the vesting of certain eligible options. Eligible options are defined as unvested stock options held by current employees, including executive officers, with an exercise price of $21.00 per share or higher. No options held by non-employee directors were subject to acceleration. This resulted in the accelerated vesting of options to purchase 338,995 shares of common stock of the Company with a weighted average price of $27.68 per share. The closing market price of the Company’s common stock on December 29, 2005, the last full trading day before the date of acceleration, was $11.64 per share.

The Board of Directors approved the accelerated vesting of these options to avoid recognizing compensation expense that the Company would otherwise be required to report in its statement of operations upon adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”) in the first quarter of 2006. The Company’s stock-based compensation expense under the fair value method presented in our pro forma amounts includes expense of approximately $3.3 million for the fourth quarter of 2005 as a result of the accelerated stock option vesting.

Research and Development Expenses

Research and development expenses are charged to operating expenses as incurred.

Concentration of Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, short-term investments, and trade receivables.

The Company sells its products primarily to telecom OEMs and defense electronics and homeland security systems integrators. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have historically been within management’s expectations. Concentrations of credit risk with respect to trade accounts receivable are due to the few number of entities comprising the Company’s customer base.

Revenue from three major customers accounted for 73% of total revenue in 2005. As of December 31, 2005, the Company had accounts receivable from three customers that accounted for 37%, 20% and 15%, respectively, of the Company’s accounts receivable as of that date. Revenues from three major customers accounted for 72% of total revenues in 2004. As of December 31, 2004, the Company had accounts receivable from two customers that

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

accounted for 49% and 16%, respectively, of the Company’s accounts receivable as of that date. Revenues from three major customers accounted for 78% of total revenues in 2003.

In 2005, 2004 and 2003, 82%, 80% and 75%, respectively, of the Company’s total revenues were derived from sales invoiced and shipped to customers outside the United States.

The Company designs custom semiconductor devices. However, the Company does not own or operate a semiconductor fabrication facility (a “foundry”) and depends upon a limited number of third parties to produce these components. The Company’s use of various third-party foundries gives it the flexibility to use the process technology that is best suited for each application and eliminates the need for the Company to invest in and maintain its own foundry. The Company’s primary foundry is a division of Northrop Grumman, which is a wholly-owned subsidiary of Northrop Grumman Corporation, and is referred to in these consolidated financial statements as Velocium. The loss of the Company’s relationship with or access to the foundries it currently uses, particularly Velocium, and any resulting delay or reduction in the supply of semiconductors to the Company, would severely impact the Company’s ability to fulfill customer orders and could damage its relationships with its customers. The Company’s current supply agreement with Velocium expired in December 2005 and the companies entered into a mutually agreed extension until March 31, 2006. While the Company believes it is a significant customer of and does not anticipate an interruption in its relationship with Velocium, there can be no assurance that Velocium will renew its agreement with the Company. The Company estimates that it may take up to six months to shift production of a given semiconductor circuit design to a new foundry.

The Company also may not be successful in forming alternative supply arrangements that provide a sufficient supply of gallium arsenide devices. Because there are limited numbers of third-party foundries that use the particular process technologies the Company selects for its products and have sufficient capacity to meet its needs, using alternative or additional third-party foundries would require an extensive qualification process that could prevent or delay product shipments and their associated revenues.

Because the Company does not own or control any of these third-party semiconductor suppliers, any change in the corporate structure or ownership of the corporations that own these foundries, could have a negative effect on future relationships and ability to negotiate favorable supply agreements.

The Company outsources the assembly and testing of most of its products to a Thailand facility of HANA Microelectronics Co., Ltd. (“HANA”), a contract manufacturer. The Company plans to continue this arrangement as a key element of its operating strategy. If this manufacturer does not provide the Company with high-quality products and services in a timely manner, or terminates its relationship with the Company, the Company may be unable to obtain satisfactory replacements to fulfill customer orders on a timely basis. In the event of an interruption of supply from this manufacturer, sales of the Company’s products could be delayed or lost and its reputation could be harmed. The Company’s manufacturing agreement with HANA currently expires in July 2006, but will renew automatically for a one-year period unless either party notifies the other of its desire to terminate the agreement at least 90 days prior to the expiration of the term. In addition, either party may terminate the agreement without cause upon 120 days prior written notice to the other party, or either party may terminate the agreement if the non-terminating party is in breach and does not cure the breach within 30 days after notice of the breach is given by the terminating party. There can be no assurance that HANA will not seek to terminate its agreement with the Company.

Fair Value of Financial Instruments

The amounts reported as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities. The fair value for the Company’s investments in marketable debt securities is estimated based on quoted market prices.

The following estimated fair value amounts have been determined using available market information. However, considerable judgment is required in interpreting market data to develop the estimates of fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

	December 31, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
Short-term investments:
Commercial paper	$	3,618	$	—	$	(40	)	$	3,578
Government agency obligations		10,404		—		(23	)		10,381
Total	$	14,022	$	—	$	(63	)	$	13,959
Cash equivalents:
Commercial paper	$	1,898	$	—	$	—		$	1,898

	December 31, 2004
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
Short-term investments:
Commercial paper	$	2,058	$	—	$	(2	)	$	2,056
Government agency obligations		18,301		—		(28	)		18,273
Total	$	20,359	$	—	$	(30	)	$	20,329

At December 31, 2005, the Company had $8.9 million of short-term investments with maturities of less than one year and $5.1 million of short-term investments with maturities between one and two years.

At December 31, 2005, the Company had net unrealized losses of $63,000 related to $5.1 million of investments in debt securities. These securities were in an unrealized loss position for a period of less than one year. The decline in value of these investments is primarily related to changes in interest rates and is considered to be temporary in nature. Realized gains and losses were insignificant for the years ended December 31, 2005, 2004, 2003.

The Company reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Comprehensive Income (Loss)

Comprehensive income (loss) generally represents all changes in stockholders’ equity except those resulting from investments or contributions by stockholders. The Company’s unrealized gains and losses on its available-for-sale securities represents the only component of comprehensive income (loss) excluded from the reported net loss and is displayed in the statements of stockholders’ equity.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed giving effect to all potentially dilutive common stock equivalents, including stock options to purchase common stock and restricted stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As the Company incurred net losses for all periods presented, diluted net loss per share is the same as basic net loss per share. Potential dilutive common shares of 1,292,877 in 2005, 1,588,360 in 2004 and 1,922,161 in 2003 from the assumed exercise of stock options were not included in the net loss per share calculations as their inclusion would have been anti-dilutive.

Advertising Costs

The Company expenses all advertising costs as incurred and the amounts were not material for all periods presented.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151, “Inventory Costs — An Amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight and re-handling costs must be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of 2006, beginning on January 1, 2006. The Company does not expect SFAS 151 to have a material financial statement impact.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Non-monetary Assets — An Amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 eliminates the exception from fair value measurement for non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, “Accounting for Non-monetary Transactions,” and replaces it with the exception for exchanges that do not have commercial substance. SFAS 153 specifies that a non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for fiscal periods beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company does not expect it to have a material financial statement impact.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the measurement of all share-based payments to employees, including grants of stock options, using a fair-value-based method and the recording of such expense in the consolidated statements of operations. The accounting provisions of SFAS 123(R) were originally effective for all reporting periods beginning after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. See “Stock-Based Compensation” above for the pro forma net income (loss) and net income (loss) per share amounts, as if the Company had used a fair-value-based method similar to the methods required under SFAS 123(R) to measure compensation expense for employee stock incentive awards.

In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 107, providing supplemental implementation guidance for SFAS 123R. In April 2005, the SEC approved a rule that delayed the effective date of SFAS 123(R) to the first annual reporting period beginning after June 15, 2005. Although the Company has not yet determined whether the adoption of SFAS 123(R) will result in amounts that are similar to the current pro forma disclosures under SFAS 123, it is evaluating the requirements under SFAS 123(R) and SAB No. 107 and expects the adoption to have a significant adverse impact on the Company’s consolidated statements of operations and net loss per share. SFAS 123(R) will be effective for the Company beginning with the first quarter of 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In May 2005, the FASB issued Statement of Financial Accounting Standards 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of this statement will have a material impact on our results of operations or financial condition.

In November 2005, the FASB issued FASB Staff Position FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP FAS 115-1”), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP FAS 115-1 also includes accounting considerations subsequent to the recognition of an other-than temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP FAS 115-1 is required to be applied to reporting periods beginning after December 15, 2005. The Company is required to adopt FSP FAS 115-1 in the first quarter of fiscal 2006. The Company does not expect the adoption of this statement will have a material impact on our results of operations or financial condition.

3.   Goodwill and Other Intangible Assets

Goodwill

At December 31, 2004 the Company had goodwill of $1,546,000 associated with the purchase of JCA Technologies, Inc. (“JCA”). See Note 13 for additional information. During the first quarter of 2005, the Company incurred an additional liability associated with the purchase of JCA and increased the goodwill balance by $20,000.

The Company conducted its 2005 annual goodwill impairment analysis in the third quarter of 2005 and no goodwill impairment was indicated.

Intangible Assets

The components of intangible assets are as follows (in thousands):

	December 31, 2005
	Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Developed technology	$	2,250	$	(639	)	$	1,611
Tradename		1,060		—			1,060
Customer relationships		780		(221	)		559
Customer backlog		140		(140	)		—
Intangible assets	$	4,230	$	(1,000	)	$	3,230

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31, 2004
	Gross Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Developed technology	$	2,250	$	(187	)	$	2,063
Tradename		1,060		—			1,060
Customer relationships		780		(65	)		715
Customer backlog		140		(117	)		23
Intangible assets	$	4,230	$	(369	)	$	3,861

The identifiable intangible assets are subject to amortization and have approximate original estimated weighted-average useful lives as follows: developed technology — five years, customer backlog — six months and customer relationships — five years.

The tradename has a gross carrying value of $1.1 million and is not subject to amortization and will be evaluated for impairment at least annually or more frequently if events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company conducted its 2005 annual impairment analysis of the tradename in the third quarter of 2005 and no impairment was indicated.

The future amortization of the identifiable intangible assets is as follows (in thousands):

Years Ending December 31,
2006	$	606
2007		606
2008		606
2009		352
Total	$	2,170

4.   Inventories

Inventories are comprised of the following at December 31 (in thousands):

	2005		2004
Raw materials	$	10,181	$	7,139
Work in process		1,509		432
Finished goods		1,758		295
Total	$	13,448	$	7,866

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.   Property and Equipment

Property and equipment consist of the following at December 31 (in thousands):

	2005			2004
Machinery and equipment	$	11,032		$	10,735
Software		618			574
Leasehold improvements		93			79
		11,743			11,388
Less accumulated depreciation		(10,422	)		(8,994	)
Property and equipment, net	$	1,321		$	2,394

During the second quarter of 2004, the Company finalized the sale of its land and buildings located in Diamond Springs, California. The Company received $4.3 million for the land and buildings, net of related closing costs and legal fees. The net book value of the property on the date of sale was $3.5 million. At the time of the closing, the Company entered into a five-year operating lease with the new owner for one of the buildings. As a result of the sale-leaseback transaction, the Company will recognize a gain of $770,000 on a straight-line basis over the term of the lease, which expires in 2009. Deferred gain recognized on the sale-leaseback was approximately $153,000 and $77,000 for the years ended December 31, 2005 and 2004, respectively.

6.   Restructuring Charges, Net and Loss on Sublease

During 2004, in connection with the acquisition of JCA, the Company recorded a charge for restructuring of $431,000 (the “Third Quarter 2004 Plan”). The charge was included as part of the purchase price allocation in accordance with Emerging Issues Task Force No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The Company terminated a total of 39 employees, in order to eliminate duplicative activities and to reduce the cost structure of the combined company. These terminations primarily affected the manufacturing and operations group. The charge was for the related severance, benefits, payroll taxes and other associated costs. During 2005, the Company incurred a net benefit to restructuring expense of $46,000 as the original estimate of charges related to the restructuring plan were higher than the final payouts.

Third Quarter 2004 Plan	Severance Benefits
	(In thousands)
Restructuring charge	$	431
Cash payments		(238	)
Accrual at December 31, 2004		193
Cash payments		(147	)
Restructuring charge adjustment		(46	)
Accrual at December 31, 2005	$	—

Effective January 2004, the Company executed several agreements related to the lease of its Sunnyvale headquarters. Due to declining commercial real estate lease rates, the original lease executed in August 2001 was at an above market rate, and would have expired in July 2006. This lease was cancelled, effective January 2004, and the Company exited the property. In consideration for the cancellation, the Company paid the landlord a settlement fee resulting in a net lease termination expense of $2.9 million. The Company also entered into a new lease for 16,000 square feet in Sunnyvale, California at a lower, market rate. The new lease was effective as of January 2004 and will expire in August 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2003, the Company recorded a restructuring charge of $490,000 all of which was for severance payments related to 18 employees terminated as part of the restructuring plan. Payments were completed by the end of fiscal 2004.

During 2002, the Company implemented a restructuring program to reduce operating expenses and align resources with long-term growth opportunities. The Company recorded a restructuring charge of $3.5 million, the components of which were $1.1 million for severance and fringe benefit costs related to the elimination of 107 positions across all functions, $310,000 for lease termination payments, and $2.1 million for excess equipment. With the exception of $20,000 of remaining net lease payments on abandoned facilities through 2006, the Company has substantially completed the activities associated with the restructuring program. Total payments made on the lease during 2005 were $77,000. At December 31, 2005 and 2004, $20,000 and $81,000 was included in restructuring liabilities, current.

The Company’s restructuring estimates will be reviewed and revised quarterly and may result in an increase or decrease to restructuring and other charges.

Loss on Sublease

During the first quarter of 2003, the Company subleased 12,700 square feet of its Sunnyvale, California headquarter building to an unrelated third party. The rental income for the lease period was less than the rental expense that would be incurred and, therefore, a loss at sublease inception of $662,000 was incurred. During the first quarter of 2004, $359,000 of this loss was reversed as the sublease was terminated prior to its expiration date, as part of the overall lease termination described above.

7.   Segment Disclosures

The Company operates in a single business segment. Although the Company sells to customers in various geographic regions throughout the world, the end customers may be located elsewhere. The Company’s total revenues by billing location for the years ended December 31 were as follows (in thousands):

	2005				2004				2003
United States	$	8,917	18.3	%	$	6,538	19.7	%	$	8,375	24.8	%
Finland		23,717	48.8	%		18,545	55.9	%		20,083	59.3	%
Italy		7,754	15.9	%		1,672	5.0	%		1,271	3.8	%
Singapore		1,022	2.0	%		3,274	9.9	%		35	0.1	%
Rest of the world		7,325	15.0	%		3,133	9.5	%		4,083	12.0	%
Total	$	48,735	100.0	%	$	33,162	100.0	%	$	33,847	100.0	%

For the year ended December 31, 2005, Nokia, Siemens AG and Nera ASA accounted for 47%, 16% and 10% of total product revenues, respectively. For the year ended December 31, 2004, Nokia and Nera ASA accounted for 55% and 10% of total product revenues, respectively. For the year ended December 31, 2003, Nokia and Stratex Networks accounted for 59% and 13% of total product revenues, respectively.

8.   Stockholders’ Equity

Preferred Stock

The Company had 5,000,000 shares of convertible preferred stock authorized as of December 31, 2005 and 2004, of which 300,000 shares were designated Series A Junior Participating Preferred Stock at December 31, 2005. None of such shares is issued and outstanding.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Common Stock

At December 31, 2005, the Company had reserved 3,059,396 shares of common stock for issuance in connection with its stock option plans and 258,293 shares in connection with its employee stock purchase plan.

Shareholder Rights Plan

On November 30, 2005, the Board of Directors adopted a Shareholder Rights Plan, providing for the distribution of one preferred share purchase right (“Right”) for each outstanding share of common stock held as of December 12, 2005.

The Rights are not exercisable until the earlier of the date of a public announcement that a person or entity (together with such person’s or entity’s affiliates) beneficially owns 15% or more of the outstanding shares of common stock of the Company (such person or entity, an Acquiring Person) or ten days (or such later date as may be determined by the Board of Directors) following the announcement of a tender offer which would result in any person or entity becoming an Acquiring Person. The Rights are initially exercisable for one one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $90 per one one-hundredth of a share, subject to adjustment.

If the Company is acquired in a merger or other business combination transaction or 50% or more of its assets are sold to an Acquiring Person, provisions will be made so that each holder of a Right, upon exercise, will be able to receive common stock of the acquiring company having a market value of two times the exercise price of the Right.

The Rights will expire on December 11, 2015 unless the Rights are redeemed or exchanged by the Company.

Employee Stock Purchase Plan

In October 2000, the Company established the Endwave Corporation Employee Stock Purchase Plan (“Purchase Plan”). All employees who work a minimum of 20 hours per week and are customarily employed by the Company (or an affiliate thereof) for at least five months per calendar year are eligible to participate. Under this plan, employees may purchase shares of common stock through payroll deductions of up to 15% of their earnings with a limit of 3,000 shares per offering period under the plan. The price paid for the Company’s common stock purchased under the plan is equal to 85% of the lower of the fair market value of the Company’s common stock on the date of commencement of participation by an employee in an offering under the plan or the date of purchase. During 2005, there were 62,828 shares issued under the Purchase Plan at a weighted average price of $9.33 per share. In 2004, there were 215,368 shares issued under the Purchase Plan at a weighted average price of $0.93 per share. During 2003, there were 121,148 shares issued under the Purchase Plan at a weighted average price of $0.77 per share.

Stock Option Plans

The Company’s 1992 Stock Option Plan (the “1992 Plan”) was adopted in September 1992, amended in April 1999, and terminated in March 2000 such that no further options could be granted thereunder; however, previously granted and unexercised options remain outstanding and governed by the terms of the 1992 Plan. The 1992 Plan provides for the issuance of up to 3,088 shares of common stock to directors, employees and consultants upon the exercise of options outstanding under the 1992 Plan as of December 31, 2005.

The Company’s 2000 Stock Option Plan (the “2000 Plan”) was adopted in March 2000, amended in July 2000, and provides for the issuance of options to purchase common stock to directors, employees, and consultants. The 2000 Plan provides for annual reserve increases to the number of authorized shares. During 2005, authorized shares were increased by 676,668 to 4,690,482 shares. Under the 2000 Plan, incentive stock optionsare granted under the plan at exercise prices not less than fair value and non statutory stock options are granted at an exercise price not less than 85% of the fair value on the date of grant, as determined by the closing sales price of the Company’s common

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

stock. Options granted under the 2000 Plan generally have a ten-year term. Options vest and become exercisable as specified in each individual’s option agreement, generally over a four-year period. Subject to approval by the Company’s board of directors, options may be exercised early; however, in such event the unvested shares are subject to a repurchase option by the Company upon termination of the individual’s employment or services. At December 31, 2005, 23,800 unvested shares outstanding are subject to repurchase.

Non-Employee Directors’ Stock Option Plan

The Company’s 2000 Non-Employee Directors’ Stock Option Plan (“Director Plan”) was adopted in October 2000. The Director Plan provides for non-statutory stock option grants to non-employee directors. During 2004, the shareholders approved an amendment to increase the initial grant to 20,000 shares when an individual first becomes a non-employee director of the Company, and to increase the annual automatic grants to 5,000 shares (which will be reduced pro-rata if an individual did not serve as a director for the full year of the preceding fiscal year). Options granted under the plan to non-employee directors are granted at fair market value on the date of grant, provide for monthly vesting over a four-year period and have a ten-year term. The Company granted options to purchase 42,500, 32,500 and 10,000 shares of the Company’s common stock under the Director Plan during the years ended December 31, 2005, 2004 and 2003, respectively. The total number of shares authorized for this plan is 150,000.

A summary of stock option activity for all plans described above, is as follows:

				Weighted-
				Average
	Number of			Exercise
	Shares			Price
Outstanding at December 31, 2002		2,325,751		$	3.82
Options granted		725,574			1.84
Options exercised		(211,776	)		2.34
Options cancelled		(917,388	)		3.86
Outstanding at December 31, 2003		1,922,161			3.22
Options granted		705,025			10.51
Options exercised		(936,991	)		2.18
Options cancelled		(101,835	)		11.44
Outstanding at December 31, 2004		1,588,360			6.55
Options granted		561,650			23.21
Options exercised		(793,444	)		5.47
Options cancelled		(63,689	)		12.18
Outstanding at December 31, 2005		1,292,877		$	14.19

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information concerning outstanding and exercisable options:

Options Outstanding at December 31, 2005							December 31, 2005
					Weighted-Average
			Weighted-Average		Remaining				Weighted-Average
Exercise Price per Share	Shares		Exercise Price		Contractual Life		Shares		Exercise Price
$ 0.76 - $ 1.17		65,857	$	1.00		6.95		21,988	$	0.92
$ 1.18 - $ 1.21		26,146	$	1.21		6.58		22,968	$	1.21
$ 1.93 - $ 1.93		175,163	$	1.93		7.43		53,867	$	1.93
$ 2.68 - $ 4.80		14,847	$	4.04		6.33		9,594	$	3.99
$ 5.00 - $ 9.82		43,278	$	8.42		8.13		8,868	$	7.96
$10.20 - $10.20		168,688	$	10.20		8.59		21,096	$	10.20
$10.22 - $10.22		193,813	$	10.22		8.09		28,995	$	10.22
$10.50 - $20.32		226,746	$	14.08		9.16		22,869	$	13.75
$21.47 - $21.47		204,039	$	21.47		9.09		204,039	$	21.47
$24.00 - $56.00		174,300	$	35.65		9.26		174,300	$	35.65
		1,292,877	$	14.19		8.46		568,584	$	20.54

At December 31, 2004 and 2003, options to purchase 1,173,347 and 1,215,137 shares of common stock were exercisable.

Deferred Stock Compensation

In connection with the deferred compensation totaling approximately $20,218,000 related to the grant of stock options to employees prior to the initial public offering, the Company amortized approximately $0, $204,000 and $672,000 in 2005, 2004 and 2003, respectively. The Company also incurred compensation expense of $124,000 during 2003, for the acceleration of certain stock options to terminating employees. In addition, during 2004 and 2003, the Company recorded approximately $17,000 and $399,000, respectively, as a reduction in deferred compensation and additional paid in capital due to the forfeiture of unvested shares for terminated employees.

9.   Commitments and Contingencies

Commitments

The Company leases its office, manufacturing and design facilities in Sunnyvale, California, Torrance, California, Diamond Springs, California, Chiang Mai, Thailand and Andover, Massachusetts under non-cancelable lease agreements, which expire in various periods through June 2009. Rent expense under the operating leases was approximately $619,000, $452,000 and $1.7 million, for the years ended December 31, 2005, 2004 and 2003, respectively.

Future annual minimum lease payments under non-cancelable operating leases with initial terms of one year or more as of December 31, 2005 are as follows (in thousands):

Years Ending December 31,
2006	$	456
2007		308
2008		300
2009		105
Total	$	1,169

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future annual minimum lease receipts under non-cancelable operating leases with initial terms of one year or more as of December 31, 2005 are $14,000 for the year ended December 31, 2006.

Contingencies

The Company is involved in legal proceedings arising in the ordinary course of business. While there can be no assurances as to the ultimate outcome of any litigation involving the Company, management does not believe any pending legal proceedings will result in judgment or settlement that will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

10.   Related Party Transactions

During December 2005, Northrop Grumman sold all remaining shares owned of the Company’s common stock and was at that time no longer considered a related party. The Company continues to maintain a supply agreement and a technology services agreement with Velocium. The Company recorded purchases under these agreements through the date of Northrop Grumman liquidation of the Company’s shares of $7.1 million, $4.2 million and $3.1 million for 2005, 2004, and 2003, respectively.

The Company also sells various products and services under purchase orders and agreements to Northrop Grumman and recognized revenues through the date of Northrop Grumman’s liquidation of the Company’s shares of $61,000, $86,000 and $345,000 in 2005, 2004 and 2003, respectively and incurred costs related to these revenues of approximately $39,000, $51,000 and $124,000.

At December 31, 2004, the Company had accounts receivable of $15,000 and accounts payable of $1.3 million, related to its supplier and customer relationships with Northrop Grumman, respectively.

11.   Income Taxes

As of December 31, 2005, the Company had a federal net operating loss carryforward of approximately $188 million. The Company also had federal research and development tax credit carryforwards of approximately $1.7 million. These net operating loss and credit carryforwards will expire at various dates beginning in 2007 through 2025, if not utilized.

As of December 31, 2005, the Company had a state net operating loss carryforward of approximately $81 million. The net operating losses will begin to expire at various dates beginning in 2006. The Company also has state research and development tax credit carryforwards of approximately $1.7 million. The credits will carryforward indefinitely, if not utilized.

Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to the ownership change provisions of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and credit carryforwards and temporary differences between the carrying amounts of assets for financial reporting and the amount used for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows at December 31 (in thousands):

	2005			2004
Deferred tax assets:
Net operating loss carryforwards	$	70,000		$	64,300
Research credit		2,700			2,400
Capitalized research and development		500			1,100
Other		5,100			4,400
Total deferred tax assets		78,300			72,200
Valuation allowance for deferred tax assets		(77,000	)		(70,700	)
Deferred tax assets		1,300			1,500
Deferred tax liabilities:
Intangible assets		(1,300	)		(1,500	)
Net deferred tax assets (liabilities)	$	—		$	—

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been offset by a valuation allowance. The valuation allowance increased by $6.3 million, $1.1 million and $1.8 million during 2005, 2004 and 2003, respectively.

The effective tax rate differs from the U.S. federal statutory rate as a result of the following for the year ended December 31:

	2005			2004			2003
Income tax benefit at statutory rate		(35	)%		(35	)%		(35	)%
State, net of federal effect		(6	)		(6	)		(6	)
Change in valuation allowance		41			36			37
Nondeductible deferred compensation		—			5			4
Effective income tax rate		—	%		—	%		—	%

12.   401(k) Plan

Substantially all regular employees of the company meeting certain service requirements, are eligible to participate in the Company’s 401(k) employee retirement plan. Employee contributions are limited to the maximum amount allowed under the Internal Revenue Code. The Company may match contributions based upon a percentage of employee contributions up to a maximum of 6% of employee compensation. Company contributions under these plans were $0 for 2005, 2004 and 2003.

13.   Business Combinations

On July 21, 2004, the Company acquired all of the outstanding capital stock of JCA, a provider of RF amplifiers and modules. The transaction was accounted for under the purchase method of accounting and, accordingly, the results of operations are included in the accompanying consolidated statements of operations for all periods or partial periods subsequent to the acquisition date.

The net tangible assets acquired and liabilities assumed in the acquisition were recorded at fair value, which approximates the carrying amount as of the acquisition date. The Company determined the valuation of the identifiable intangible assets using future revenue assumptions. The amounts allocated to the identifiable intangible assets were determined through established valuation techniques accepted in the technology industry.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In calculating the value of the acquired in-process research and development (“IPRD”), consideration was given to the relevant market size and growth factors, expected industry trends, the anticipated nature and timing of new product introductions by the Company and its competitors, individual product sales cycles, and the estimated lives of each of the products derived from the underlying technology. The value of the acquired IPRD reflects the relative value and contribution of the acquired research and development. Consideration was given to the stage of completion, the complexity of the work completed to date, the difficulty of completing the remaining development, costs already incurred, and the expected cost to complete the project in determining the value assigned to the acquired IPRD. The amounts allocated to the acquired IPRD were immediately expensed in the period the acquisition was completed because the projects associated with the IPRD had not yet reached technological feasibility and no future alternative uses existed for the technology.

The income approach, which includes an analysis of the cash flows and risks associated with achieving such cash flows, was used to value all of the identifiable intangible assets. Key assumptions used in analyzing the expected cash flows from the other identifiable net intangible assets included the Company’s estimates of revenue growth, cost of sales, operating expenses and taxes. The purchase price in excess of the identified tangible and intangible assets was allocated to goodwill.

The total purchase price of $6.1 million consisted of $5.9 million in cash and $158,000 in direct transaction costs. In connection with the acquisition of JCA, the Company implemented a restructuring plan to consolidate JCA’s manufacturing process to the Company’s Diamond Springs location. The restructuring plan terminated a total of 39 employees, in order to eliminate duplicative activities and to reduce the cost structure of the combined company. These terminations primarily affected the manufacturing and operations group. The estimated cost was $431,000 and was accrued for at the time of the acquisition and has been recognized as a liability assumed in the business combination in accordance with EITF 95-3. The payments were complete during the first quarter of fiscal 2005.

The aggregate purchase price for the JCA acquisition has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition as follows (in thousands):

Tangible assets acquired	$	1,057
Liabilities assumed		(655	)
In-process research and development		320
Developed technology		2,250
Tradename		1,060
Customer relationships and backlog		920
Other		1,261
Goodwill		1,546
Deferred tax liability		(1,692	)
Total purchase price	$	6,067

In accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” deferred taxes of approximately $1.3 million have been recorded for the tax effect of the amortizable intangible assets which are not deductible.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pro forma financial information

The following table presents the pro forma financial information for the combined entity of Endwave and JCA for the years ended December 31, 2004 and 2003, as if the acquisition had occurred at the beginning of the periods presented after giving effect to certain purchase accounting adjustments (in thousands, except per share amounts):

	Year Ended December 31,
	2004			2003
Total revenues	$	36,422		$	40,420
Net loss	$	(6,564	)	$	(13,084	)
Net loss per share — basic and diluted	$	(0.67	)	$	(1.43	)

These results are presented for illustrative purposes only and are not necessarily indicative of the actual operating results or financial position that would have occurred if the Company and JCA had been a consolidated entity during the periods presented.

On May 13, 2003, the Company completed the acquisition of certain assets of Verticom, Inc. for $250,000 in cash. The asset purchase included the product design for Verticom’s MTS-2000 synthesizer, which is used in a military and device application, as well as the inventory, equipment and intellectual property licenses required to manufacture and supply production units to a new Endwave customer. The results of operations of the acquisition have been included in the results of the Company from the date of acquisition. Pro forma results of operations have not been presented as the effect of this acquisition was not material to the Company’s financial position, results of operations or cash flows for the periods presented.

15.   Quarterly Financial Information (unaudited)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
2005:
Total revenues	$	9,100		$	12,242		$	14,320		$	13,073
Cost of product revenues		6,288			8,072			9,782			9,444
Net income (loss)(1)		(847	)		318			(193	)		(152	)
Basic net income (loss) per share	$	(0.08	)	$	0.03		$	(0.02	)	$	(0.01	)
Diluted net income (loss) per share	$	(0.08	)	$	0.03		$	(0.02	)	$	(0.01	)
2004:
Total revenues	$	6,617		$	7,576		$	7,594		$	11,375
Cost of product revenues		3,971			5,257			5,482			7,866
Net income (loss)(2)		(2,179	)		(429	)		(2,034	)		238
Basic net income (loss) per share	$	(0.23	)	$	(0.04	)	$	(0.21	)	$	0.02
Diluted net income (loss) per share	$	(0.23	)	$	(0.04	)	$	(0.21	)	$	0.02

(1)	Net income (loss) for the first quarter, second quarter, third quarter and fourth quarter of 2005 includes net charges of $175,000, $106,000, $925,000 and $230,000, respectively, for a restructuring benefit, amortization of intangible assets and expensing of transaction costs for a suspended secondary offering.
(2)	Net income (loss) for the first quarter, third quarter and fourth quarter of 2004 includes charges of $2.5 million, $853,000 and $221,000, respectively, for restructuring activities, asset impairments, recovery on sublease agreements, amortization of intangible assets, and in-process research and development.

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of the end of the period covered by this report to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our chief executive officer and our chief financial officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control — Integrated Framework. Based on its assessment using those criteria, our management concluded that, as of December 31, 2005, our internal control over financial reporting is effective.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005, has been audited by Burr, Pilger & Mayer LLP, an independent registered public accounting firm, as stated in their report appearing below.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Endwave Corporation

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting included in Item 9A, that Endwave Corporation and its subsidiary (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Endwave Corporation and its subsidiary maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Endwave Corporation and its subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Endwave Corporation and its subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2005 and the related financial statement schedule as of and for the years ended December 31, 2005 and 2004 and our report dated March 14, 2006 expressed an unqualified opinion on those consolidated financial statements and the related financial statement schedule.

/s/  Burr, Pilger, & Mayer LLP

Palo Alto, California

March 14, 2006

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Item 9B.   Other Information

Not applicable.

PART III

Item 10.   Directors and Executive Officers of the Registrant

Our directors and executive officers, their ages as of February 17, 2006 and their positions with us, as well as certain biographical information of these individuals, are as follows:

Name	Age		Position
Edward A. Keible, Jr.		62	Chief Executive Officer, President and Director
Julianne M. Biagini		43	Chief Financial Officer, Executive Vice President and Secretary
John J. Mikulsky		60	Chief Operating Officer and Executive Vice President
Brett W. Wallace		41	Executive Vice President
Edward C.V. Winn(1)(2)		67	Chairman of the Board of Directors
Joseph J. Lazzara(1)(2)(3)		54	Director
John F. McGrath, Jr.(1)		41	Director
Wade Meyercord(2)(3)		65	Director

(1)	Member of the Audit Committee
(2)	Member of the Nominating and Governance Committee
(3)	Member of the Compensation Committee

Edward A. Keible, Jr. has served as our President and Chief Executive Officer and as a director since January 1994. From 1973 until 1993, Mr. Keible held various positions at Raychem Corporation, a materials science company, culminating in the position of Senior Vice President with specific oversight of Raychem’s International and Electronics Groups. Mr. Keible holds a B.A. in engineering sciences and a B.E. and an M.E. in materials science from Dartmouth College and an M.B.A. from Harvard Business School.

Julianne M. Biagini has served as our Chief Financial Officer and Secretary since May 2001. From May 2001 until August 2005, Ms. Biagini also served as our Senior Vice President of Finance and Administration. Ms. Biagini resigned as Executive Vice President and Chief Financial Officer of Endwave, said resignation to become effective on April 25, 2006. In August 2005, she was promoted to Executive Vice President. From March 1994 until April 2001, Ms. Biagini served in various capacities for us, most recently as our Vice President of Finance and Administration and Secretary. From 1992 until 1994, Ms. Biagini was the manager of Accounting and Tax at Exponent, Inc., an engineering and scientific consulting firm. Prior to 1992, Ms. Biagini worked at KPMG, an international accounting firm, as a tax specialist. Ms. Biagini serves as a member of the Board of Directors of AeA (the American Electronics Association). Ms. Biagini is a registered C.P.A. in the state of California with a B.S. in business administration from San Jose State University and an M.B.A. from Santa Clara University.

John J. Mikulsky has served as our Chief Operating Officer and Executive Vice President since August 2005. From May 2001 until August 2005, Mr. Mikulsky served as our Chief Marketing Officer and Executive Vice President, Marketing and Business Development. From May 1996 until April 2001, Mr. Mikulsky served as our Vice President of Product Development. From 1993 until 1996, Mr. Mikulsky worked as a Technology Manager for Balazs Analytical Laboratory, a provider of analytical services to the semiconductor and disk drive industries. Prior to 1993, Mr. Mikulsky worked at Raychem Corporation, most recently as a Division Manager for its Electronic Systems Division. Mr. Mikulsky holds a B.S. in electrical engineering from Marquette University, an M.S. in electrical engineering from Stanford University and an S.M. in Management from the Sloan School at the Massachusetts Institute of Technology.

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Brett W. Wallace has served as Executive Vice President since March 2006. Mr. Wallace will become our Chief Financial Officer and Secretary on April 25, 2006. From November 2004 until February 2006, Mr. Wallace was a Managing Director in investment banking with Raymond James & Associates. From June 1999 until October 2004, Mr. Wallace was a Managing Director in investment banking with Piper Jaffray & Co. Prior to 1999, Mr. Wallace worked with C.E. Unterberg, Towbin, most recently as a Managing Director in investment banking. Mr. Wallace holds a B.A. in economics from the University of California, Berkeley and an M.B.A. from UCLA’s Anderson School of Management.

Edward C.V. Winn has served as director of Endwave since July 2000. From March 1992 to January 2000, Mr. Winn served in various capacities with TriQuint Semiconductor, Inc., a semiconductor manufacturer, most recently as Executive Vice President, Finance and Administration and Chief Financial Officer. Previously, Mr. Winn served in various capacities with Avantek, Inc., a microwave component and subsystem manufacturer, most recently as Product Group Vice President. Mr. Winn received a B.S. in Physics from Rensselaer Polytechnic Institute and an M.B.A. from Harvard Business School. Mr. Winn serves as a member on the Board of Directors of Volterra Semiconductor Corporation.

Joseph J. Lazzara has served as a director of Endwave since February 2004. Mr. Lazzara has served as the Chief Executive Officer of Scientific Technologies Incorporation (“STI”), a manufacturer and supplier of machine safeguarding products and automation sensors, since June 1993, President of STI since June 1989 and Treasurer and a director of STI since September 1984. Mr. Lazzara served as a Vice President of STI from September 1984 until June 1989. He has also served as Treasurer and a director of STI’s parent company, Scientific Technology Incorporation, since August 1981. Prior to 1981, Mr. Lazzara was employed by Hewlett-Packard Company, a global technology solutions provider, in Process and Engineering Management. Mr. Lazzara received a B.S. in engineering from Purdue University and an M.B.A. from Santa Clara University. Mr. Lazzara serves as a member on the Board of Directors of STI and AeA (the American Electronics Association).

John F. McGrath, Jr. has served as a director of Endwave since January 2005. Mr. McGrath is currently the Vice President and Chief Financial Officer for Network Equipment Technologies, a manufacturer of keyboard-video-mouse audio/video switches, splitters and extenders for computers and video sources, a position he has held since 2001. Prior to joining Network Equipment Technologies in 2001, Mr. McGrath was an independent consultant to enterprise software firm Niku Corporation. From 1997 to 2000, Mr. McGrath served in various financial capacities at Aspect Communications, including as Vice President of Finance and Director of Finance for Europe, Middle East and Africa. Prior to that he was Director of Finance for TCSI Corporation. From 1986 to 1991, Mr. McGrath worked as a Manager in the High Technology/Manufacturing Group at Ernst & Young LLP. Mr. McGrath holds a B.S. in Accounting from the University of Wyoming and an M.B.A. from the Stanford Graduate School of Business and is a registered C.P.A. in the state of California.

Wade Meyercord has served as a director of Endwave since March 2004. From 1987 to present, Mr. Meyercord has served as President of Meyercord and Associates, a consulting firm specializing in board of directors and executive compensation. From 1999 to 2002, Mr. Meyercord served as Senior Vice President and Chief Financial Officer of RioPort.com, Inc., a company that delivers an integrated, secure platform for acquiring, managing and experiencing music and spoken audio programming from the Internet. From 1998 to 1999, Mr. Meyercord Served as Senior Vice President, e-commerce of Diamond Multimedia. Prior to 1998, Mr. Meyercord held various management and/or executive level positions with Read-Rite Corporation, Memorex Corporation and IBM Corporation. Mr. Meyercord received a B.S. in mechanical engineering from Purdue University and an M.B.A. in engineering administration from Syracuse University. Mr. Meyercord serves as a member on the Board of Directors of Microchip and California Micro Devices.

Executive officers serve at the discretion of our Board of Directors. There are no family relationships between any of our executive officers and members of our Board of Directors. No director has a contractual right to serve as a member of our Board of Directors. Other than Mr. Keible, all of our directors are “independent” within the meaning of the Nasdaq Stock Market listing requirements and the requirements of the Securities and Exchange Commission.

We have a staggered Board of Directors, which may have the effect of deterring hostile takeovers or delaying changes in control of our management. For purposes of determining their term of office, directors are divided into three classes, with the term of office of the Class I directors to expire at our 2007 annual meeting of stockholders, the

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term of office of the Class II directors to expire at our 2008 annual meeting of stockholders and the term of office of the Class III directors to expire at our 2006 annual meeting of stockholders. Class I consists of Mr. Lazzara; Class II consists of Messrs. Meyercord and McGrath; and Class III consists of Messrs. Keible and Winn. Directors elected to succeed those directors whose terms expire will be elected to a three-year term of office. All directors hold office until the next annual meeting of stockholders in the year in which their terms expire and until their successors have been duly elected and qualified. Executive officers serve at the discretion of our Board of Directors. There are no family relationships between any of our officers and directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file with the Commission initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater than ten percent stockholders are required by the Commission’s regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2005, our officers, directors and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements, except as follows:

•  one report was timely filed by Ms. Sharer, a former director, but reported an incorrect ending total, which was subsequently corrected on one Form 4/A amending the previous Form 4 report;

•  one report, covering one transaction, was filed late by Mr. Mikulsky;

•  one report, covering one transaction, was filed late by Mr. Keible; three reports were timely filed by Mr. Edward Keible, but reported incorrect ending totals, and were subsequently corrected on three Form 4/A amending the previous Forms 4; and

•  one report, covering one transaction, was filed late by Ms. Biagini.

Committees of the Board of Directors

Our Board of Directors has three committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Below is a description of each committee of our Board of Directors. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate, to carry out its responsibilities. Our Board of Directors has determined that each member of each committee meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to Endwave.

Audit Committee

The Audit Committee of our Board of Directors, currently comprised of Messrs. Lazzara, McGrath and Winn, oversees our corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of, and assesses the qualifications of, our independent registered public accounting firm; determines and approves the engagement of our independent registered public accounting firm; determines whether to retain or terminate our existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; reviews and approves the retention of our independent registered public accounting firm to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent registered public accounting firm on our audit engagement team as required by law; confers with management and our independent registered public accounting firm regarding the effectiveness of our internal controls over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm, including reviewing our disclosures under “Management’s Discussion and Analysis of

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Financial Condition and Results of Operations.” Our Board of Directors annually reviews the Nasdaq listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent, as independence is currently defined in Rule 4200(a) (15) of the Nasdaq listing standards. Our Board of Directors has determined that Messrs. Winn and McGrath qualify as “audit committee financial experts,” as defined in applicable Securities and Exchange Commission rules.

Compensation Committee

The Compensation Committee of our Board of Directors, currently comprised of Messrs. Lazzara and Meyercord, reviews and approves our overall compensation strategy and policies. Ms. Sharer was a member of the Compensation Committee in 2005 and until her resignation from our Board of Directors in February 2006. The Compensation Committee reviews and approves corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management; reviews and approves the compensation and other terms of employment of our Chief Executive Officer; reviews and approves the compensation and other terms of employment of our other officers; and administers our stock option and purchase plans, pension and profit sharing plans, stock bonus plans, deferred compensation plans and other similar programs. All current members of our Compensation Committee are, and all former members of our Compensation Committee have been, independent within the meaning of Rule 4200(a)(15) of the Nasdaq listing standards.

Nominating and Governance Committee

The Nominating and Governance Committee of our Board of Directors, currently comprised of Messrs. Lazzara, Meyercord and Winn, is responsible for: identifying, reviewing and evaluating candidates to serve as members of our Board of Directors, consistent with criteria approved by our Board of Directors; reviewing and evaluating incumbent directors and recommending candidates for election to our Board of Directors; making recommendations to our Board of Directors regarding the membership of the committees of our Board of Directors; and assessing the performance of management and our Board of Directors. Ms. Sharer was a member of the Nominating Committee in 2005 and until her resignation from our Board of Directors in February 2006. All current members of our Nominating and Governance Committee are, and all former members of our Nominating and Governance Committee have been, independent within the meaning of Rule 4200(a)(15) of the Nasdaq listing standards.

Code of Business Conduct and Ethics

We have adopted the Endwave Corporation Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Endwave Corporation Code of Business Conduct and Ethics is available on our website at www.endwave.com. We will post on our website any amendments to this code or any waivers of this code that apply to directors or executive officers. A copy of this code may be obtained without charge by making a written request to:

Endwave Corporation

Attention: Investor Relations

776 Palomar Avenue

Sunnyvale, CA 94085

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Item 11.   Executive Compensation

Compensation of Executive Officers

The following table shows, for the years ended December 31, 2005, 2004 and 2003, compensation awarded, paid to or earned by our “named executive officers” (within the meaning of Item 402 of Regulation S-K promulgated by the Securities and Exchange Commission) for services rendered by them as our officers.

Summary Compensation Table

							Long-Term Compensation
	Annual Compensation(1)						Awards
							Securities
			Salary				Underlying		All Other
Name and Principal Position	Year		($)		Bonus($)		Options(#)		Compensation($)
Edward A. Keible, Jr.(2)		2005		340,600		170,000		75,000		459
President and Chief Executive Officer		2004		327,231		40,000		118,000		335
		2003		318,000		95,400		110,777		1,974
Julianne M. Biagini(3)		2005		213,100		80,000		30,000		409
Chief Financial Officer,		2004		204,231		20,000		60,000		363
Executive Vice President and Corporate Secretary		2003		195,000		48,750		46,659		963
John J. Mikulsky(4)		2005		241,000		90,000		45,000		459
Chief Operating Officer		2004		231,462		20,000		60,000		420
and Executive Vice President		2003		225,000		56,250		55,799		1,573

(1)	In accordance with rules promulgated by the Securities and Exchange Commission, other annual compensation in the form of perquisites and other personal benefits has been omitted where the aggregate amount of such perquisites and other personal benefits constitutes less than the lesser of $50,000 or 10% of the total annual salary and bonus for the Named Officer for the fiscal year.
(2)	All Other Compensation represents group life insurance payments made by Endwave in the amounts of $459, $335 and $1,974 for 2005, 2004 and 2003, respectively.
(3)	All Other Compensation represents group life insurance payments made by Endwave in the amounts of $409, $363 and $963 for 2005, 2004 and 2003, respectively.
(4)	All Other Compensation represents group life insurance payments made by Endwave in the amounts of $459, $420 and $1,573 for 2005, 2004 and 2003, respectively.

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The following table sets forth information regarding options granted to each Named Officer during the year ended December 31, 2005. The information regarding stock options granted to our named executive officers as a percentage of total stock options granted to employees in 2005 is based on options to purchase a total of 519,150 shares of our common stock that were granted to employees in 2005 under our 2000 Equity Incentive Plan. No stock appreciation rights or restricted stock awards were granted during 2005.

Option Grants in 2005

	Number of								Potential Realizable
	Securities		% of Total						Value at Assumed
	Underlying		Options						Annual Rates of Stock
	Options		Granted to						Price Appreciation for
	Granted		Employees in		Exercise		Expiration		Option Term ($)(2)
Name	(#)(1)		Fiscal Year (%)		Price ($/Sh)		Date		5%		10%
Edward A. Keible, Jr		37,500		7.22		34.89		7/31/15		822,545		2,084,327
		4,657		0.90		21.47		2/03/15		62,859		159,284
		32,843		6.33		21.47		2/03/15		443,305		1,123,333
Julianne M. Biagini		15,000		2.89		34.89		7/31/15		329,018		833,731
		10,343		1.99		21.47		2/03/15		139,607		353763
		4,657		0.90		21.47		2/03/15		62,859		159,284
John J. Mikulsky		30,000		5.78		34.89		7/31/15		658,036		1,667,461
		4,657		0.90		21.47		2/03/15		62,859		159,284
		10,343		1.99		21.47		2/03/15		139,607		353,763

(1)

Options granted under our 2000 Equity Incentive Plan and under our 1992 Stock Option Plan vest in accordance with the terms of the applicable option grant and the terms of our Executive Officer Severance and Retention Plan, detailed in “Employment, Severance and Change in Control Agreements” below.

(2)

The potential realizable value is based on the term of the option at its time of grant. It is calculated by assuming that the stock price on the date of grant appreciates at the indicated rate, compounded annually for the entire term of the option and the option is exercised solely on the last day of its term for the appreciated price. These amounts represent certain assumed rates of appreciation less the exercise price, in accordance with the rules of the Securities and Exchange Commission, and do not reflect our estimate or projection of future stock price performance. Actual gains, if any, are dependent on the actual future performance of our common stock and no gain to the optionee is possible unless the stock price increases over the option term, which will benefit all stockholders.

Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values

					Number of Securities		Value of Unexercised
			Value		Underlying Unexercised		In-the-Money Options at
	Shares Acquired		Realized		Options at FY-End (#)		FY-End ($)
Name	on Exercise (#)		($)		Exercisable/Unexercisable		Exercisable/Unexercisable
Edward A. Keible, Jr		114,807		2,441,122		201,569/0		1,384,070/0
Julianne M. Biagini		140,379		3,644,307		68,126/0		289,500/0
John J. Mikulsky		160,228		4,587,984		109,677/0		628,596/0

As of December 31, 2005, options to purchase 175,014 shares of common stock held by our named executive officers were in-the-money.

Compensation of Non-Employee Directors

In January 2004, we increased the fee to be paid for each Board meeting from $1,000 to $1,500 and in July 2004 we increased the fee paid to each non-employee director to $2,000. In addition, each of our non-employee directors receive a fee of $1,000 for each committee meeting attended in person by those Board members serving on committees of the Board of Directors occurring apart from a meeting of the full Board. Further, in 2004, annual retainer payments were made as follows: non-employee Board membership — $5,000, audit and compensation committee membership — $1,000 and each committee or Board chairmanship -$1,000. Beginning January 2005

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and thereafter, until changed by the Board of Directors, fees for service on our Board of Directors were changed to reflect the compensation set forth in the table below. The members of the Board of Directors were and remain eligible for reimbursement for travel expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy.

Annual Retainer	$	10,000
Board Chair Annual Retainer	$	10,000
Audit Committee Chair Annual Retainer	$	10,000
Compensation Committee Chair Annual Retainer	$	5,000
Nominating and Governance Committee Chair Annual Retainer	$	3,000
Director Meeting Fee (in person)	$	1,000
Director Meeting Fee (telephonic)	$	500
Audit or Compensation Committee Meeting Fee (in person)	$	1,000
Audit or Compensation Committee Meeting Fee (telephonic)	$	500

Non-employee directors are eligible to participate in our 2000 Non-Employee Director Plan, the Director Plan. Pursuant to the Director Plan, all non-employee directors are automatically granted an option to purchase 20,000 shares of common stock upon their election to our Board of Directors. Each non-employee director is also granted an option to purchase an additional 6,000 shares of common stock each year following the date of our annual meeting of stockholders, provided that if any non-employee director has not served in that capacity for the entire period since the preceding annual stockholders meeting, then the number of shares subject to the annual grant will be reduced, pro rata, for each full quarter the director did not serve during the previous period. All options under our Director Plan expire after ten years and have an exercise price equal to the fair market value on the date of grant. Until recently, all of these options vested over four years at the rate of 1/48 of the total grant per month. In February 2005, the Board of Directors approved an amendment to the Director Plan providing that annual option grants, but not initial option grants, will vest over two years at the rate of 1/24 of the total grant per month. Our directors are also eligible to participate in our 2000 Equity Incentive Plan and our employee directors are eligible to participate in our 2000 Employee Stock Purchase Plan.

During the last fiscal year, we granted options covering an aggregate of 42,500 shares to our non-employee directors at an average exercise price of $15.21 per share. The fair market value of such common stock on the date of grant was the same as the exercise price per share, based on the closing sales price reported on the Nasdaq National Market for the date of grant. As of February 17, 2006 52,914 shares of common stock have been purchased upon the exercise of options granted under the Director Plan.

Employment, Severance and Change in Control Agreements

In March 2000, in connection with our merger with TRW Milliwave Inc., our Board of Directors approved an Officer Retention Plan providing for the acceleration of vesting, under certain circumstances, of a portion of stock options granted to our officers under our 1992 Stock Option Plan and 2000 Equity Incentive Plan. The Officer Retention Plan was amended in March 2002 and in October 2003 and renamed the Executive Officer Severance and Retention Plan. Under the Executive Officer Severance and Retention Plan, as amended, if an executive officer is terminated without cause, or resigns for certain specified reasons, the executive officer will receive (i) salary and benefits continuation based on the executive officer’s position and length of service with us and (ii) acceleration of vesting on the unvested portion of some of the executive officer’s stock options, based on the officer’s position and length of service with us. In the case of the Chief Executive Officer, the salary and benefits continuation period will be equal to the greater of two months for every year of service to us, or a total of 12 months, if the termination of employment does not occur in connection with, or within six months after, a change in control transaction. In the case of an Executive Vice President, the salary and benefits continuation will be equal to the greater of 1.5 months for every year of service to us, or a total of nine months, if the termination of employment does not occur in connection with, or within six months after, a change in control transaction. Under the circumstances set forth above, subject to certain exceptions, an executive officer will vest as if the executive officer had remained employed by Endwave for twice the salary and benefits continuation period described above. Upon the closing of a change in control transaction, each executive officer will receive this same amount of acceleration of vesting even if his or her

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employment is not terminated. However, if an executive officer’s employment is terminated by us without cause or by the executive officer for certain specified reasons in connection with, or within six months after, the change in control transaction, the executive officer will receive salary and benefits continuation for twice the period that would have applied had such termination not occurred in connection with a change in control, and additional accelerated vesting in the same amount as provided when termination does not occur in connection with a change in control transaction.

In 2003, our Board of Directors approved a Key Employee Severance and Retention Plan providing benefits to certain senior, non-executive employees. Under the Key Employee Severance and Retention Plan, if we terminate the employment of an eligible key employee without cause, or such employee resigns for certain specified reasons, in connection with or within six months after a change in control transaction, the key employee will receive salary and benefits continuation based on the key employee’s length of service with us. In addition, upon the closing of a change in control transaction, certain specified options granted to such employee will vest in full even if such key employee’s employment is not terminated.

In 2003, our Board of Directors approved a Transaction Incentive Plan for the benefit of our executive officers and certain senior, non-executive employees. Under the Transaction Incentive Plan, an eligible employee will receive a cash bonus if the employee remains employed by us at the time of a change in control transaction. The amount of the bonus for an eligible employee will be calculated by multiplying the per-share proceeds received by our stockholders in the transaction, including certain dividends, by a number of “phantom” shares assigned to such employee, less profits received by the eligible employee on certain vested stock options.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is or has been an officer or employee of Endwave. In addition, no member of our Compensation Committee serves as a member of a Board of Directors or Compensation Committee of any entity that has one or more executive officers serving as a member of our Board of Directors.

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Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information regarding the ownership of our common stock as of February 17, 2006 by: (i) each of our named executive officers; (ii) each director; (iii) our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. Except as otherwise indicated, the address of each of the persons set forth below is c/o Endwave Corporation, 776 Palomar Avenue, Sunnyvale, California, 94085.

	Shares Beneficially
	Owned(1)
Name and Address	Number		Percent(2)
Entities affiliated with Wood River Management LLC(3)		4,171,477		36.71	%
c/o Arthur Steinberg, Esq,
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Entities affiliated with EagleRock Capital Management(4)		953,916		8.39
551 Fifth Avenue, 34th Floor
New York, NY 10176
Entities affiliated with Potomac Capital Management		764,578		6.75
825 Third Avenue
New York, NY 10022
Edward A. Keible, Jr.(5)		287,087		2.47
Julianne M. Biagini(6)		122,827		1.07
John J. Mikulsky(7)		195,201		1.70
Edward C.V. Winn(8)		12,758		*
Joseph J. Lazzara(8)		5,193		*
John F. McGrath, Jr.(8)		4,153		*
Wade Meyercord(8)		4,661		*
Carol Herod Sharer(9)		7,758		*
All directors and executive officers as a group (8 persons)(10)		639,638		5.37

* Less than one percent.

(1)	This table is based upon information supplied to us by our officers, directors and principal stockholders and upon any Schedules 13D or 13G filed with the Securities and Exchange. Unless otherwise indicated in the footnotes to this table, and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
(2)	Applicable percentages are based on 11,363,475 shares outstanding on February 17, 2006, adjusted as required by rules promulgated by the Securities and Exchange Commission.
(3)	Includes 2,843,239 shares held by Wood River Partners, L.P. (the “Partnership”) and 1,328,238 shares held by Wood River Partners Offshore, Ltd. (the “Offshore Fund”). Wood River Capital Management, L.L.C. (the “Adviser”) is an investment adviser and is the management company for the partnership and the Offshore Fund and as such may be deemed to beneficially own 4,171,477 shares. Wood River Associates, L.L.C. (the “General Partner”) is the general partner of the Partnership and as such may be deemed to beneficially own 1,328,238 shares. Pursuant to an order of the United States District Court for the Southern District of New York dated October 13, 2005, Arthur Steinberg, Esq. (the “Receiver”) was appointed as the Receiver of the Wood River Entities. Due to the powers and authority conveyed upon the Receiver by the order, the Receiver may be deemed to share beneficial ownership of the shares.
(4)	The shares are held by EagleRock Master Fund, L.P. (“ERMF”) and EagleRock Institutional Partners LP (“ERIP”). EagleRock Capital Management, LLC (“EagleRock”) is the investment manager of ERMF and

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	ERIP and has sole power to vote and dispose of the shares held by ERMF and ERIP and may be deemed to beneficially own such shares. Nader Tavakoli is the Manager of EagleRock and may direct the voting and disposition of the shares held by ERMF and ERIP and may be deemed to beneficially own such shares.
(5)	Includes 276,659 shares issuable upon exercise of options exercisable within 60 days of the date of this table. If exercised in full within 60 days of the date of this table, 172,802 shares would be subject to repurchase by us. Also includes 10,518 shares held by the Keible Family Trust, of which Mr. Keible is co-trustee. Mr. Keible’s spouse shares voting and investment power over the shares held by Mr. Keible’s father-in-law.
(6)	Includes 98,126 shares issuable upon exercise of options exercisable within 60 days of the date of this table. If exercised in full within 60 days of the date of this table, 76,004 shares would be subject to repurchase by us. Includes 15,342 shares held in escrow and that are subject to repurchase.
(7)	Includes 139,677 shares issuable upon exercise of options exercisable within 60 days of the date of this table. If exercised in full within 60 days of the date of this table, 78,766 shares would be subject to repurchase by us. Also includes 600 shares owned by Mr. Mikulsky’s daughter.
(8)	Represents shares issuable upon exercise of options exercisable within 60 days of the date of this table.
(9)	Includes 2,758 shares issuable upon exercise of options exercisable within 60 days of the date of this table.
(10)	See footnotes 5 through 9 above, as applicable. Includes 644,638 shares issuable upon exercise of options exercisable within 60 days of the date of this table. If exercised in full within 60 days of the date of this table, 327,572 shares would be subject to a repurchase right by us.

Equity Compensation Plan Information

The following table provides certain information with respect to all of our equity compensation plans in effect as of the end of December 31, 2005.

					Number of Securities
	Number of		Weighted-		Remaining Available
	Securities to be		Average Exercise		for Issuance
	Issued Upon		Price of		Under Equity
	Exercise of		Outstanding		Compensation Plans
	Outstanding Options,		Options,		(Excluding Securities
	Warrants and		Warrants and		Reflected in
Plan Category	Rights(a)		Rights(b)		Column (a))(c)(1)
Equity compensation plans approved by security holders		1,292,877	$	14.19		1,551,170	(2)
Equity compensation plans not approved by security holders		0		0		0
Total		1,292,877	$	14.19		1,551,170

(1)

Each year on October 17, starting 2001 and continuing through 2005, the aggregate number of shares of common stock that may be issued pursuant to stock awards under the 2000 Equity Incentive Plan is automatically increased by the lesser of 3,000,000 shares or 6% of the total number of shares of common stock outstanding on that date or such lesser amount as may be determined by the Board of Directors. In addition, each year on October 17, starting in 2001 and continuing through 2005, the aggregate number of shares of common stock that may be issued pursuant to stock awards under the 2000 Employee Stock Purchase Plan is automatically increased by the lesser of 350,000 shares or 1.5% of the total number of shares of common stock outstanding on that date or such lesser amount as may be determined by the Board of Directors.

(2)

Includes 258,293 shares issuable under the 2000 Employee Stock Purchase Plan.

Item 13.   Certain Relationships and Related Transactions

Indemnification

Our Bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers, employees and other agents to the extent not prohibited by Delaware law. The Bylaws also require us to

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advance litigation expenses in the case of stockholder derivative actions or other actions. The indemnified party must repay such advances if it is ultimately determined that the indemnified party is not entitled to indemnification.

Transactions with Northrop Grumman Corporation

Northrop Grumman Corporation was a beneficial owner of a significant portion of our outstanding common stock from March 2000 through the beginning of December 2005. The record holder of such shares was most recently Northrop Grumman Space & Mission Systems Corp., a wholly-owned subsidiary of Northrop Grumman Corporation. We maintain a supply agreement and a technology services agreement with Northrop Grumman Space & Mission Systems Corp. The supply agreement, which specifies volume and price commitments, was effective by its terms through December 31, 2005 and has been extended by mutual agreement until March 31, 2006 while parties negotiate the terms of a new supply agreement. Under the existing agreement, we recorded purchases of $7.1 million, $4.2 million and $3.1 million for 2005, 2004 and 2003, respectively.

We also sell various products and services under purchase orders and agreements to various subsidiaries and divisions of Northrop Grumman Corporation, and recognized revenues of $61,000, $86,000 and $345,000 in 2005, 2004 and 2003, respectively. In the years ended December 31, 2005, 2004 and 2003, we incurred costs related to these revenues of approximately $39,000, $51,000 and $124,000.

At December 31, 2004, we had accounts receivable of $15,000 and accounts payable of $1.3 million related to our supplier and customer relationships, respectively, with Northrop Grumman Corporation and its subsidiaries.

Some radios incorporating our transceivers that are manufactured and shipped by one of our customers have experienced degraded performance after installation in the field. The cause of the degradation was identified to be a faulty semiconductor component originally developed and supplied by TRW Inc. that was incorporated in the transceiver. TRW was later acquired by Northrop Grumman Corporation and renamed Northrop Grumman Space & Mission Systems Corp., and its foundry is referred to in this report by its tradename, Velocium. Pursuant to a settlement agreement between TRW and us, we are responsible for the direct costs associated with the repair and replacement of the degraded transceivers produced under our supply agreement with the customer. Northrop Grumman Space & Mission Systems Corp., as successor to TRW, compensated our customer for the indirect costs associated with the repair and replacement of the degraded radios and transceivers. These indirect costs include the costs associated with removing and replacing the radios in the field as well as removing and replacing the transceiver module in each returned radio. Under an agreement we entered into with Northrop Grumman Space & Mission Systems Corp. in March 2005, we agreed to pay $300,000 to Northrop Grumman Space & Mission Systems Corp. as final reimbursement for these indirect costs and to assume sole responsibility for any future product failures attributable to the TRW semiconductor component. We are in the process of designing a replacement component, which will be fabricated by an alternate supplier, that we believe will eliminate the degradation of performance in future production units. We expect to complete the design and qualification of this replacement component by mid-2006 at a cost of approximately $115,000. During 2001, we reserved $4.6 million for warranty charges to cover the actual repair of the transceivers containing these faulty components, of which $2.4 million had been used or reversed through December 31, 2005. We believe that our remaining reserve is adequate to cover our remaining warranty obligations.

Item 14.   Principal Accounting Fees and Services

The following table shows the fees paid or accrued by Endwave for the audit and other services provided by our independent registered public accounting firms Burr, Pilger & Mayer LLP for fiscal 2004 and 2005 (in thousands):

	2004		2005
Audit Fees(1)	$	183	$	464
Tax Fees(2)		0		0
All Other Fees(3)		0		96
Total	$	183	$	560

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(1)	Audit fees represent fees for professional services provided in connection with the audit of our annual consolidated financial statements and review of our quarterly condensed consolidated financial statements.
(2)	Tax fees consisted primarily of income tax compliance and related services.
(3)	Represents fees for services provided in connection with other miscellaneous items not otherwise included in the categories above including $96,000 related to the filing of a registration statement on Form S-3 in fiscal 2005.

The Audit Committee has determined that the provision by Burr, Pilger & Mayer LLP, of non-audit services is compatible with maintaining the independence of Burr, Pilger & Mayer LLP. During fiscal 2005, all services provided by Burr, Pilger & Mayer LLP were pre-approved by the Audit Committee.

Audit Committee Pre-Approval Policy

The Audit Committee of our Board of Directors has adopted a policy requiring the pre-approval of the engagement of our independent registered public accounting firm prior to rendering any audit or non-audit services.

Item 15.   Exhibits and Financial Statement Schedules

(a) Financial Statements Schedules and Exhibits.

(1) The following consolidated financial statements are included in Item 8:

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statement of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2) The following financial statement schedule is included in Item 15(d): Schedule II — Valuation and Qualifying Accounts. All other schedules not listed above have been omitted because they are inapplicable or are not required.

(3) Listing of Exhibits:

(b) Intentionally omitted

(c) Exhibits — 2

Number			Description
	2	.1(1)†	Asset Purchase Agreement by and among M/A-COM Tech, Inc., Tyco Electronics Logistics AG and the Registrant dated April 24, 2001.
	2	.2(2)†	Asset Purchase Agreement by and among Signal Technology Corporation and the Registrant dated September 24, 2002.
	2	.3(3)†	Purchase and Sale Agreement by and Among New Focus, Inc., Bookham Technology PLC and the Registrant dated July 21, 2004.
	3	.1(4)	Amended and Restated Certificate of Incorporation effective October 20, 2000.
	3	.2(5)	Certificate of Amendment of Amended and Restated Certificate of Incorporation effective June 28, 2002.
	3	.3(4)	Amended and Restated Bylaws effective October 20, 2000.
	3	.4(12)	Certificate of Designation for Series A Junior Participating Preferred Stock.
	4	.1(4)	Form of specimen Common Stock Certificate.

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Number			Description
	4	.2(11)	Amended and Restated Registration Rights Agreement by and between Northrop Grumman Space & Mission Systems Corp. and the Registrant dated September 14, 2005.
	4	.3(12)	Rights Agreement dated as of December 1, 2005 between Endwave Corporation and Computershare Trust Company, Inc.
	4	.4(12)	Form of Rights Certificate
	10	.1(4)	Form of Indemnity Agreement entered into by the Registrant with each of its directors and officers.
	10	.2(4)*	1992 Stock Option Plan.
	10	.3(4)*	Form of Incentive Stock Option under 1992 Stock Option Plan.
	10	.4(4)*	Form of Nonstatutory Stock Option under 1992 Stock Option Plan.
	10	.5(4)*	2000 Equity Incentive Plan, as amended.
	10	.6(4)*	Form of Stock Option Agreement under 2000 Equity Incentive Plan.
	10	.7(4)*	2000 Employee Stock Purchase Plan.
	10	.8(4)*	Form of 2000 Employee Stock Purchase Plan Offering.
	10	.9*	2000 Non-Employee Directors’ Stock Option Plan, as amended.
	10	.10(4)*	Form of Nonstatutory Stock Option Agreement under the 2000 Non-Employee Director Plan.
	10	.11(7), (13)*	Description of Compensation Payable to Non-Employee Directors.
	10	.12(13)*	2006 Base Salaries for Named Executive Officers.
	10	.13(13)*	2006 Executive Incentive Compensation Plan.
	10	.14(8)*	Executive Officer Severance and Retention Plan.
	10	.15(8)*	Transaction Incentive Plan.
	10	.16(4)	License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.
	10	.17(4)†	Production Agreement by and between TRW Inc. and the Registrant dated March 31, 2000 for the performance of the Development Agreement by and between TRW Inc. and Nokia Telecommunications OY dated January 28, 1999.
	10	.18(4)†	Services Agreement by and between TRW Inc. and the Registrant dated March 31, 2000.
	10	.19(9)†	Development Agreement by and between Nokia and the Registrant dated August 14, 2003.
	10	.20(10)†	Purchase Agreement by and between Nokia Corporation and the Registrant dated December 31, 2003.
	10	.21(5)	Industrial Lease by and between The Irvine Company and the Registrant dated January 28, 2004.
	10	.22(5)†	Amended and Restated Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and the Registrant dated March 26, 2004.
	10	.23(6)	Settlement and Release Agreement by and between Northrop Grumman Space & Mission Systems Corp. and the Registrant dated March 23, 2005.
	10	.24†	Purchase Agreement between Nokia and Endwave Corporation dated January 1, 2006.
	10	.25†	Frame Purchase Agreement by and between Endwave Corporation and Siemens Mobile Communications Spa dated January 16, 2006.
	23	.1	Consent of Burr, Pilger & Mayer LLP, independent registered public accounting firm.
	23	.2	Consent of Ernst & Young LLP, independent registered public accounting firm.
	31	.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

87

(1)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 8, 2001 and incorporated herein by reference.
(2)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on October 11, 2002 and incorporated herein by reference.
(3)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on August 4, 2004 and incorporated herein by reference.
(4)	Previously filed with the Registrant’s Registration Statement on Form S-1 (Registration No. 333-41302) and incorporated herein by reference.
(5)	Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference.
(6)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on March 25, 2005 and incorporated herein by reference.
(7)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on February 3, 2005 and incorporated herein by reference.
(8)	Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference.
(9)	Previously filed with an amendment to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 filed on August 4, 2004 and incorporated herein by reference.
(10)	Previously filed with an amendment to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on August 4, 2004 and incorporated herein by reference.
(11)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 15, 2005 and incorporated herein by reference.
(12)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on December 5, 2005 and incorporated herein by reference.
(13)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on February 8, 2006 and incorporated herein by reference.
*	Indicates a management contract or compensatory plan or arrangement.
†	Confidential treatment has been requested for a portion of this exhibit.

(d) Financial Statement Schedule

88

ENDWAVE CORPORATION

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful accounts:

			Additions
	Balance at		Charged to		Deductions			Balances
	Beginning		Costs and		and			at End of
	of Period		Expense		Write-offs			Period
	(In thousands)
Year ended December 31, 2005	$	243	$	59	$	(6	)	$	296
Year ended December 31, 2004	$	284	$	66	$	(107	)	$	243
Year ended December 31, 2003	$	324	$	126	$	(166	)	$	284

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SIGNATURES

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

ENDWAVE CORPORATION

By:  /s/  JULIANNE M. BIAGINI

Julianne M. Biagini

Executive Vice President and

Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Julianne M. Biagini and Edward A. Keible, Jr., his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signatures	Title	Date
/s/  EDWARD A. KEIBLE, JR. Edward A. Keible, Jr.	President, Chief Executive Officer and Director (Principal Executive Officer)	March 14, 2006
/s/  JULIANNE M. BIAGINI Julianne M. Biagini	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 14, 2006
/s/  EDWARD C.V. WINN Edward C.V. Winn	Chairman of the Board of Directors	March 14, 2006
/s/  JOSEPH J. LAZZARA Joseph J. Lazzara	Director	March 14, 2006
/s/  JOHN F. MCGRATH, JR. John F. McGrath, Jr.	Director	March 14, 2006
/s/  WADE MEYERCORD Wade Meyercord	Director	March 14, 2006

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INDEX TO EXHIBITS

Number			Description
	2	.1(1)†	Asset Purchase Agreement by and among M/A-COM Tech, Inc., Tyco Electronics Logistics AG and the Registrant dated April 24, 2001.
	2	.2(2)†	Asset Purchase Agreement by and among Signal Technology Corporation and the Registrant dated September 24, 2002.
	2	.3(3)†	Purchase and Sale Agreement by and Among New Focus, Inc., Bookham Technology PLC and the Registrant dated July 21, 2004.
	3	.1(4)	Amended and Restated Certificate of Incorporation effective October 20, 2000.
	3	.2(5)	Certificate of Amendment of Amended and Restated Certificate of Incorporation effective June 28, 2002.
	3	.3(4)	Amended and Restated Bylaws effective October 20, 2000.
	3	.4(12)	Certificate of Designation for Series A Junior Participating Preferred Stock.
	4	.1(4)	Form of specimen Common Stock Certificate.
	4	.2(11)	Amended and Restated Registration Rights Agreement by and between Northrop Grumman Space & Mission Systems Corp. and the Registrant dated September 14, 2005.
	4	.3(12)	Rights Agreement dated as of December 1, 2005 between Endwave Corporation and Computershare Trust Company, Inc.
	4	.4(12)	Form of Rights Certificate
	10	.1(4)	Form of Indemnity Agreement entered into by the Registrant with each of its directors and officers.
	10	.2(4)*	1992 Stock Option Plan.
	10	.3(4)*	Form of Incentive Stock Option under 1992 Stock Option Plan.
	10	.4(4)*	Form of Nonstatutory Stock Option under 1992 Stock Option Plan.
	10	.5(4)*	2000 Equity Incentive Plan, as amended.
	10	.6(4)*	Form of Stock Option Agreement under 2000 Equity Incentive Plan.
	10	.7(4)*	2000 Employee Stock Purchase Plan.
	10	.8(4)*	Form of 2000 Employee Stock Purchase Plan Offering.
	10	.9*	2000 Non-Employee Directors’ Stock Option Plan, as amended.
	10	.10(4)*	Form of Nonstatutory Stock Option Agreement under the 2000 Non-Employee Director Plan.
	10	.11(7), (13)*	Description of Compensation Payable to Non-Employee Directors.
	10	.12(13)*	2006 Base Salaries for Named Executive Officers.
	10	.13(13)*	2006 Executive Incentive Compensation Plan.
	10	.14(8)*	Executive Officer Severance and Retention Plan.
	10	.15(8)*	Transaction Incentive Plan.
	10	.16(4)	License Agreement by and between TRW Inc. and TRW Milliwave Inc. dated February 28, 2000.
	10	.17(4)†	Production Agreement by and between TRW Inc. and the Registrant dated March 31, 2000 for the performance of the Development Agreement by and between TRW Inc. and Nokia Telecommunications OY dated January 28, 1999.
	10	.18(4)†	Services Agreement by and between TRW Inc. and the Registrant dated March 31, 2000.
	10	.19(9)†	Development Agreement by and between Nokia and the Registrant dated August 14, 2003.
	10	.20(10)†	Purchase Agreement by and between Nokia Corporation and the Registrant dated December 31, 2003.
	10	.21(5)	Industrial Lease by and between The Irvine Company and the Registrant dated January 28, 2004.
	10	.22(5)†	Amended and Restated Supply Agreement by and between Northrop Grumman Space and Mission Systems Corp. and the Registrant dated March 26, 2004.

91

Number			Description
	10	.23(6)	Settlement and Release Agreement by and between Northrop Grumman Space & Mission Systems Corp. and the Registrant dated March 23, 2005.
	10	.24†	Purchase Agreement between Nokia and Endwave Corporation dated January 1, 2006.
	10	.25†	Frame Purchase Agreement by and between Endwave Corporation and Siemens Mobile Communications Spa dated January 16, 2006.
	23	.1	Consent of Burr, Pilger & Mayer LLP, independent registered public accounting firm.
	23	.2	Consent of Ernst & Young LLP, independent registered public accounting firm.
	31	.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 8, 2001 and incorporated herein by reference.
(2)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on October 11, 2002 and incorporated herein by reference
(3)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on August 4, 2004 and incorporated herein by reference.
(4)	Previously filed with the Registrant’s Registration Statement on Form S-1 (Registration No. 333-41302) and incorporated herein by reference.
(5)	Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference.
(6)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on March 25, 2005 and incorporated herein by reference.
(7)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on February 3, 2005 and incorporated herein by reference.
(8)	Previously filed with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference.
(9)	Previously filed with an amendment to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 filed on August 4, 2004 and incorporated herein by reference.
(10)	Previously filed with an amendment to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on August 4, 2004 and incorporated herein by reference.
(11)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 15, 2005 and incorporated herein by reference.
(12)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on December 5, 2005 and incorporated herein by reference.
(13)	Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on February 8, 2006 and incorporated herein by reference.
*	Indicates a management contract or compensatory plan or arrangement.
†	Confidential treatment has been requested for a portion of this exhibit.

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EX-10.9

Exhibit 10.9

Endwave Corporation

2000 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

Adopted by the Board of Directors July 7, 2000
Approved By Stockholders August 24, 2000
Effective Date: October 20, 2000
Amended by the Board of Directors January 29, 2004
Amendment Approved by Stockholders July 21, 2004
Amended by the Board of Directors February 2, 2005
Amended by the Board of Directors February 1, 2006

1. Purposes.

     (a) Eligible Option Recipients. The persons eligible to receive Options are the Non-Employee Directors of the Company.

     (b) Available Options. The purpose of the Plan is to provide a means by which Non-Employee Directors may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

2. Definitions.

     (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

     (b) “Annual Grant” means an Option granted annually to Non-Employee Directors in accordance with subsection 6(b) of the Plan.

     (c) “Annual Meeting” means the annual meeting of the stockholders of the Company.

     (d) “Board” means the Board of Directors of the Company.

     (e) “Code” means the Internal Revenue Code of 1986, as amended.

     (f) “Common Stock” means the common stock of the Company.

     (g) “Company” means Endwave Corporation, a Delaware corporation.

     (h) “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for

1.

such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors of the Company who are not compensated by the Company for their services as Directors or Directors of the Company who are merely paid a director’s fee by the Company for their services as Directors.

     (i) “Continuous Service” means that the Optionholder’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Optionholder’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder’s service. For example, a change in status without interruption from a Non-Employee Director of the Company to a Consultant of an Affiliate or an Employee of the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

     (j) “Director” means a member of the Board of Directors of the Company.

     (k) “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.

     (l) “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

     (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (n) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.

          (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.

     (o) “Initial Grant” means an Option granted to a Non-Employee Director in accordance with subsection 6(a) of the Plan.

     (p) “IPO Date” means the effective date of the initial public offering of the Common Stock.

2.

     (q) “Non-Employee Director” means a Director who is not an Employee.

     (r) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (s) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

     (t) “Option” means a Nonstatutory Stock Option granted pursuant to the Plan.

     (u) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (v) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

     (w) “Plan” means this Endwave Corporation 2000 Non-Employee Directors’ Stock Option Plan.

     (x) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

     (y) “Securities Act” means the Securities Act of 1933, as amended.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan. The Board may not delegate administration of the Plan to a committee.

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

          (i) To determine the provisions of each Option to the extent not specified in the Plan.

          (ii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

          (iii) To amend the Plan or an Option as provided in Section 12.

          (iv) To terminate or suspend the Plan as provided in Section 13.

3.

          (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan.

     (c) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in the Common Stock, the Common Stock that may be issued pursuant to Options shall not exceed in the aggregate one hundred fifty thousand (150,000) shares of Common Stock.

     (b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan.

     (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.

5. Eligibility.

     The Options as set forth in Section 6 automatically shall be granted under the Plan to all Non-Employee Directors, except as otherwise provided in Section 6.

6. Non-Discretionary Grants.

     (a) Initial Grants. Without any further action of the Board, each person who is elected or appointed for the first time to be a Non-Employee Director after the IPO Date automatically shall be granted an Initial Grant to purchase twenty thousand (20,000) shares of Common Stock on the terms and conditions set forth herein upon the date of his or her initial election or appointment to be a Non-Employee Director by the Board or stockholders of the Company; provided, however, that no Initial Grant shall be made to any person who, on or before the date of his or her initial election or appointment to be a Non-Employee Director, elects irrevocably not to receive an Initial Grant and notifies the Board of such election.

     (b) Annual Grants. Without any further action of the Board, a Non-Employee Director shall be granted an Annual Grant as follows: On the day following each Annual Meeting commencing with the Annual Meeting in 2001, each person who is then a Non-Employee Director automatically shall be granted an Annual Grant to purchase six thousand (6,000) shares of Common Stock on the terms and conditions set forth herein; provided, however, that if the person has not been serving as a Non-Employee Director for the entire period since the preceding Annual Meeting, then the number of shares subject to the Annual Grant shall be reduced pro rata for each full quarter prior to the date of grant during which such person did not serve as a Non-Employee Director. Notwithstanding the preceding provisions of this subsection 6(b) to the contrary, an Annual Grant shall not be made to a Non-Employee

4.

Director who, on or before the date such Annual Grant would otherwise be made to Non-Employee Directors, elects irrevocably not to receive such Annual Grant and notifies the Board of such election.

7. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as required by the Plan. Each Option shall contain such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

     (a) Term. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

     (b) Exercise Price. The exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

     (c) Consideration. The purchase price of stock acquired pursuant to an Option may be paid, to the extent permitted by applicable statutes and regulations, in any combination of the following methods:

          (i) By cash or check.

          (ii) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that the Optionholder has held for the period required to avoid a charge to the Company’s reported earnings (generally six months) or that the Optionholder did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes shall include delivery to the Company of the Optionholder’s attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, the Optionholder may not exercise the Option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

          (iii) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

5.

     (d) Transferability. Except as provided otherwise in the Option, each Option is transferable only by will or by the laws of descent and distribution. An Option shall be exercisable during the lifetime of the Optionholder only by the Optionholder as provided herein. However, the Optionholder may, by delivering written notice to the Company in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (e) Exercise Schedule. The Option shall be exercisable as the shares of Common Stock subject to the Option vest.

     (f) Vesting Schedule. Initial Grants shall provide for monthly vesting over a four year period such that 1/48^th of the shares of Common Stock subject to the Option vest each month after the date of grant. Annual Grants shall provide for monthly vesting over a two year period such that 1/24^th of the shares of Common Stock subject to the Option vest each month after the date of grant.

     (g) Termination of Continuous Service. In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.

     (h) Extension of Termination Date. If the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 7(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

     (i) Disability of Optionholder. In the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.

     (j) Death of Optionholder. In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the three-month period after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise the Option as of the date of death) by the Optionholder’s estate, by a person who

6.

acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Options, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Options.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Options unless and until such authority is obtained.

9. Use of Proceeds from Stock.

     Proceeds from the sale of stock pursuant to Options shall constitute general funds of the Company.

10. Miscellaneous.

     (a) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.

     (b) No Service Rights. Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

     (c) Investment Assurances. The Company may require an Optionholder, as a condition of exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or

7.

she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is acquiring the stock subject to the Option for the Optionholder’s own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (iii) the issuance of the shares upon the exercise or acquisition of stock under the Option has been registered under a then currently effective registration statement under the Securities Act or (iv) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.

     (d) Withholding Obligations. The Optionholder may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of the Common Stock.

11. Adjustments upon Changes in Stock.

     (a) Capitalization Adjustments. If any change is made in the stock subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject both to the Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified in Section 5, and the outstanding Options will be appropriately adjusted in the class(es) and number of securities and price per share of stock subject to such outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then all outstanding Options shall terminate immediately prior to such event.

     (c) Corporate Transaction. In the event of (i) a sale, lease or other disposition of all or substantially all of the securities or assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately

8.

preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any surviving corporation or acquiring corporation may assume any Options outstanding under the Plan or substitute similar Options (including awards to acquire the same consideration paid to the stockholders in the Corporate Transaction) for those outstanding under the Plan. In the event no surviving corporation or acquiring corporation assumes such Options or substitutes Options for those outstanding under the Plan, then the Options shall terminate if not exercised at or prior to such event.

     (d) Change in Control. In the event of a Change in Control (as defined below), the vesting of all Options outstanding under the Plan that are held by Optionholders whose Continuous Service has not terminated as of the effective date of the Change in Control shall be accelerated in full. For purposes of the Plan, “Change in Control” means:

          (i) the sale of all or substantially all of the Company’s assets to a single purchaser or a group of related purchasers;

          (ii) the sale, exchange or other disposition, in a single transaction, of more than fifty percent (50%) of the Company’s outstanding capital stock; or

          (iii) a merger or consolidation of the Company in a transaction following which the Company’s stockholders receive less than fifty percent (50%) of the outstanding voting shares of the surviving entity.

12. Amendment of the Plan and Options.

     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

     (b) Stockholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval.

     (c) No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.

     (d) Amendment of Options. The Board at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.

13. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.

9.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the Optionholder.

14. Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

15. Choice of Law.

     All questions concerning the construction, validity and interpretation of this Plan shall be governed by the law of the State of Delaware, without regard to such state’s conflict of laws rules.

10.

EX-10.24

1(19)

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 10.24

PURCHASE AGREEMENT

BETWEEN

NOKIA CORPORATION
Networks

AND

ENDWAVE CORPORATION

On January 1, 2006

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

2(19)

TABLE OF CONTENTS

1.0 DEFINITIONS	3
2.0 SCOPE AND ORDER OF PRIORITY	5
3.0 PRODUCTS	6
4.0 PURCHASE ESTIMATES AND FLEXIBILITY	8
5.0 ORDERING, LOGISTICS AND DELIVERY	8
6.0 PRICE(S)	9
7.0 PAYMENT TERM	9
9.0 ACCEPTANCE AND REJECTION OF PRODUCT(S) AND QUALITY	10
10.0 PRODUCTION RECOVERY AND FACILITY SURVEY	11
11.0 INSURANCE	12
12.0 WARRANTY	12
13.0 PRODUCT LIABILITY	13
14.0 INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION	13
17.0 USE OF SELLER SUB-SUPPLIERS AND BUYER SUBCONTRACTORS	15
18.0 DUTY TO INFORM AND FORCE MAJEURE	16
19.0 CONFIDENTIALITY	16
20.0 EFFECTIVE DATE, TERM AND TERMINATION	17
21.0 MISCELLANEOUS	17
22.0 APPLICABLE LAW AND DISPUTES	18
23.0 PREVIOUS AGREEMENTS AND APPLIED DOCUMENTS	19
EXHIBIT TO THIS PURCHASE AGREEMENT
Exhibit 1 Insurance Requirements

ADDENDUMS TO THIS PURCHASE AGREEMENT

Addendum A	(intentionally left blank – placeholder for Nokia Mobile Phones’ Addendum)
Addendum B	Nokia Networks’ Addendum

Appendices to Addendum B
Appendix 1	The Products, Prices, Discounts and Price Validity
Appendix 2	Specifications
Appendix 3	Quality Requirements and Workmanship Standards
Appendix 4	Logistics Appendix/Appendices
Appendix 5	Environmental Requirements
Appendix 6	Support

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

1(19)

PURCHASE AGREEMENT No. ESLNST2676

NOKIA CORPORATION, represented through its Networks business group, a public limited liability company incorporated in Finland, having its registered address at Keilalahdentie 4, FIN-02150 Espoo, Finland, business identity code 0112038-9, including its Affiliates (“BUYER”)

AND

Endwave Corporation, a corporation formed under the laws of State of Delaware and registered under the California trade register number C1933055 with a registered/principal office at 776 Palomar Avenue, Sunnyvale, CA 94085, USA including its Affiliates (“SELLER”)

have made and entered into this Purchase Agreement (“Purchase Agreement”) including its Exhibits and Addendum(s).

1.0 DEFINITIONS

For the purposes of this Purchase Agreement the following definitions shall govern (and where the context so admits the singular shall include the plural and vice versa). Some of the definitions may be used either in the Nokia Networks or Nokia Mobile Phones (if applicable) specific Addendums and the Appendices thereto.

“Addendum”

means the Nokia Networks and/or Nokia Mobile Phones specific supplement to this Purchase Agreement where the Parties define and agree on terms that are applicable to Nokia Mobile Phones (Addendum A) or Nokia Networks (Addendum B) purchases.

“Affiliate”

means any other entity

(i) which is directly or indirectly controlling such Party; or

(ii) which is under the same direct or indirect ownership or control as such Party; or

(iii) which is directly or indirectly owned or controlled by such Party.

For these purposes, entity shall be treated as being controlled by another if that other entity has fifty percent (50 %) or more of votes in such entity, is able to direct its affairs and/or to control the composition of its board of directors or equivalent body.

“Appendix”

means a subject specific attachment to the Nokia Mobile Phones and/or Nokia Networks specific Addendum respectively.

“Consumption”

means the moment when a Product is taken from Supplier Managed Inventory for BUYER’s use, as defined in detail in the logistics appendix of Addendum A and/or Addendum B.

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2(19)

“Delivery”

means the moment when SELLER has successfully completed the delivery of all the Products which meet all the requirements set forth under this Purchase Agreement and/or the Addendum A and/or Addendum B, as ordered under the Purchase Order or as taken for the Consumption and/or as may be further defined under the logistics appendix of Addendum A and/or Addendum B.

“Delivery Date”

means the mutually (in paper, electronic or other format) agreed date(s) of delivery of the ordered Product(s) to BUYER.

“Development Agreement”

means an agreement between the Parties in accordance with which SELLER will design, develop, and/or test for BUYER’s approval certain new products that BUYER may elect to have SELLER furnish to BUYER under this Purchase Agreement.

“Exhibit”

means an appendix to this Purchase Agreement that is common and applicable to both Nokia Networks and Nokia Mobile Phones purchases under this Purchase Agreement.

“Force Majeure”

means events beyond the control of the Party which occur after the Effective Date of this Purchase Agreement and which were not reasonably foreseeable at the time of signing of this Purchase Agreement and whose effects are not capable of being overcome without unreasonable expense and/or loss of time to the Party concerned. Events of Force Majeure shall include (without being limited to) war, civil unrest, acts of government, natural disasters, fire, flood, earthquake, explosions and Acts of God.

“Intellectual Property Right(s)”

means any patent(s), petty patent(s), utility model(s), design patent(s), design(s), chip topography right(s), copyright(s), trademark(s), trade name(s), trade dress(es), trade secret(s), and/or any other industrial and/or intellectual property right(s), and applications therefore.

“Lead Time”

means the mutually in writing agreed time period from the date of issuing a Purchase Order to the Delivery Date.

“NOKIA Bank Link Policy”

     means NOKIA’s centralized system for payments pursuant to which all invoices maturing during a working week (i.e. Monday through Friday) are consolidated and paid on one predetermined business day during that same week irrespective of the invoice due date. At the moment, the payment day is Wednesday, but the payment day is subject to change by BUYER at any time without notice.

“NOKIA Products”

means mobile telephones, wireless data products and other wireless and fixed communications products, equipment and terminals, connectivity solutions, multimedia

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3(19)

and IT and IP solutions and products and their accessories, manufactured by or for BUYER.

“NOKIA Supplier Requirements”

means a document as updated by BUYER from time to time setting forth certain requirements for SELLER’s quality system.

“Party/Parties”

means BUYER and/or SELLER.

“Price(s)”

means the mutually agreed price(s) for each Product as set forth in Addendum A and/or Addendum B and/or the Appendices thereto and/or otherwise mutually agreed between the Parties.

“Process”

means the mutually agreed manufacturing process of the Product(s).

“Product(s)”

means all products subject to purchase and sale between the Parties as listed in Addendum A and/or Addendum B and/or the Appendices thereto and/or otherwise mutually agreed between the Parties.

“Purchase Order(s)”

means a document (in paper, electronic or other format), issued by BUYER where BUYER requests SELLER to deliver the Products.

“Quality Requirements”

means the document that specifies the quality requirements to which all of the Products shall strictly conform. The Quality Requirements are set forth in the Addendums and/or the Appendices thereto.

“Specification(s)”

means the mutually agreed written specification(s) associated with BUYER’s code number for each Product as set forth in Addendum A and/or Addendum B or otherwise mutually agreed between the Parties.

“Subcontractor”

means any third party appointed by BUYER to (i) design and/or manufacture NOKIA Products, or parts thereof, for BUYER and/or (ii) purchase and/or incorporate any Product(s) into products sold by such third party to BUYER or its designees.

“Sub-supplier”

     means a third party, which SELLER uses in the Process either as a material and/or component supplier or otherwise.

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

4(19)

“Supplier Manual”

means the “Nokia Mobile Phones Supplier Manual” and its subsequent equivalents (in paper , electronic or other format).

“Tooling”

means the moulds, casting moulds, manufacturing, testing and other tools, drawings and technical documents, which SELLER produces or which are produced for SELLER at the cost of BUYER.

2.0	SCOPE AND ORDER OF PRIORITY
2.1	This Purchase Agreement contains the terms and conditions which apply globally to all sale and purchase of Product(s). The Parties may agree on Nokia Networks and/or Nokia Mobile Phones specific purchase terms in separate Addendums to this Purchase Agreement. In case the terms of an Addendum are in conflict with this Purchase Agreement, the terms of the Addendum will prevail with respect to respective business group.
	Notwithstanding the foregoing, Clause 13 (Product Liability), Clause 3.2 (Rights in BUYER Customised Products), Clause 3.3 (Rights in Tooling for BUYER Customised Products) and Clause 14 (Intellectual Property Rights Indemnification) of this Purchase Agreement shall always prevail over any terms on product liability or intellectual property rights in any documents of this Purchase Agreement and/or the Addendums and/or the Appendices thereto.
2.2	The Affiliates of BUYER may place Purchase Orders for the Products to SELLER in their own name and for their own account under the terms and conditions of this Purchase Agreement.
2.3	The Subcontractors of BUYER may place Purchase Orders for the Products under the terms and conditions of this Purchase Agreement as defined in Clause 17.4 and, where applicable, the references to BUYER shall then be interpreted as references to the Subcontractor.
2.4	The Parties agree that nothing contained in this Purchase Agreement or otherwise shall mean that BUYER has any obligation to place Purchase Orders or take Products for the Consumption or have any minimum purchase commitments under or in relation to this Purchase Agreement.
3.0	PRODUCTS
3.1	Specification(s) and Process
3.1.1	Each Product shall meet the Specification(s) and other related requirements and be manufactured in accordance with the Process. SELLER agrees to ensure the feasibility of the Specification(s) and the Process. All Product information in SELLER’s quotations shall be binding on SELLER.

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5(19)

3.1.2 SELLER is not entitled to change the Specification(s) or any part thereof, nor any raw material(s) used in the Product(s), without BUYER’s prior written consent in accordance with the process agreed between the Parties in the Addendums or otherwise. Any change:

(i)	in the Process and/or any other change, that may affect the quality, reliability, interchangeability, availability, fit, form or function of any Product,
(ii)	that may affect the correct fulfilment of this Purchase Agreement, and/or
(iii)	of a place of manufacturing,

requires mutual prior written agreement. SELLER agrees to inform BUYER of the implementation of agreed changes as reasonably requested by BUYER. For the sake of clarity the Parties understand and agree that this Clause 3.1.2 applies also to situations where any Sub-suppliers are used.

3.1.3	At BUYER’s reasonable request, SELLER agrees prior to the first delivery of the Product(s) and at any time thereafter upon BUYER’s request to specify the Process in writing.
3.1.4	SELLER shall label the Products in accordance with BUYER’s instructions.
3.2	Rights in BUYER Customised Product(s)
3.2.1	Unless otherwise agreed in a Development Agreement, all right, title and interest in and to all Intellectual Property Rights in or related to:

(i)	the Product(s), to the extent customised for BUYER; and
(ii)	the Specification(s), drawings, manuals, documents, data, software and other material, to the extent provided by or on behalf of BUYER,

shall hereby vest in and be the sole and exclusive property of BUYER. Unless otherwise agreed in a Development Agreement, Seller shall be entitled to use such Specifications, drawings, manuals, documents, data, software and other material provided by BUYER for the purposes of this Agreement.

3.2.2    BUYER has the right to sell, offer for sale, rent, lease, distribute, manufacture, have manufactured by a third party and/or otherwise use and/or licence any BUYER customised Product(s) and/or any BUYER customised part of a Product without charge.

3.2.3    SELLER shall not directly or indirectly use, manufacture, sell, offer for sale, rent, lease, distribute, license or otherwise exploit any Product(s) or part of Product(s), to the extent customised for BUYER, without BUYER’s prior written consent.

3.3       Rights in Tooling for BUYER Customised Product(s)

3.3.1    All right, title and interest in and to all Intellectual Property Rights in or related to:

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(i)	the Tooling, to the extent (a) provided by or on behalf of BUYER, or (b) paid by BUYER; and
(ii)	the drawings, documentation and other material relating to such Tooling to the extent (a) provided by or on behalf of BUYER, or (b) paid for by BUYER

shall hereby vest in and be the sole and exclusive property of BUYER. SELLER shall assign any and all such rights to BUYER and take such additional actions as may be requested by BUYER to perfect BUYER’s rights thereto.

3.3.2 SELLER shall clearly mark that the Tooling shall be the property of BUYER as required in the relevant country. The Parties shall separately agree upon in the Addendums or Appendices thereto how to ensure BUYER’s rights in SELLER’s bankruptcy and other situations, if needed.

3.3.3 SELLER agrees to properly maintain the Tooling at SELLER’s cost, as may be further agreed in the Addendums.

3.4 Country of Origin and Export Control

3.4.1 SELLER agrees to inform BUYER in writing about the country of origin status of each Product. SELLER agrees to inform BUYER of any change of a country of origin status by giving at least six (6) months’ prior written notice, or as soon as possible if not reasonably possible to provide earlier notice. This Clause 3.4.1 shall not limit SELLER’s other obligations in this Purchase Agreement and especially in Clause 3.1.2 and Clauses 17.1-17.3.

3.4.2 The SELLER shall comply with the U.S and other governments’ export control regulations and warrants that it will not export any Products without appropriate authorization. The SELLER agrees that it shall promptly, upon BUYER’s request, provide BUYER the export control classifications and information on the applicable export or re-export authorizations and all necessary information of the Products for any required export, re-export or import licenses. The SELLER further warrants that it will keep BUYER informed of any changes or expected changes in the export control classifications or applicable export or re-export authorizations.

4.0 PURCHASE ESTIMATES AND FLEXIBILITY

4.1 The Parties hereto acknowledge, that any global forecast(s), other forecasts or estimates of different business group’s for BUYER’s anticipated needs for Products are estimates only based on the best assumption of BUYER and SELLER agrees to use the global forecast(s), other forecasts and estimates to determine its manufacturing capacity requirements for Products.

4.2 SELLER agrees that global forecasts, other forecasts and estimates are not offers to purchase Products and are not binding on BUYER. BUYER shall not have any minimum ordering and/or purchase commitment for Product(s).

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4.3 SELLER agrees to use best efforts to meet BUYER’s quantity requirements, that exceed forecasts referred to above, even in situations of capacity limitations or allocation between several purchasers. Additional flexibility requirements may be further defined in the Addendums. This flexibility is a business risk of SELLER.

5.0 ORDERING, LOGISTICS AND DELIVERY

5.1 The Parties shall comply with the separate mutually agreed ordering and logistics procedure(s) as specified in the Addendums or otherwise.

5.2 Provided BUYER has complied with agreed ordering and logistics procedures specified in Addendum B and its appendices, SELLER shall not have the right to refuse to supply the Products ordered by BUYER in accordance with the purchase volumes indicated in BUYER’s estimates or other planning tools referred to in Clause 4 above. In case no estimate is given SELLER shall make its best efforts to accept all Purchase Orders.

5.3	Partial or early deliveries are not allowed, unless expressly accepted by BUYER in writing on a case-by-case basis prior to the intended Delivery Date.
5.4	Time shall be of the essence in this Purchase Agreement.

5.5 If SELLER cannot deliver the Products in accordance with the agreed Lead Times, if applicable, and/or on the mutually agreed Delivery Date, or in accordance with the minimum and maximum levels agreed in the Addendums or the Appendices thereto, then SELLER shall as soon as SELLER becomes or should have become aware of the delay, inform BUYER thereof in writing. Such notice shall be entitled “Notice of Delay”, and shall also include:

(a)	identification of which kind and what quantities of the Products will be delayed;
(b)	the anticipated duration of delay for each kind and quantity;
(c)	the cause(s) of the delay;
(d)	the actions that SELLER is taking and will take to remedy or shorten the delay; and
(e)	a proposal, for BUYER’s approval, of a new Delivery Date for each kind and quantity of the delayed Products, together with a clear, firm commitment to treat such new Delivery Date as contractual and to make the deliveries by such date.

In order to avoid any delay in Delivery, SELLER shall use best efforts (such as, but not limited to, expedited freight), at the cost of SELLER, to minimize the possible delay.

5.6 If BUYER does not agree with SELLER’s proposal for the new Delivery Date submitted in accordance with Clause 5.5 above, and in case the respective delivery of the Products is delayed one (1) day or more from the agreed Delivery Date due to reasons other than an event of Force Majeure (as set forth below in Clause 18), then BUYER shall have the right to terminate the respective delivery in whole or part without any

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8(19)

liability to SELLER. Should BUYER in any such case purchase the respective products from a third party supplier, then SELLER shall be liable to compensate BUYER for any and all direct costs, which exceed the Price of the Products under this Purchase Agreement, arising out of such covering purchase.

5.7	The terms of delivery are set forth in the Addendums and/or the Appendices thereto and defined in accordance with INCOTERMS 2000.
6.0	PRICE(S)
6.1	The Price(s) are stated in the Addendums hereto unless otherwise agreed. Changes in Price(s) shall be mutually agreed in writing and negotiated in good faith. The Price(s) are set in USD, unless otherwise mutually agreed in the Addendums or otherwise.
6.2	All Prices are gross amounts but exclusive of any value added tax (VAT) only. BUYER shall be entitled to withhold from payments any applicable withholding taxes. SELLER shall comply with all local tax and employment legislation.
	Each Party shall pay all taxes (including, but not limited to, taxes based upon its income) or levies imposed on it under applicable laws, regulations and tax treaties as a result of this Purchase Agreement and any payments made hereunder (including those required to be withheld or deducted from payments) and shall furnish evidence of such paid taxes as is sufficient to enable the other Party to obtain any credits available to it.
6.3	[*]
7.0	PAYMENT TERM
7.1	The payment term is [*] days net from the date of invoice, unless otherwise stated in the Addendums. The date of invoice shall not be earlier than the date of shipment. If the Parties use BUYER’s self-billing, BUYER shall issue an invoice as mutually agreed in the Addendums or otherwise. The Parties agree to apply the NOKIA Bank Link Policy to all payments. BUYER has the obligation to pay an invoice where SELLER has delivered the Products in accordance with this Purchase Agreement.
7.2	BUYER is entitled to withhold payment in respect of a delivery of the Products, which delivery is not fulfilled in accordance with the requirements set forth under this Purchase Agreement and the Addendums hereto, until the delivery is completed to comply with said requirements. Notwithstanding the above, if BUYER in accordance with Clause 5.3 above accepts partial delivery in writing, then Seller shall be entitled to invoice BUYER accordingly.
	[*]
7.3	BUYER shall be liable for late payment interest as defined in the Addendum.
8.0	ENVIRONMENTAL AND ETHICAL ISSUES

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8.1 SELLER shall comply with the principles of the Business Charter for Sustainable Development (published by the International Chamber of Commerce in 1991) for environmental management. SELLER encourages the adoption of the principles therein by its Sub-suppliers. BUYER may, where appropriate, request improvements in SELLER’s practices to ensure compliance with the said principles and the NOKIA Supplier Requirements for the environment. SELLER shall take into consideration environmental issues in all phases or Product development and the Process.

8.2 SELLER shall inform BUYER, on request, of all materials, substances and compounds by weight and by location in the Products in the form required by BUYER. SELLER shall further, upon request, provide BUYER with instructions for disassembly, re-use and end-of-life treatment of the Products and with any other information that BUYER may need based on statutory requirements.

8.3 BUYER has the right, but is not obliged, to return any Products to SELLER free of charge and SELLER shall be responsible for the proper disposal and/or recycling of the Products. If any Product does not strictly conform to the Environmental Requirements as they exist at the time of delivery, and where the law requires selective end-of-life treatment for the Products, SELLER shall compensate any such direct costs to BUYER if the law was in effect at the time of Product shipment from SELLER.

8.4 SELLER shall implement an environment management system (EMS) based on the basic principles of ISO 14001 standard.

8.5 SELLER agrees that in the designing, manufacturing, delivering and through the entire supply chain of the Products all national and international laws, directives, statutes (including but not limited to EU statutes) and regulations are diligently followed.

8.6 SELLER shall be committed to ethical conduct and respect for human rights in the spirit of internationally recognized social and ethical standards, e.g., SA8000. SELLER further monitors the ethical performance of its Sub-suppliers and takes immediate and thorough steps in cases where ethical performance of its Sub-suppliers is questioned.

9.0 ACCEPTANCE AND REJECTION OF PRODUCT(S) AND QUALITY

9.1 SELLER warrants that it shall at all times strictly adhere to the agreed Quality Requirements and the NOKIA Supplier Requirements. The Product quality acceptance and rejection process shall be as separately agreed in writing in the Addendums and/or the Appendices thereto. SELLER shall be responsible for taking preventive and corrective actions to ensure continuity of compliance with the Specifications, the Quality Requirements and workmanship standards.

9.2 SELLER agrees to inspect the Product(s) prior to the Delivery, measure and maintain records of the out-going quality level of the Product(s) as mutually agreed, and confirm that the Products meet the Specification(s). Upon request, SELLER shall submit to BUYER SELLER’s Product inspection and testing records. SELLER agrees to without delay inform BUYER of any relevant quality related issues and to use its best efforts to correct any deviations from agreed quality without delay.

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9.3 SELLER agrees to properly inspect and supervise the quality of raw materials and components used in the Process and to ensure the continuous proper quality of the Products.

9.4 BUYER has no liability to conduct incoming inspections but may do so as may be further defined in the Addendums. BUYER’s acceptance of Product(s) shall not release SELLER from any of its obligations and liabilities under this Purchase Agreement and/or the Addendums.

9.5 If BUYER has to initiate and maintain incoming inspection activities as a result of SELLER’s inability to deliver only Products that strictly conform to the Quality Requirements, then SELLER shall compensate the cost of such incoming inspections to BUYER in a mutually agreed way.

10.0 PRODUCTION RECOVERY AND FACILITY SURVEY

10.1	SELLER agrees to maintain and provide to BUYER a written production recovery plan within thirty (30) days from the Effective Date of this Purchase Agreement. The plan shall describe in detail SELLER’s plan for recovery from incidents affecting the operation of production line(s), the Process or any SELLER or Sub-supplier plant involved in the Process and alternative processes for resuming production of the Products by opening an alternative facility or setting up the necessary equipment and assembly lines in an existing factory of SELLER and/or of its Affiliates. SELLER agrees to allow BUYER and a BUYER-appointed third party to audit SELLER’s risk management systems with reasonable advance notice of such facility audit(s). SELLER does not have an obligation to allow such audit rights to a BUYER appointed third party who is in the reasonable judgment of SELLER a competitor of SELLER. SELLER agrees to comply with BUYER’s reasonable recommendations regarding such risk management systems.
	SELLER agrees that should any of the events of Force Majeure or other events that affect manufacturing occur, it shall promptly implement the steps detailed in the recovery plan to the full extent and shall take all other necessary measures to resume the performance of its obligations under this Purchase Agreement in the shortest time possible.
10.2	BUYER reserves the right, by itself or through its appointed representative, during regular business hours and following reasonable notice to SELLER, to inspect SELLER’s physical facilities or quality control procedures, or to conduct environmental management system audits, both prior to the first delivery of the Products under this Purchase Agreement and periodically thereafter, in order to verify compliance of SELLER with the Specifications, the Quality Requirements, and other standard industry practices and procedures. [*] SELLER does not have an obligation to allow such inspection rights to a BUYER appointed third party who is in the reasonable judgment of SELLER a competitor of SELLER.
	SELLER shall maintain quality control procedures mutually agreed upon by the Parties as a result of such facility survey. In the event that BUYER determines during any

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11(19)

facility survey, that the quality procedures applied by SELLER are insufficient as to ensure consistent production of Products which are strictly in conformance with the Specifications and the Quality Requirements, then BUYER shall specifically inform SELLER thereof and of the corrective measures to be undertaken by SELLER. SELLER hereby agrees to undertake any such corrective measures without delay. The Parties further agree, that the above shall also apply to any and all Sub-suppliers of SELLER involved in the manufacture of the Products. The SELLER hereby agrees to take all measures necessary in order to ensure compliance of its Sub-suppliers with this Clause 10.

11.0	INSURANCE
11.1	SELLER shall maintain in force and upon request give evidence of adequate insurance coverage in accordance with the Exhibit 1.
12.0	WARRANTY
12.1	SELLER initially warrants all Products to be free from defects in design, materials and workmanship for a period of [*] from the Delivery Date or, where applicable, from the Consumption (“Warranty Period”). The warranty includes further that the Products shall:

(i)	be new, unused, in a good working condition;
(ii)	be fit for the purpose for which they are intended; and
(iii)	strictly conform to the Specification(s) and the agreed quality.

	Any breach of, non-conformance with or deviation from the warranty set out in this Clause 12.1 shall be referred to as Defect in this Purchase Agreement and the Addendums hereto.
	Further, SELLER and BUYER agree that no later than 1 January 2007, the warranty period for all Products delivered after said date will be [*]. Before 1 January 2007, the Parties will meet and confer to review Product return data for the previous 12 months period and the SELLER reserves the right to renegotiate prices.
12.2	If any Product(s) do not meet the warranties given by SELLER, SELLER may at SELLER’s option and upon notice to BUYER:

(i)	supply replacement Product(s) to fully satisfy the given warranties at SELLER’s sole risk and expense within a reasonable time period specified by BUYER; or
(ii)	repair such Product(s) at SELLER’s sole risk and expense within a reasonable time period specified by BUYER; or
(iii)	repair the Product(s) or cause the Product(s) to be repaired by any third party at SELLER’s sole risk and expense; and/or
(iv)	take measures and/or bear costs as further defined in the Addendums hereto.

12.3 Extended service warranty is separately addressed in Appendix 6 to Addendum B.

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13.0 PRODUCT LIABILITY

13.1 Seller shall defend, indemnify and hold Buyer and its officers, directors, employees and customers harmless from and against all damage, claims, demands, suits, proceedings, damages, costs, expenses and liabilities, including without limitation, reasonable legal fees brought against Buyer by an unaffiliated third party for

(i)	injury to persons, including death; and/or
(ii)	loss or damage to any property

resulting from any acts or omissions of Seller in the performance of this Agreement and/or a failure of the Products to conform to the Specifications and the Quality

Requirements. Seller shall maintain in force and upon request give evidence of adequate insurance covering its potential liability under this Clause 13.1.

Buyer shall on its behalf indemnify and hold Seller and its officers, directors and employees harmless from and against all damage, claims, demands, suits, proceedings, damages, costs, expenses and liabilities, including without limitation, reasonable legal fees brought against Seller by an unaffiliated third party for

(i)	injury to persons, including death; and/or
(ii)	loss or damage to any property

resulting from any acts or omissions of Buyer in the performance of this Agreement.

13.2 As a condition to such indemnification, each Indemnitee shall give timely notice to the Indemnitor of the relevant claim, and shall cooperate with the Indemnitor, at the Indemnitor’s expense, in the defense and/or settlement of such claim.

13.3 Without limiting the indemnity obligations related to an unaffiliated third party’s successful product liability claim, neither Party shall be liable to the other for any special, punitive, or consequential damage, including but not limited to loss of business or goodwill, loss of revenue or profits, arising under or in connection with such product liability claim under this clause 13. , except in cases of intentional misconduct or gross negligence. For the purposes of this clause 13.3, ‘gross negligence’ shall mean wilful default in the United Kingdom.

14.0 INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION

14.1 Seller represents and warrants that the Products do not infringe any Intellectual Property Right of any third party.

14.2 Seller shall settle and/or defend at its own option and its own expense and to indemnify and hold Buyer harmless from any cost, expense, loss, attorney’s fees or damage arising out of any third party claim, demand, suit or proceedings against Buyer or any customer of Buyer to the extent such claim, demand, suit or proceedings alleges that the Products infringe upon any Intellectual Property Rights of any third party, provided that: (1) Buyer informs Seller in writing of any such claim, demand, proceeding or suit without delay; (2) Seller is given control over the defense thereof and Buyer reasonably cooperates in the defense at Seller’s expense; and (3)Buyer will

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not agree with the third party to the settlement of any such claim, demand, suit or proceeding prior to final judgment thereon without the prior written consent of Seller, which consent shall not be unreasonably withheld. Buyer shall have the right to select its own counsel to participate in any such defense at Buyer’s own expense.

	This indemnification does not apply to the extent that: (1) infringement arises by a combination made by Buyer or a customer of Buyer to whom Buyer has supplied the Products, of Products furnished under this Agreement with other Products not furnished hereunder by Seller except to the extent Seller is a contributory infringer, or (2) infringement arises solely from changes or modifications made to or from the Products by Buyer or Buyer’s customer, or (3) infringement arises from Products that are made in accordance with drawings, samples, or manufacturing specifications designated by Buyer and Seller proves that such infringements arise solely from such drawings, samples, or manufacturing specifications designated by Buyer.
14.3	If a claim, demand, suit or proceeding alleging infringement is brought against Buyer or Seller, or Seller believes one may be brought, Seller shall have the option, at its expense, to: (1) modify the Products to avoid the allegation of infringement, while at the same time maintaining compliance of the Products with the requirements set forth under this Agreement, or (2) replace the Products with non-infringing but equivalent Products, which comply with requirements set forth under this Agreement, or (3) [*]
14.4	In the event that any Product to be furnished under this Agreement is to be made in accordance with drawings, samples or manufacturing specifications designated by Buyer and to the extent such Product is not the design of Seller, Buyer agrees to settle and/or defend, at is own option and its own expense and to indemnify, hold Seller harmless from any cost, expense, loss, attorney’s fees or damage arising out of any claim, demand, suit or proceedings against Seller to the extent such claim, demand, suit or proceedings allege that such Product, drawings, samples or manufacturing specifications designated by Buyer infringes upon any Intellectual Property Right of any third party; provided that (1) Seller informs Buyer in writing of any such claim, demand, suit or proceedings without delay, and (2) Buyer is given control over the defense therof and Seller reasonably cooperates in the defense at Buyer’s expense, and (3) Seller will not agree with the third party to the settlement of any such claim, demand, suit or proceedings prior to a final judgement theron without the prior written consent of Buyer, which consent shall not be unreasonably withheld. Seller shall have the right to select its own counsel to participate in any such defense at Seller’s own expense. This indemnification does not apply to the extent any infringement or any claim of infringement results from changes or modifications made by Seller or on behalf of Seller to the drawings, samples, manufacturing specifications or any other information designated by Buyer.
14.5	The foregoing indemnification obligations are Indemnitee’s sole and exclusive remedy, and Indemnitor’s entire liability, for any claims of infringement of intellectual property rights by the Products.

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15.0	DEFENSE
15.1	SELLER agrees to defend at SELLER’s risk and expense any and all claims, suits, actions, demands and proceedings under Clauses 13 and 14 with counsel acceptable to BUYER, at BUYER’s prior written request for such defence. If Buyer reasonably determines that any claim or any proposed claim settlement might adversely affect any Buyer indemnities, Buyer may take control of the investigation, defense and/or settlement of the claim at Buyer’s risk and expense. If Buyer elects to do so, Buyer and its attorneys shall proceed diligently and in good faith. Notwithstanding the indemnifying party’s primary right to have control over the defense, the Indemnitee may take all necessary steps, at the expense of the Indemnifying party, to defend itself until the Indemnifying party, to the reasonable satisfaction of the Indemnitee, assigns a counsel and initiates defense in a professional manner, and the Indemnifying party agrees to fully cooperate with such defense.
16.0	LIMITATION AND/OR EXCLUSION OF LIABILITY
16.1	EXCLUDING WARRANTY CLAIMS UNDER CLAUSE 12, PRODUCT LIABILITY INDEMNIFICATION CLAIMS UNDER CLAUSE 13, INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION CLAIMS UNDER CLAUSE 14, DEFENSE COSTS UNDER CLAUSE 15 AND CONFIDENTIALITY CLAIMS UNDER CLAUSE 19, NEITHER PARTY SHALL BE LIABLE TO EACH OTHER IN CONTRACT, TORT OR OTHERWISE, WHATEVER THE CAUSE THEREOF, FOR LOSS OF BUSINESS OR GOODWILL, LOSS OF REVENUE OR LOSS OF PROFITS OR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGE INCURRED BY THE OTHER PARTY AND ARISING UNDER OR IN CONNECTION WITH THIS PURCHASE AGREEMENT, UNLESS SUCH DAMAGE IS CAUSED BY GROSS NEGLIGENCE OR WILFUL MISCONDUCT. FOR THE PURPOSES OF THIS CLAUSE 16.1 GROSS NEGLIGENCE SHALL MEAN WILLFUL DEFAULT IN THE UNITED KINGDOM.
17.0	USE OF SELLER SUB-SUPPLIERS AND BUYER SUBCONTRACTORS.
17.1	SELLER agrees not to use other than [*] in the manufacturing of the Product(s) without BUYER’s prior written consent.
17.2	Upon BUYER’s request, SELLER shall provide a list of all critical Sub-suppliers involved in the Process, no more frequently than semi-annually. For the purposes of this clause 17.2, a critical Sub-supplier is any vendor who sells component parts to SELLER that are equal to or greater than ten (10%) percent of the SELLER Bill of Material for a particular Product, all MMIC vendors and all other vendors mutually agreed to be critical Sub-suppliers.
17.3	SELLER has the sole responsibility and liability for the performance and non-performance of the Sub-supplier(s).
17.4	On BUYER’s request, SELLER agrees that this Purchase Agreement and the Addendums hereto shall in their entirety be applied between SELLER and the Subcontractor(s) including without limitation BUYER’s logistics service providers.

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SELLER may refrain from deliveries to the Subcontractor(s) that are not credit worthy or in the reasonable judgment of SELLER are competitors of SELLER. In any case, SELLER agrees that this Purchase Agreement and the Addendums hereto are in their entirety applied between SELLER and BUYER also to and regarding any Product(s) sold and/or delivered by SELLER to the Subcontractor(s) to be used for manufacturing Products for BUYER and BUYER is explicitly entitled to benefit the terms and conditions of this Purchase Agreement and the Addendums hereto to the extent applicable. However,

(i)	the Subcontractor(s) shall be independent in relation to BUYER;
(ii)	BUYER undertakes no liability for performance and/or non-performance of the Subcontractor(s)’ obligations against SELLER;
(iii)	SELLER shall enforce all Subcontractor(s)’ undertakings and exercise SELLER’s rights only against the Subcontractor(s) directly and not against BUYER; and
(iv)	BUYER shall at all times maintain its own rights in accordance with this Purchase Agreement and the Addendums hereto
(v)	the Subcontractor agrees to be bound by the terms of this Purchase Agreement.

18.0	DUTY TO INFORM AND FORCE MAJEURE
18.1	SELLER agrees to promptly inform BUYER in writing of event(s) that are about to occur or appear imminent and may reasonably affect SELLER’s ability to meet any of its obligations under this Purchase Agreement, including without limitation delay in Delivery, a material change in ownership of SELLER, infringement of third party Intellectual Property Rights, or any other action, omission or development which would be important for BUYER to be aware of in order to take precautions to prevent such from causing adverse effect to its business, reputation, production schedule, or product liability.
18.2	The affected Party is not liable for a failure to perform any of its obligations under this Purchase Agreement to the extent it proves that the failure was due to Force Majeure. The affected Party shall without delay take reasonable steps to limit or minimise the consequences of Force Majeure.
	[*]
19.0	CONFIDENTIALITY
19.1	Each Party (“Receiving Party”) shall not disclose to third Parties nor use for any purpose other than for the proper fulfilment of this Purchase Agreement any technical or commercial information (“Information”) received from the other Party (“Disclosing Party”) in whatever form under or in connection with this Purchase Agreement without the prior written permission of the Disclosing Party except information which

a) is in the public domain at the time of disclosure or later becomes part of the public domain through no fault of the Receiving Party; or

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b)	was known to the Receiving Party prior to disclosure by the Disclosing Party as proven by the written records of the Receiving Party; or
c)	is disclosed to the Receiving Party by a third party who did not obtain such Information, directly or indirectly, from the Disclosing Party; or
d)	was independently developed (by personnel having no access to the Information) by the Receiving Party.

	BUYER may communicate the terms and conditions of this Purchase Agreement with its Subcontractors and logistics service providers in accordance with Clause 17.4.
19.2	SELLER hereby expressly agrees, that the use of BUYER as reference, and/or the use of BUYER or reference to BUYER in the marketing or in any materials or activities of SELLER in any way is strictly forbidden. SELLER shall not make any statements, announcements and/or press release of this Purchase Agreement or part thereof, or of the relationship herein described, without a prior written acceptance of BUYER given on case-by-case basis.
19.3	The provisions of this Clause 19 shall be valid for [*] years from the date of disclosure.
	Any Non-Disclosure Agreement(s) entered into between the Parties prior to the Effective Date of this Purchase Agreement shall remain to be valid, in accordance with its terms and conditions, in respect of the Information disclosed by either Party before the Effective Date of this Purchase Agreement, and in respect of the Information disclosed outside the scope of this Purchase Agreement.
20.0	EFFECTIVE DATE, TERM AND TERMINATION
20.1	This Purchase Agreement becomes effective on January 1st 2006 (“Effective Date”) and, except for Seller’s cumulative Product Retrofit liability described in Addendum B, shall have no retroactive effect for deliveries made prior to 1 January 2006. This Purchase Agreement continues to be effective until terminated in accordance with this Clause 20.
20.2	Either Party may terminate this Purchase Agreement for convenience with at least eighteen (18) months’ prior written notice.
20.3	Either Party may terminate this Purchase Agreement forthwith in writing if the other Party:

(i)	becomes insolvent, is declared bankrupt, suffers other similar proceeding or discontinues its business; or
(ii)	is in breach of any of its material obligations under this Purchase Agreement and has failed to remedy such breach within thirty (30) days after having received written notice of such breach and the intention of the notifying Party to terminate this Purchase Agreement if the breach is not timely remedied.

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

17 (19)

	In addition to what is mentioned above BUYER has the right to terminate this Purchase Agreement in case SELLER sells all or substantially all of its assets, merges or consolidates with a third party or suffers a material change of ownership.
	The termination of this Purchase Agreement in accordance with this Clause 20.3 shall also terminate the carrying out of any outstanding Purchase Orders, whether confirmed or not.
20.4	This Purchase Agreement shall survive any termination with regard to Product(s) already delivered under this Purchase Agreement.
20.5	The Party is entitled to claim actual damages from the other Party in the case where this other Party has breached this Agreement or any provision thereof.
21.0	MISCELLANEOUS
21.1	Neither Party shall assign any of its rights or obligations under this Purchase Agreement without prior written consent of the other Party.
21.2	No waiver is effective unless executed in writing in each separate case and signed by both Parties.
21.3	Notwithstanding anything to the contrary in any of the terms of this Purchase Agreement, any co-operation, requirement, request, direction, instruction, acceptance or other similar action or lack of such action by BUYER shall not release SELLER from any of its obligations and liabilities under this Purchase Agreement, unless expressly agreed by BUYER in writing.
21.4	The governing language of this Purchase Agreement and any correspondence shall be English.
21.5	All rights and remedies under this Purchase Agreement are cumulative. A Party’s exercise of any right or remedy does not affect its other rights or remedies in accordance with this Purchase Agreement.
21.6	In the event that any provision of this Purchase Agreement shall be held invalid as contrary to any law, statute or regulation in that regard, the invalidity of such provision shall in no way affect the validity of any other provision of this Purchase Agreement and each and every provision shall be severable from each and every other.
21.7	The headings used in this Purchase Agreement are inserted for convenience only and shall not affect the interpretation of the respective provisions of this Purchase Agreement. This Purchase Agreement shall not be construed more or less strictly against either Party for its participation or lack thereof in its drafting.
21.8	The Parties shall be deemed independent contractors hereunder. This Purchase Agreement is not intended to create a partnership, franchise, joint venture, agency, or employment relationship between the Parties. Unless otherwise agreed in writing by

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

18 (19)

	the Parties, neither Party shall make any express or implied agreements, warranties, guarantees, commitments or representations, or incur any debt, in the name or on behalf of the other Party.
22.0	APPLICABLE LAW AND DISPUTES
22.1	This Agreement shall be governed by the laws of [*] without regard to its conflict of laws principles, as if wholly performed therein. The United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement. The parties agree that any and all disputes arising out of or in connection with this Agreement shall be finally settled in arbitration by three neutral arbitrators appointed by the International Chamber of Commerce (“ICC”) and shall be conducted pursuant to the ICC’s regulations then in force. The arbitration proceedings shall be conducted in Geneva, Switzerland.
22.2	All arbitration proceedings and all discovery related thereto shall be conducted in the English language. Subject to the limitations on liability set forth in this Agreement, the arbitrators may fashion any legal or equitable remedy. The arbitration award shall be executable and final, and binding on the Parties.
22.3	In the event of a breach, threatened breach or likely breach of this Agreement, nothing contained in this Agreement to the contrary shall bar the non-breaching Party from seeking injunctive relief in a court of competent jurisdiction. In addition, notwithstanding anything to the contrary, any disputes related to BUYER’s Intellectual Property Rights or confidential information may, at BUYER’s sole election, be resolved by a court of competent jurisdiction.

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

19 (19)

23.0	PREVIOUS AGREEMENTS AND APPLIED DOCUMENTS
23.1	This Purchase Agreement, along with associated Addendum(s) and Appendices, contains the entire understanding between the Parties in respect of this subject matter. The Addendums, Appendices, and Exhibits shall be an integral part of this Purchase Agreement.
23.2	Amendments to this Purchase Agreement shall be valid only if executed in writing and signed by both Parties, unless otherwise agreed in the Addendums.

IN WITNESS WHEREOF this Purchase Agreement has been duly signed and executed in two original copies

For and on behalf of
NOKIA CORPORATION
Networks

Signed by: /s/ Nils Nordman	Signed by: /s/ Hemi Vander Stichele
Name: Nils Nordman	Name: Hemi Vander Stichele
Title: Purchasing Manager	Title: Director, Networks Global Sourcing
Date: Dec. 29, 2005	Date: December 29, 2005
Place: Espoo, Finland	Place: Espoo, Finland
For and on behalf of
ENDWAVE CORPORATION
Signed by: /s/ Steven Layton	Signed:
Name: Steven Layton	Name:
Title: V.P. + G.M.	Title:
Date: December 30, 2005	Date:
Place: Sunnyvale, CA	Place:

(No further entries or terms; Addendums and Appendices follow)

© Nokia Corporation
Proprietary and Confidential

Purchase Agreement 4.0

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 1 to ESLNST2676

INSURANCE REQUIREMENTS APPENDIX (01/2002, US-Small)

SELLER shall meet and comply with the following “Insurance Requirements”, as stated in this Insurance Requirements Appendix (this “Appendix”):

1. SELLER’s Obligations

a.	SELLER shall carry and maintain in full force and effect during the term of the parties’ agreement(s) at least the minimum insurance coverages stated in Section 2 below.
b.	All insurance policies providing such coverage must be written on an occurrence basis for worker’s compensation and employer’s, commercial general, commercial automobile and umbrella liability coverage and on a claims made basis for professional/errors and omissions and software errors and omissions coverages. SELLER’s insurance is primary to any valid collectible insurance carried by the Additional Insureds (defined below).
c.	The insurer(s) providing such coverages must be licensed and admitted in the state(s) of SELLER’s operations and performance of the parties’ agreement(s), and have a rating of “A-” and policyholder’s surplus size “VII” or better as listed in the then-current Best’s Insurance Report published by A.M. Best Company, Inc., or equivalent rating from Standard & Poors or Moody’s.
d.	The Commercial General Liability and Umbrella Liability insurance coverages shall protect SELLER and NOKIA and each of the Additional Insureds, where applicable, from and against claims against SELLER and/or NOKIA for damages for personal injury, property damage, bodily injury, including without limitation, mental distress and anguish, and death, which may be sustained by or made against SELLER, NOKIA, their respective directors, officers, employees and agents, affiliates or sustained by any third parties, unless claims are wholly due to the gross negligence or willful misconduct of NOKIA.

2.	Minimum Insurance Coverage
	The required minimum insurance coverages and limits which SELLER shall obtain and maintain shall include the following:

2.A. Worker’s Compensation and Employer’s Liability:

2.A.1. Coverage A — Statutory Benefits

Coverage for liability imposed under the Workers’ Compensation laws or similar provisions of the state(s) in which SELLER is performing work to fulfill obligations under the parties’ agreement(s), including exempt employees.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

1.

2.A.2. Coverage B — Employer’s Liability

     Limits of at least: USD [*] Bodily Injury by Accident

                    USD [*] Bodily Injury by Disease – Policy Aggregate

                    USD [*] Bodily Injury by Disease – Each Employee

2.A.3. Extensions of Coverage

2.A.3.1. Other States Insurance Coverage

2.A.3.2. Federal Workers’ Compensation Act Coverage (as applicable)

2.A.3.3. Proprietors, Partners and Executive Officers Coverage

2.B. Commercial General Liability:

2.B.1. Required Coverage Limits

The following coverages shall have the following minimum limits, exclusive of defense costs, which shall be paid under the insurance policy outside the limits:

     USD [*] General Annual Aggregate

     USD [*] Products/Completed Operations Annual Aggregate

     USD [*] Personal and Advertising Injury Annual Aggregate

     USD [*] Each Occurrence

     USD [*] Medical Payments

2.B.2. Extensions of Coverage

2.B.2.1. Duty to Defend

2.B.2.2. “Pay on behalf of” wording

2.B.2.3. Contractual Liability Coverage

2.B.2.4. Separation of Insureds

2.B.2.5. Worldwide Coverage

2.C. Commercial Automobile Liability:

2.C.1. Required Coverage Limits

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2.

	USD [*] Combined Single Limit Each Accident (Bodily Injury/Property Damage)
2.C.2. Extensions of Coverage
	Coverage for all owned, hired and non-owned motor vehicles

2.D. Umbrella Liability:
	2.D.1.	Required Coverage Limits
		USD [*] Each Occurrence
	2.D.2.	Coverage
		Excess of Employer’s Liability, Commercial General Liability and Commercial Automobile Liability insurance policies, including all coverages and extensions of coverage
	2.D.3.	Extensions of Coverage

v

      2.D.3.1. Duty to Defend

      2.D.3.2. “Pay on behalf of” wording

	The minimum amounts of insurance required in this Section 2 may be satisfied by SELLER purchasing primary coverage in the amounts and coverages specified, or a separate umbrella or excess policy together with a lower limit primary underlying coverage. The structure of coverage is at SELLER’s option so long as the total amount of insurance meets these minimum requirements.
3.	Retentions
	Any deductibles, self-insured retention loss limits, retentions or similar obligations (collectively, “Retentions”) must be disclosed on the certificate of insurance provided to NOKIA. Payment of all Retentions shall be the sole expense obligation of SELLER.
4.	Additional Insured

a. SELLER shall have NOKIA (including its parent, subsidiary, affiliated and managed entities), its directors, officers and employees, agents and assigns named as additional insureds (collectively, the “Additional Insureds”) under each General Liability, Automobile Liability and Umbrella Liability insurance policy obtained by SELLER pursuant to the requirements contained in this Appendix. Such additional insured status shall be procured and evidenced by an “Additional Insured Endorsement” and shall cover the Additional Insureds for any and all claims and legal proceedings of any kind whatsoever arising out of SELLER’s work or operations (including the sale of goods to NOKIA) performed by or on behalf of NOKIA, except for claims caused by the gross negligence or willful misconduct of Nokia. Such Additional Insured Endorsement shall

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3.

provide that such insurance is primary and shall not contribute with any insurance or self-insurance that NOKIA has procured to protect itself unless claims are wholly due to the gross negligence or willful misconduct of NOKIA.

b.

Each of the insurance limits required by this Appendix shall be fully paid and exhausted before NOKIA, including any and all of NOKIA’s separate insurance coverage, if any, including NOKIA’s umbrella and/or excess insurance policies, if any, becomes involved in the defense or payment of any claim or legal proceeding. NOKIA’s separate insurance coverages, if any, shall be excess over any insurance afforded by SELLER in compliance with the terms of this Appendix.

5.	Waiver of Subrogation
	Where permitted by law, SELLER waives and will require its insurers to waive all rights of subrogation and recovery against the Additional Insureds, whether sounding in contract, tort (including negligence and strict liability) or otherwise, unless such damages are caused in whole or in part due solely to the gross negligence or willful misconduct of NOKIA, or acts or omissions of NOKIA triggering strict liability.
6.	Proof of Insurance

a.	Before commencement of the parties’ agreement(s) and prior to NOKIA having any obligation to pay SELLER whatsoever, SELLER shall provide to NOKIA a certificate of insurance (ACCORD Form 25-S (1/95), or the latest edition) signed by a duly authorized officer or agent of the insurer certifying that the minimum insurance coverages set forth in Section 2 of this Appendix are in effect. Further, the certificate of insurance must state that NOKIA will receive at least 30 days’ written notice of policy cancellation, non-renewal or material modification. SELLER shall thereafter provide NOKIA, at least 30 days’ prior to the expiration date of the cancelled, non-renewed or materially modified policy, written evidence by an insurance certificate that such policy has been replaced, renewed or modified with no lapse in coverage by another policy which meets the minimum insurance coverages set forth in Section 2 of this Appendix. If SELLER does not provide NOKIA with such certificates of insurance within 30 days after the date of the parties’ agreement(s) and after each policy renewal thereafter, then NOKIA may (i) suspend payments to SELLER until evidence of required coverage is provided or (ii) terminate the parties’ agreement(s) or any then-current statement(s) of work, work order(s), etc.
b.	NOKIA’s approval of any of SELLER’s insurance coverages does not relieve or limit any of SELLER’s obligations under the parties’ agreement(s), including, but not limited to, liability under the indemnification and defense provisions of the parties’ agreement(s) for claims exceeding required insurance limits.
c.	In no event shall NOKIA’s allowing SELLER to begin or complete its obligations under the parties’ agreement(s), or acceptance of any such performance or payment therefor, be construed as a waiver of NOKIA’s right to assert a claim against SELLER for breach of SELLER’s obligations under this Appendix, or declare SELLER in default of the

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

4.

parties’ agreement(s) for failure to comply with any of SELLER’s obligations under this Appendix, all and each of which are deemed material.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5.

NETWORKS’ ADDENDUM (ADDENDUM B)

TO PURCHASE AGREEMENT

NO. ESLNST2676

BETWEEN

NOKIA CORPORATION

AND

ENDWAVE CORPORATION

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

TABLE OF CONTENTS

1.	DEFINITIONS	1
2.	SCOPE AND ORDER OF PRIORITY	2
3.	PURCHASE ORDERS	2
4.	RE-SCHEDULING AND CANCELLATION	3
5.	TERMS OF DELIVERY, PASSING OF TITLE AND DELIVERY TIMES	3
6.	PRICES	3
7.	PAYMENT TERM	3
8.	PACKING AND MARKING	4
9.	INSPECTIONS BY BUYER	5
10.	AVAILABILITY OF PRODUCT(S)	5
11.	WARRANTY	6
13.	REPRESENTATIVES OF THE PARTIES	8
14.	EFFECTIVE DATE, TERM AND TERMINATION	8

Appendix 1	The Products, Prices, Discounts and Price Validity
Appendix 2	Specifications
Appendix 3	Quality Requirements and Workmanship Standards
Appendix 4	Logistics Appendix/Appendices
Appendix 5	Environmental Requirements
Appendix 6	Support

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

1 (11)

NETWORKS’ ADDENDUM B TO PURCHASE AGREEMENT NO. ESLNST2676

NOKIA CORPORATION, represented through its Networks business group, a public limited liability company incorporated in Finland, having its registered address at Keilalahdentie 4, FIN-02150 Espoo, Finland business identity code 0112038-9 including its Affiliates (“BUYER”)AND

ENDWAVE CORPORATION, a corporation formed under the laws of State of Delaware and registered under the California trade register number C1933055 with a registered/principal office at 776 Palomar Avenue, Sunnyvale, CA, 94085 including its Affiliates (“SELLER”)

have made and entered into this Networks’ Addendum (“Addendum B”) including its Appendices.

1. DEFINITIONS

In addition to what has been agreed in the Purchase Agreement, including any amendments thereto, the following definitions shall apply (and where the context so admits the singular shall include the plural and vice versa):

“E-Trade Agreement”

means the “Electronic Data Interchange Agreement” (EDI), “Electronic Trade Agreement”, “RosettaNet Trading Partner Agreement” or similar agreement (if any) between the Parties in which the Parties have agreed and defined the use of electronic data interchange or extranet information and data exchange for the purchase and sales of the Products strictly in accordance with this Purchase Agreement.

“Hidden Defect”

means such defect, which could not have been detected during an ordinary incoming inspection and which is attributable to non-compliance with the terms of the Purchase Agreement or this Addendum B or to SELLER’s design work of the Products.

“Logistics Appendix”

means the documents attached (or to be attached later) hereto as Appendix 4, which describe e.g. the logistics procedures for forecasting, ordering, shipping and invoicing the Products. Each of BUYER’s sites and/or Affiliates may create a Logistics Appendix in conjunction with SELLER in order to specify the procedures unique to that particular site and/or Affiliate and which procedures are not otherwise covered by the Purchase Agreement.

“Manufacturing Information”

shall mean Specifications and other technical and commercial documentation and information, irrespective of its form, necessary for the manufacturing of Product(s) by SELLER (including without limitation and as applicable, information on SELLER’s suppliers, sub-suppliers and subcontractors, from which SELLER procures Third Party Components (if any) and raw materials for Product(s) and its contract manufacturers and

© Nokia Corporation
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Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2 (11)

other subcontractors participating in the manufacturing of Product(s)).

“BUYER Direct Competitor”

shall mean [*], or any other major company with a broad product portfolio whose primary business is telecom infrastructure and in addition [*]

“Supplier Managed Inventory” or “SMI”

means an inventory situated in a third party warehouse or at BUYER’s site, in which SELLER shall store and to which SELLER shall supply the Products to ensure optimum availability of the Products by BUYER. Delivery, purchase, and passage of legal title of the Products shall be deemed to take place upon Consumption. The Logistics Appendix shall further govern the method of and specific terms and conditions regarding the SMI model.

“Consumption”

means the moment when a Product is taken from Supplier Managed Inventory for BUYER’s use, as defined in detail in the Logistics Appendix.

“Third Party Component”

shall mean any hardware and/or software component or part of any Product, to the extent Intellectual Property Rights in the component are not (i) held by SELLER or (ii) licensed to SELLER by BUYER.

2.	Scope AND ORDER OF PRIORITY
2.1	This Addendum B is hereby incorporated into the Purchase Agreement entered into by and between BUYER and SELLER on January 1st, 2006, or any other agreement replacing or amending such agreement. The Appendices shall be an integral part of this Addendum B.
	The object of this Addendum B is to define the terms and conditions specific to purchases of Networks business group of Nokia and to specify the procedures unique to the transactions related thereto, which are not covered by the Purchase Agreement.
2.2	In case of any discrepancies between the Purchase Agreement and this Addendum B, the text of this Addendum B, including the Appendices hereto, or any amendments thereto, or replacing agreement, shall always prevail over the Purchase Agreement with the exception of the Product Liability and Intellectual Property Rights terms of the Purchase Agreement which shall always prevail over any terms under this Addendum B and/or the Appendices hereto.
	In case of any discrepancies between this Addendum B and the Appendices hereto, the text of this Addendum B shall always prevail over any of the Appendices hereto.

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3 (11)

3.	PURCHASE ORDERS
3.1	BUYER may place Purchase Orders for the Products by mail, by telefax or in electronic form in accordance with the E-Trade Agreement, or in any other mutually agreed way.
3.2	The method of placing Purchase Orders may be governed by the Logistics Appendix in respect of each of BUYER’s sites and/or Affiliates. However, if the method of placing Purchase Orders is not defined in the Logistics Appendix, SELLER shall forthwith and not later than [*] business days from the receipt of the Purchase Order send BUYER a confirmation of such Purchase Order. If such confirmation is not received by BUYER within the above defined time period, the said Purchase Order shall be deemed to be accepted by SELLER and to be in force as such.
3.3	In case SELLER’s confirmation of Purchase Order or SELLER’s invoice contain terms and conditions, which are contrary to, or attempt to amend, or change in any way this Addendum B, such terms and conditions shall be regarded as null and void.
3.4	The Parties have agreed on a SMI model under which BUYER may purchase the Products from SELLER’s inventory without placing Purchase Orders. Under the SMI model, the SELLER shall not have a right to refuse to supply Products included in the relevant Logistics Appendix so that the agreed minimum and maximum levels would not be met.
4.	RE-SCHEDULING AND CANCELLATION
4.1	Unless otherwise agreed between the Parties in writing, BUYER may, without any liability to SELLER, by written notice sent to SELLER not less than [*] days prior to the intended Delivery Date, re-schedule the respective Purchase Order later in time. Early delivery may be authorized by a mutual agreement.
4.2	Unless otherwise agreed between the Parties in writing, BUYER may, without any liability to SELLER, by written notice sent to SELLER not less than [*] days prior to the intended Delivery Date, cancel the respective Purchase Order for its convenience.
5.	TERMS OF DELIVERY, PASSING OF TITLE and DELIVERY TIMES
5.1	The term of delivery is [*] (INCOTERMS 2000), unless otherwise agreed between the Parties in Appendix 1 or in the Logistics Appendix or in the Support Appendix.
5.2	Unless otherwise separately agreed, equitable title to the Products and risk of loss shall pass upon BUYER’s receipt of the Products at the [*] point.
5.3	Any changes to the mutually agreed Delivery Date are subject to the prior written approval of BUYER, where for the purposes of this clause 5.3, unsigned electronic notice from the Nokia electronic ordering system qualifies as a “writing.” The maximum Lead Times for the Products are specified in the Logistics Appendix and/or in Appendix 1.

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

4 (11)

6.	PRICES
6.1	The Prices, the validity period for such Prices, and the discounts for the Products are provided in Appendix 1. For the Products not included in Appendix 1, the Prices and discounts shall be mutually agreed upon separately in writing.
6.2	[*]
6.3	All changes in Prices shall become effective upon written agreement and shall apply to all Purchase Orders whether confirmed or not, but not yet delivered by SELLER.
	All changes in Prices for Products included in the SMI shall become effective upon written agreement and shall apply to all Products taken for Consumption after the agreed effective date of price change.
6.4	Unless otherwise expressly stated in Appendix 1 hereto, all Prices shall be stated in USD
7.	PAYMENT TERM
7.1	All payments under this Addendum B shall be made within [*] days from the date of receipt of SELLER’s invoice or BUYER’s self-billing invoice, subject to NOKIA Bank Link Policy, unless otherwise agreed between the Parties in writing.
7.2	All payments under this Addendum B for Products included in the SMI shall be made within the days agreed hereabove, but however, calculated from the date when BUYER issues the self-billing report (or a comparable report) as specified in more detail in the relevant Logistics Appendix.
7.3	Buyer’s obligation to pay any invoice is conditional on the following:

(a) Seller has delivered, in accordance with this Agreement, the full quantities of the Products requested in the respective Order (and reflected in Seller’s invoice);

(b) the delivered Products strictly conform to the Specifications and the Quality Requirements.

Buyer is entitled to withhold payment in respect of a delivery of the Products, which delivery is not fulfilled in accordance with the requirements set forth under subclauses (a) and (b) above, until the delivery is completed to comply with the said subclauses. Notwithstanding the above, if partial delivery is accepted in writing by Buyer in accordance with this Agreement, then Seller shall be entitled to invoice Buyer accordingly and Buyer will pay such invoice within [*] days of its receipt, subject to Nokia Bank Link Policy. In the event that payment is not made within such [*] days, however, subject to the Nokia Bank Link Policy, Buyer shall be liable to pay interest at an annual rate of equal to [*] above the London Interbank Offered Rate (LIBOR) for Euro deposits offered for a one-month period on the due date or the maximum rate permitted by applicable law, whichever is the lesser, which interest shall accrue on a daily basis from the date payment becomes overdue until the Seller receives payment of the

© Nokia Corporation
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Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5 (11)

overdue amount. Seller may excuse the payment of late payment interest only in writing, with or without receiving consideration from Buyer.

8.	PACKING AND MARKING
8.1	SELLER’s obligations for packing and packaging include, without limitation, the following: (i) all Products shall be packed and packaged by SELLER for protection during shipment, handling, and storage in strict conformance with BUYER’s written requirements and instructions, and otherwise in accordance with best commercial practice; (ii) highly polished, highly finished, or precision Products or those that might be sensitive to stresses of temperature or moisture, or electro-static or electro-magnetic charges, are to be properly preserved and packed in containers which will afford physical protection against any damage and deterioration from those or any other causes. Any Products packed with nonconforming packing and/or packaging are, upon request of BUYER, subject to rejection and repackaging at SELLER’s expense. The Prices for the Products shall include the cost of packing and packaging required to prevent any deterioration or damage to the Products during transportation and subsequent storage. SELLER shall indemnify BUYER against any damage that the Products suffer due to improper or nonconforming packaging and/or packing.
8.2	[*]
8.3	Further details on packing and packaging may be set forth in the Logistics Appendix and/or in the Specifications.
8.4	If BUYER directs SELLER to mark or label any Products with a trade name, trademark, logo or service mark owned or licensed by BUYER (“BUYER Identification”), SELLER shall apply the marking or labeling only on the quantity of Products and in the manner specified in BUYER’s written instructions. SELLER shall not sell nor otherwise dispose of, nor permit the sale or disposal of, any Products bearing any BUYER Identification (including any rejected Products) to anyone other than BUYER without first obtaining BUYER’s express written consent and first removing all BUYER Identification. Upon termination or expiration of this Addendum B any materials bearing BUYER Identification shall be returned to BUYER or destroyed.
8.5	The packages shall bear the same serial number as the corresponding Products.
8.6	SELLER shall have a system to enable Product Traceability back to the factory, including the date code and batch or serial number. SELLER shall also have a system to trace critical raw materials and components back to their source. SELLER shall keep the Product Traceability records for [*] years unless otherwise agreed in writing between BUYER and SELLER. SELLER shall not be obligated to meet these responsibilities with a Radio Frequency Identification (“RFID”) tag or a RFID label system.

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

6 (11)

9.	INSPECTIONS BY BUYER
9.1	BUYER may inspect the Products upon delivery to ascertain correct quantities and whether there exists any visible damage or deviation from the Purchase Order or other delivery document in the Products delivered. BUYER may also use statistical sampling methods in the incoming inspection. Items not subjected to incoming inspection by individual unit or lot sampling within [*] days from Consumption shall be deemed accepted for purposes of self-invoicing and payment.
9.2	If the delivered Products or relevant sample thereof do not pass BUYER’s inspection, BUYER is entitled to, at its own option and upon notice to SELLER, reject the entire delivery lot or batch of Products inspected, or accept those items that pass while rejecting those that do not, and

a)	treat the Purchase Order or delivery as discharged either in whole or in part and terminate the respective Purchase Order or delivery without any liability to SELLER except for accepted units, or
b)	demand SELLER to replace all damaged or incorrect Products and deliver additional Products in order to meet the correct quantities without delay within [*] hours (or within the time period specified in the Logistics Appendix) from the receipt by SELLER of BUYER’s notice.

9.3	BUYER has the right to deduct the value of the rejected and/or undelivered Products from SELLER’s invoice or from BUYER’s self-billing report (or comparable), and BUYER shall provide SELLER with a debit note accordingly and/or, upon request of BUYER, SELLER shall be obligated to provide BUYER with a credit note.BUYER shall provide its inspection report to SELLER without delay. BUYER shall return rejected Products to SELLER without undue delay, unless otherwise agreed upon between the Parties. Any return of the Products shall be made at SELLER’s expense. In addition the SELLER shall compensate BUYER’s costs related to handling of such rejected delivery lot or batch or part thereof in a mutually agreed way.
	[*]
9.4	Notwithstanding Clause 9.3, in case BUYER wishes to sort a delivery, which has failed the incoming inspection referred to above in Clause 9.1 in order to determine whether certain Products may nevertheless be suitable for use by BUYER, then BUYER may do so at its own option. In such event, the Parties reserve the right to negotiate of the compensation for additional costs of such action to BUYER.
10.	AVAILABILITY OF PRODUCT(S)
10.1	SELLER guarantees the availability of the Product(s) in accordance with the Specification(s) during the period when each Product is included in this Addendum B. SELLER further guarantees such availability of the Product(s) for [*] years after the

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7 (11)

	exclusion of the given Product from Addendum B, provided that the Parties separately agree upon prices, delivery terms and other material commercial issues.
10.2	If SELLER plans to discontinue to manufacture the Product after the exclusion of the Product from this Addendum B, but before the end of the [*] year period after the exclusion of the Product from this Addendum B, SELLER shall notify BUYER in writing about its intention in accordance with the instructions given by BUYER at least [*] months prior to the intended date of discontinuation, in order to allow BUYER to place an end-of-life order before the discontinuation. Such Products shall be delivered in one delivery or several partial deliveries in accordance with BUYER ´s instructions and within twelve (12) months from the end-of-life order date.
11.	WARRANTY
11.1	SELLER warrants that replaced or repaired products will be made of new material, and conform to their Product Specification(s). A replaced or repaired Product shall have a Warranty Period of [*] months after replacement delivery. The details of field return warranty are set forth in Appendix 6, Support. Further, SELLER and BUYER agree that no later than 1 January 2007, the warranty period for all repaired or replaced Products after said date will be [*] months.
11.2	RETROFIT
11.2.1	If Hidden Defects appear during or after the Warranty Period, such that the parties agree that retrofit of fielded units is necessary, BUYER shall notify SELLER in writing and SELLER shall respond to BUYER within [*] from the date of BUYER’s notice. Such response shall include a detailed outline of the corrective actions necessary to remedy the Hidden Defect. The corrective actions include but are not limited to (i) redesigning the Products, (ii) modifying the Products, (iii) repairing the Products and/or (iv) replacing all Products with new ones that do not have the Hidden Defect. For clarity, this clause 11. 2 does not include any Product after [*] years from Delivery.
11.2.2	SELLER shall at SELLER’s cost and without unreasonable delay undertake any and all necessary investigative and corrective actions to ensure that the Products are made to conform to the terms of the Purchase Agreement and this Addendum B, and that such Hidden Defects do not reappear in the Products. Notwithstanding the foregoing, BUYER shall, unless otherwise agreed between the Parties on a case-by-case basis, at BUYER’s option and at SELLER’s cost replace or cause the Products in the field to be replaced by a third party.
11.2.3	If SELLER is not able to present a correction plan that both Parties can accept and/or to perform the corrective actions within the reasonable time period set by BUYER, then BUYER is entitled to, by written notice to SELLER, take the corrective actions at the cost of SELLER by itself or by a third party appointed by BUYER, and/or terminate this Addendum B and/or any Logistics Appendix, and/or terminate all/any part of undelivered Purchase Orders under this Addendum B without prejudice to any other rights of BUYER and without any liability towards SELLER.

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

8 (11)

11.2.4	[*]
11.2.5	[*]
11.3	SELLER shall in designing of the Products and in manufacturing and Delivery of the Products strictly comply with the Environmental Requirements set forth in Appendix 5 of this Addendum B. SELLER warrants, that each Product that SELLER delivers hereunder strictly conforms to such requirements.
12.	MANUFACTURING RIGHTS
12.1	Escrow Agreement
	The parties have entered into a technology escrow agreement dated August 14, 2003 with a third-party escrow agent (the “Escrow Agreement”). Pursuant to the Escrow Agreement, SELLER will promptly deposit with the escrow agent the then-existing Manufacturing Information and, upon BUYER’s acceptance of any implemented Changes whatsoever to any Specifications or any Product(s), SELLER will promptly deposit with the escrow agent any updated Manufacturing Information. SELLER shall bear all expenses and fees charged by the escrow agent under the Escrow Agreement. Before any deposit, BUYER may, solely at the presence of a representative of the SELLER, briefly review the Manufacturing Information so as to generally ascertain that its contents comply with the requirements of this Agreement and SELLER shall, upon request, demonstrate to the reasonable satisfaction of BUYER that the contents do comply with said requirements.
12.2	Trigger Events
	Under the terms of the Escrow Agreement, BUYER will have the right to obtain the Manufacturing Information in the event that BUYER elects to purchase Products under any Purchase Agreement and, thereafter, any of the following events (each, a “Trigger Event”) occurs:

(1)	a breach by SELLER against a material obligation under the Purchase Agreement, which breach is not duly remedied within a reasonable time fixed by BUYER, which period shall not be less than ninety (90) days, in a written notice drawing the attention of SELLER to the breach and requiring the breach to be remedied; and/or
(2)	SELLER becoming insolvent, filing for any form of bankruptcy or re-organization proceedings, making any assignment for the benefit of creditors, having a receiver, administrative receiver or officer appointed over the whole or a substantial part of the assets or ceasing to conduct any material part of its business relating to any Product(s); and/or
(3)	a material change in ownership in or effective control over SELLER (A) resulting in any BUYER Direct Competitor obtaining control over the SELLER, and (B) where

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

9 (11)

such BUYER Direct Competitor refuses to accept and fulfill orders for Products in material breach of the terms of the Purchase Agreement.

12.3	Manufacturing License
	In the event of a Trigger Event, SELLER grants to BUYER and its Affiliates a world-wide, non-transferable and royalty free license and right, without the right to sublicense, under all Intellectual Property Rights of SELLER, (i) to modify Product(s) or have the Product(s) modified (provided, however, that BUYER will indemnify and hold SELLER harmless from and against any damages, costs and expenses incurred by SELLER in cases where such damages, costs and expenses are solely due to BUYER’s modifications), and (ii) and manufacture, have manufactured, make, have made, use, sell, offer to sell, and import such Products (“the Manufacturing License”). For the avoidance of doubt, BUYER may use any Manufacturing Information for such purposes provided, however, that BUYER shall treat such Manufacturing Information as SELLER’s Information under Clause 19 of the Purchase Agreement. In addition to such license, SELLER shall also provide BUYER with assistance in obtaining access to SELLER’s suppliers, sub-suppliers and subcontractors, from which it procures raw materials for Product(s) and Third Party Components and to SELLER’s contract manufacturers and other subcontractors participating in the production of Product(s).
	BUYER hereby covenants and agrees that the Manufacturing License shall only be exercisable if and when a Trigger Event occurs. BUYER hereby further covenants and agrees that if a Trigger Event occurs and (i) thereafter the SELLER has been able to cure its breaching situation mentioned in Clauses 12.2 (1) – (3) for a continuous period of ninety (90) days, and (ii) the SELLER has the capability to accept and fulfill orders for Products under the Purchase Agreement, and (iii) the SELLER agrees to purchase from BUYER any raw materials or Third Party Components that BUYER has purchased and committed to in order to exercise its rights under the Manufacturing License, then BUYER will purchase Products from SELLER under the Purchase Agreement and BUYER’s right to exercise the Manufacturing License shall terminate. Upon termination of BUYER’s right to exercise the Manufacturing License, BUYER shall return the Manufacturing Information to the third-party escrow agent named in the Escrow Agreement and shall immediately destroy any copies thereof.
13.	REPRESENTATIVES OF THE PARTIES
13.1	The following persons shall act as the representatives of the Parties regarding notices, performance, extension, termination and amendments in respect of this Addendum B:

REPRESENTING THE BUYER		REPRESENTING THE SELLER
Name:	Nils Nordman	Name:	Steve Layton
Title:	Purchasing Manager	Title:	Vice-President & General Manager
Address:	P.O BOX 368, 00045 Nokia	Address:	776 Palomar Avenue, Sunnyvale
Telephone:	+358718027068	Telephone	: 01-408-522-3177
Telefax:	+358718031520	Telefax:	01-408-522-3181

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

10 (11)

cc NET Legal / Senior Legal Counsel cc: Endwave General Counsel

14.	EFFECTIVE DATE, TERM AND TERMINATION
14.1	This Addendum B shall become effective on January 1st 2006 (“Effective Date”) and, except for Seller’s cumulative Product Retrofit liability described in this Addendum B, shall have no retroactive effect for deliveries made prior to 1 January 2006.
14.2	This Addendum B shall continue to be effective until terminated for convenience with at least eighteen (18) months prior written notice or otherwise in accordance with Clause 20 of the Purchase Agreement.

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

11 (11)

IN WITNESS WHEREOF this Addendum B has been duly signed and executed in two original copies

For and on behalf of
NOKIA CORPORATION
Networks

Signed by:  /s/ Nils Nordman	Signed by:  /s/ Hemi Van Stichele
Name:       Nils Nordman	Name:       Hemi Van Stichele
Title:         Purchasing Manager	Title:         Director Global Sourcing
Date:         December 29, 2005	Date:         December 29, 2005
Place:        Espoo, Finland	Place:        Espoo, Finland
For and on behalf of
ENDWAVE CORPORATION
Signed by:  /s/ Steve Layton	Signed:
Name:       Steve Layton	Name:
Title:          V.P. + G.M.	Title:
Date:         December 30, 2005	Date:
Place:        Sunnyvale, CA	Place:

(No further entries to this Addendum B; Appendices immediately follow)

© Nokia Corporation
Proprietary and Confidential

Addendum B to Purchase Agreement

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL APPENDIX 1
SELLER:	Endwave Corporation
BUYER:	Nokia Corporation/ Nokia Networks
Validity Period:	01.01.2006-31.12.2006
Purchase Agreement number:	ESLNST2676
Currency :	USD
Delivery period:	New prices are valid for deliveries 01.01.2006-31.12.2006
Terms of delivery:	[*]
Terms of payment:	[*] net according to Nokia Bank Link Policy

Purchase estimates are based on the best assumptions of NET and they are provided for planning purposes of Endwave.

Purchase estimates shall not be regarded as binding purchase orders by NET under any circumstances.

NET and/or its subcontractors shall be under no obligation to purchase any specific quantity of the Parts from Endwave.

2006

2006

2006

2006

2006

Nokia

Country

Unit Price for

Unit Price for

Unit Price for

Unit Price for

Unit Price for

Plant

code

Name

Frequency

Class

Of Origin

Currency

1st 10K

next 10K

next 10K

next 10K

next 10K

Duty Paid By

Espoo Plant

5603638

Microwave Module

18 Ghz HDR low

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603640

Microwave Module

18 Ghz HDR high

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603582

Microwave Module

23 Ghz Upscreen low

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603592

Microwave Module

23 Ghz Upscreen high

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603662

Microwave Module

23 GHz HDR low

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603664

Microwave Module

23 GHz HDR high

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603646

Microwave Module

26 GHz HDR low

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603642

Microwave Module

26 GHz HDR high

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603652

Microwave Module

38 GHz HDR low

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603650

Microwave Module

38 GHz HDR high

Class 2

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603416

Microwave Module

18 Ghz RATS high

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603418

Microwave Module

18 Ghz RATS low

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603390

Microwave Module

23 GHz RATS low

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603392

Microwave Module

23 GHz RATS high

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603394

Microwave Module

26 GHz RATS low

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603396

Microwave Module

26 GHz RATS high

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603408

Microwave Module

38 GHz RATS low

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Espoo Plant

5603410

Microwave Module

38 GHz RATS high

Class 1

[*]

USD

[*]

[*]

[*]

[*]

[*]

Buyer

Endwave undertakes to supply during validity period listed Parts in quantitites estimated by NET, subject to NET and/or its subcontractors purchase orders.

This Appendix 1 replaces any prior Appendix 1.

The Parties agree that the prices may be reviewed during 2006.

Signed on behalf of Endwave Corporation:	Signed on behalf of Nokia Corporation / Nokia Networks :
Steve Layton Vice-President & General Manager	Nils Nordman Purchasing Manager

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as am

	APPENDIX 2 -	1 (2)
	SPECIFICATIONS
Appendix 2 to ESLNST2676
NET/RN/CT
Henrik Balk	29.12.2005

Endwave Purchase Agreement
(no. eslnst2676)
Appendix 2 — Specifications

Document Owner	Nils Nordman
Document Author	Henrik Balk
Document Version	V1.2

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		2 (2)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations Kari Vepsäläinen	29.12.2005

1 purpose of document

This document defines the approved specification versions and waivers for microwave module types under purchase agreement.

2 MWU Specification versions and waivers

				Approved specification
	Microwave module	Low or		and waiver document
Component code	type	high	Duplex frequencies	versions
5603390	23 GHz class1	low	[*]
5603392	23 GHz class1	high	[*]
5603394	26 GHz class1	low	[*]
5603396	26 GHz class1	high	[*]	E10014774QE_E0
5603408	38 GHz class1	low	[*]	133-020935_00
5603410	38 GHz class1	high	[*]
5603416	18 GHz class1	high	[*]
5603418	18 GHz class1	low	[*]
5603582	23 GHz class2 (screened)	low	[*]	E10014774QE_E0
5603592	23 GHz class2 (screened)	high	[*]	133-004317_01
5603638	18 GHz class2	low	[*]	E10014774QE_E3
5603640	18 GHz class2	high	[*]	133-022287_00
5603642	26 GHz class2	high	[*]	E10014774QE_E3
5603646	26 GHz class2	low	[*]	133-020721_00
5603650	38 GHz class2	high	[*]	E10014774QE_E3
5603652	38 GHz class2	low	[*]	—
5603662	23 GHz class2	low	[*]	E10014774QE_E3
5603664	23 GHz class2	high	[*]	133-019065_01

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		1 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

Nokia Networks – Quality Requirements
Appendix for Microwave Products

Document Owner	Nils Nordman
Document Author	Kari Vepsäläinen
Document Version	1.0 (Final)

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		2 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

1. PURPOSE OF DOCUMENT

This document encapsulates Nokia Networks’ (later “Nokia”) quality requirements in detail for products, product design, manufacturing and delivery of products, and services delivered to Nokia. Such products are referred to hereinafter as “Products”.

Supplier’s conformance to the quality requirements listed herein and to Nokia Supplier Requirements (see also Chapter 5 – Nokia Supplier Assessments) shall be verified by means of Supplier surveys, requested self-assessments, and assessments done by Nokia or a designated third party.

The term “Supplier” is used in this document as a general term meaning all external organizations selling products and/or services to Nokia. When referring to the Supplier’s own suppliers, the word is not capitalized. When there is a need to separate supplier that has responsibility of some part of a process the word subcontractor is used.

2. REQUIREMENTS FOR QUALITY AND ENVIRONMENTAL SYSTEMS, AND ETHICAL STANDARDS

Supplier agrees to operate under a documented quality and environmental management systems (‘Quality System” and “EMS”, respectively) covering all Products and services supplied by Supplier and products or services supplied by Supplier’s subcontractor(s). The Quality System shall meet, at the minimum, the applicable requirements of ISO9001: 2000 or other equivalent internationally recognized standard. The EMS shall be certified according to ISO 14001 or complaint to stated requirements. These afore-mentioned certifications have to cover all sites manufacturing or delivering products to Nokia, including but not limited to Supplier’s subcontractor’s sites. For ethical requirements, Supplier shall be committed to ethical conduct, full compliance to applicable national and international laws and respect for human rights in the spirit of internationally recognized ethical standards, e.g., SA8000.

Supplier shall adopt quality assurance measures necessary for ensuring that all Products and deliveries will achieve the agreed standards, specifications and quality requirements.

Supplier shall adopt a systematic method for analyzing results of quality assurance measures, including but not limited to defects, and use the results of these analyses to drive systematic continuous quality improvements to Products, processes and systems.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		3 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

2.1 Quality Inspection

Supplier shall deliver Products in accordance with product specifications (set forth in Appendix 2 of Addendum B), and quality requirements and standards set forth in Chapter 7 of this Appendix. Nokia is entitled to perform incoming quality inspection on the Products before they are received to consigned inventory and to return Products that do not meet the product specifications or quality requirements to Supplier as provided in the Purchase Agreement.

Nokia is entitled to perform quality inspection on the Products as they are taken from the consignment stock for Nokia production and to return the Products to Supplier if they are found not to meet the product specifications or quality requirements.

If any Products that do not meet product specifications or quality requirements are found in Nokia production, Nokia is entitled to exchange any such Product for a compliant Product from the consignment stock at any time upon notice to Supplier.

3. QUALITY PLANNING ACTIVITIES

At the beginning of new Product/Manufacturing Process development including services, as may be applicable, or prior to any major design change, major manufacturing change or corresponding development activity for the Products in volume production, Supplier shall produce a Project Plan that fulfills Nokia Networks Advanced Product Quality Plan (‘APQP’) requirements. This plan will be presented to Nokia and mutally agreed to changes will be made as needed.

Supplier shall ensure that all resources responsible for activities in the plan are available and schedule indicated in the plan complies with Nokia’s targets. Supplier is responsible for reviewing the plan on regular basis and updating as necessary. Any proposed changes in the project plan shall be presented to Nokia and mutally agreed to. As well, any deviations or non-conformance to the plan shall be notified to Nokia

Supplier shall ensure that all specifications and related standards are fully understood by both parties prior to all development activities, and that all relevant project planning documentation and APQP milestone documentation as agreed to be available to Nokia. Supplier shall notify Nokia in writing if in doubt or discrepancy.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		4 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

4.	CONTINUOUS QUALITY AND ENVIRONMENTAL PERFORMANCE IMPROVEMENT
4.1	Quality Improvement

The Supplier shall continuously ensure that any service, product, design, manufacturing, and delivery thereof shall be free of any defects and discrepancies.

Supplier shall generate plans and corrective actions for achieving quality improvement targets and to ensure that resources for these activities are contiously available. The plans and corrective action reports shall be available for review upon Nokia’s request.

Supplier shall continuously monitor the improvement targets to verify the effectiveness of the improvement plans. Upon Nokia’s request, supplier shall demonstrate the verification of results.

4.1.1 Design Changes, Process Changes, and Change Management

Any changes made by Supplier in the design, materials or manufacturing process of the Products, which affect the interchangeability, fit, form or function of the Products, are subject to Nokia’s written approval prior to the implementation of any such change.

For any significant changes made by Supplier in the design, materials or manufacturing process of the Products, which could effect the quality, reliability, performance, or availability of the Products the Suplier shall give notice to Nokia prior to implementiation of any such change.

Prior to implementing such a change, Supplier will submit an Engineering Change Note to Nokia for approval, which will not be unreasonably withheld or delayed. Prior to granting such approval, Nokia may require Supplier to submit samples of the Product with the proposed change for Nokia qualification. It is not expected Supplier provide samples free of charge. Cost of any qualification units will be agreed to on a case-by-case basis.

4.1.2 Control Plan

All key process steps, process control parameters, key product characteristics and quality targets shall be documented in product and product line specific Control Plans (including Control Plans of subcontractors), which shall always be available to Nokia upon request. Any subcontractor shall update these Control Plans to continuously reflect the current manufacturing situation. The Control Plans shall form one basis for generating and targeting specific continuous quality improvements. In the event a subcontractor declares the information of a control

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		5 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

plan to be a trade secret not for disclosure, SELLER and BUYER shall mutually on agree a limited amount of information to be shared between the three parties. Notwithstanding this the Product manufacturing subcontractor control plan shall be available to Nokia upon request.

4,1,3 Off-line Audit and Reliability Testing in Volume Production

Supplier shall plan and perform continuously off-line audit testing in volume production over the full temperature range specified for the Product, and moreover, plan and perform periodic off-line reliability testing to the full Product specification to ensure Product conformance during its entire life cycle. Sampling rates for off-line testing shall be mutually agreed between Nokia and Supplier. Test results, and possible failure analysis and corresponding corrective actions from these tests, shall be reported to Nokia as set forth in Chapter 6 of this Appendix.

4.2 Environmental Performance Improvement

Supplier shall identify significant environmental impacts associated with Supplier’s products and operations, and implement continuous improvement programs to address any concerns. These improvement programs shall cover at minimum more efficient design for environment requirements, cost effective and sound recycling and/or disposal of product waste and improvement of treatment and control of waste emissions affecting air, water and soil, and any other part of the environment. Supplier shall further implement programs for eliminating the use of certain hazardous substances in Supplier’s Products in accordance with EU RoHS Directive (2002/95/EC), and any other similar legislation globally applicable. Further, Supplier shall implement program(s) for prepairing for Supplier and Products to meet the requirements of EU WEEE Directive (2002/96/EC) and any national legislation based on such directive, and any other similar legislation globally applicable. Supplier shall be compliant with WEEE Directive from August 13th, 2005 onwards. Supplier shall provide evidence to Nokia upon having fulfilled any of these requirements upon request or in conjunction with Nokia Supplier Requirements’ audit. Further, Supplier shall deliver to Nokia upon Nokia’s request its roadmaps to comply with EU RoHS Directive requirements.

Supplier shall evaluate Supplier’s own subcontractors and set necessary environmental improvement targets. If a subcontractor or sub-supplier is used by Supplier for waste disposal, Supplier shall make sure that suchwaste treatment service provider is authorized and licensed through on-site inspection by Supplier or has a third-party certification acceptable to Nokia.

5. Nokia supplier Assessments

[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		6 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

For a Supplier to pass any assessment, as mentioned in the preceding chapter, the requirements given in each applicable assessment element shall be fulfilled, in which case the result is “accepted”; otherwise the result is “not accepted”.

In case of “not accepted” result, the Supplier has to provide Nokia, within thirty (30) calendar days, with a Corrective Action Plan (“CAP”) and, upon having implemented the corrective actions, to submit a Corrective Action Report (“CAR”). Sometimes a CAR may be sufficient proof of the implementation of the actions; otherwise, a partial on-site assessment for corrective action verification may be performed by Nokia.

After an acceptable assessment result, the Supplier shall without any undue delay inform Nokia about significant changes in any requirement section area. Any “accepted” result or any other acceptance from Nokia’s part does not release the Supplier from any liability under this Quality Requirements Appendix, under any agreement between the Supplier and Nokia, nor otherwise.

6. QUALITY REPORTING

The Supplier shall submit reports of quality indicators such as production yields and product return rates including Paretos of found problems. [*] The detailed contents and followed parameters for quality reporting may vary from product to product, but Nokia expects the Supplier to use one mutually agreed format with respect to all products and manufacturing sites. Supplier shall submit these quality reports to Nokia on an agreed to frequency.

Nokia wants to ensure that quality is measured in a consistent manner, and that both Supplier and Nokia interpret the definitions the same way. Therefore, the purpose is to establish clear definitions for measurements for manufacturing process and returns analysis related Quality Indicators leaving no room for interpretation and possible misunderstandings between Nokia and Supplier.

Supplier shall submit the following reports (see Table A below) and data to Nokia on a continuous basis or upon request:

Table A: Quality Reports and Reporting Frequency

Report Name	Frequency
Delivery Performance Report	Weekly or monthly
Monthly Quality Report including	Monthly within first five (5) business
• [*]	days of each month
• [*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		7 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

Report Name	Frequency
• [*]
• [*]
• [*]
[*]	Upon request
[*]	Upon request
[*]	Upon request

7. SPECIFIC QUALITY REQUIREMENTS

This section contains information on specific quality requirements. The quality standards that apply to Products designed, manufactured and delivered, and services delivered to Nokia are described either in Nokia Documents or generally available industry standards. For the avoidance of doubt, Nokia is not obliged to distribute IPC, IEC, MIL, EIA, ISO or SA standards’ documents, as they are protected by copyright of the named organizations, and Supplier shall obtain its own licenses to have access to these documents.

7.1 Workmanship, Manufacturing and Test Method Standards

The Supplier shall meet the following workmanship, manufacturing and test method standards shown in Table B and Table C below:

Table B: Workmanship and Manufacturing Standards

Document Code	Specification
IPC-A-610D	Class 2 Acceptability of Electronic Assemblies
IPC-A-600F	Class 2 Acceptability of Printed Boards
IPC 7711A	Rework of Electronic Assemblies
IPC 7721A	Repair and Modification of Printed Boards and Electronic Assemblies

Table C: Test Method Standards for Microcircuits

Document Code	Specification
FCS 5962	MIL-STD-883E Test Method Standard – Microcircuits
	MIL-STD-883E-2XXX Mechanical Tests
	2009.9 External Visual

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		8 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

Document Code	Specification
	2010.10 Internal Visual
	2011.7 Bond Strength
	2017.7 Internal Visual (Hybrid)
	2019.5 Die Shear Strength
	2025.4 Adhesion of Lead Finish
	2029 Ceramic Chip Carrier Bond Strength
	2032.1 Visual Inspection of Passive Elements

7.2 Other Nokia Networks’ Requirements and Instructions, and Reference Documents

Supplier shall meet the following Nokia Networks’ requirements and instructions shown in Table D. The reference documents are listed in Table E. Reference documents are not requirements but guidelines to aid in the design of and manufacturing of Products for Nokia Networks.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		9 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

Table D: Other Nokia Networks’ Requirements and Instructions

Document Code	Revision	Specification
[*]	[*]	Marking and Labeling of NET’s Products
[*]	[*]	Protection of Electrostatic Sensitive Devices
[*]	[*]	NET Traceability Principles
[*]	[*]	Environmental Requirements for Networks (NET) Products
[*]	[*]	Nokia Supplier Requirements
[*]	[*]	Nokia Requirements for Material Package Labeling
[*]		NET Generic Product Package Requirements
[*]	[*]	MW-module Project APQP Requirements
[*]	[*]	Nokia Networks Supplier Delivery Capability Requirements
[*]		Solderability Testing
[*]		Package Requirements for ESD Sensitive Components
[*]		General Requirements for Passive Components
[*]		General Requirements for Integrated Circuits

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		10 (10)
Appendix 3 to ESLNST2676
Nokia Networks Delivery Operations
Kari Vepsäläinen	29.12.2005

Table E: Nokia Networks’ Reference Documents

Document Code	Revision	Specification
	[*]	NET’s Lead Free Process Requirements for Materials
[*]		General Requirements for Printed Wiring Boards
[*]		MIL-STD-883E-5XXX Test Procedures

7.3 Waivers to Quality Requirements

Irrespective of any requirements indicated in the referenced documents of Section 7, Seller shall be allowed to use Rodgers 4003 Ô board material in their current Products under this Agreement. The use of Rogers 4003 Ô in new products shall be mutually agreed.

8. DISCLAIMER

Neither the presence of Nokia’s representatives nor any express or implied acceptance of e.g. work, materials, components, equipment, method of manufacture or service nor the fact that Nokia or its representatives has not brought any defect or deficiency to the attention of Supplier or his representatives shall relieve Supplier from its obligations under this Appendix to perform according to and to meet all requirements set out in the Agreement or prejudice any warranty to Nokia under the Agreement.

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL
Purchase Agreement No. ESLNST2676	Version 1.0.0
Appendix 4 to Purchase Agreement

LOGISTICS APPENDIX

for Supplier Managed Inventory

MADE AND ENTERED INTO BY AND BETWEEN

NOKIA CORPORATION
Nokia Networks

AND

ENDWAVE CORPORATION

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	2(11)
Logistics Appendix 4

CONTENTS

1. DEFINITIONS	3
2. SCOPE AND OBJECTIVE	3
3. FORECASTING	4
6. DISCONTINUANCE NOTICE	6
7. PACKING LIST REQUIREMENTS	6
8. TRANSPORTATION	7
9. RETURN AND REJECTED MATERIALS	7
10. SELFBILLING PROCESS	9
11. FINAL PROVISIONS	9

SCHEDULE 1	LIST OF PRODUCTS, METHODS FOR FORECASTING, SMI LOCATION, INVENTORY LEVELS AND NOKIA’S PREMITTED FLEXIBILITY LEVELS
SCHEDULE 2	SELLER’S BANK ACCOUNT DETAILS, SELF-BILLING REPORT ISSUANCE DATE AND PERIOD AND METHOD OF SENDING SELF-BILLING REPORT; CONTACT PERSON

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	3(11)
Logistics Appendix 4

This LOGISTICS APPENDIX is made and entered into by and between

NOKIA CORPORATION, represented through its Nokia Networks business group, a public limited liability company incorporated in Finland, having its registered address at Keilalahdentie 4, FIN-02150 Espoo, Finland, business identity code 0112038-9 (hereinafter referred to as the “BUYER”),

AND

ENDWAVE CORPORATION, a company incorporated in Delaware, USA with its principal office at 776 Palomar Avenue, Sunnyvale, CA 94085, USA. (Hereinafter referred to as the “SELLER” or “SUPPLIER”).

The BUYER and the SELLER are hereinafter jointly referred to as the “Parties.”

1. DEFINITIONS

In addition to what has been agreed in the Purchase Agreement (as defined in clause 2 below), including any amendments thereto, the following definitions shall apply:

“Consumption”
Means the moment when a Product is taken from Supplier Managed Inventory for BUYER’s use

2. SCOPE AND OBJECTIVE

This Logistics Appendix is hereby incorporated into the Purchase Agreement entered into by and between the SELLER and Nokia Networks on ESLNST2676 (hereinafter referred to as “Purchase Agreement”).

The object of this Logistics Appendix is to identify the procedures for forecasting, ordering, shipping and invoicing the Products listed in Schedule 1 to this Logistics Appendix (“Schedule 1”) between BUYER and SELLER in order to specify the procedures unique to that particular site which are not otherwise covered by the Purchase Agreement

In case of any discrepancies between the Purchase Agreement and this Logistics Appendix, the text of the Purchase Agreement or any amendment thereto, or replacing agreement, shall always prevail over this Logistics Appendix unless explicitly agreed in the Purchase Agreement that the Parties may agree otherwise in Logistics Appendix.

This Logistics Appendix shall not create any obligation for BUYER to purchase or take for Consumption any particular quantity of Products from SELLER.

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Purchase Agreement No.ESLNST2676	4(11)
Logistics Appendix 4

3. FORECASTING

BUYER provides SELLER with a forecast of its or its customer’s anticipated purchasing needs, as agreed in Schedule 1 in order to permit the SELLER to plan for an adequate manufacturing capacity. Any forecast, estimate, demand supply plan, demand visibility report or any other similar information for future demand of the Products provided by BUYER to SELLER shall not be regarded as binding upon BUYER under any circumstances and BUYER shall be under no obligation to purchase or take for Consumption any quantity of the Products from SELLER.

The information given by Nokia regarding forecasting (e.g. existence, content, time period and method of the forecast) for each Product governed by this Logistics Appendix, and BUYER’s permitted flexibility levels are contained in Schedule 1.

4. INBOUND LOGISTICS MODES OF OPERATION

4.1 Standard purchase order

In addition to obtaining Products pursuant to the model described in Clause 4.2 of this Logistics Appendix, BUYER shall have the option to order Products from the SELLER under the Common Purchase Order method, in such instances, BUYER shall submit a single purchase order to SELLER for the purchase of Products. A single purchase order shall specify Product numbers, order quantities, delivery dates, delivery address and specific order number for the Products to be ordered hereunder. SELLER shall deliver the ordered Products on the date specified on the purchase order and in accordance with the terms and conditions specified in the Purchase Agreement.

4.2 Supplier Managed Inventory (SMI)

4.2.1 Definition

SELLER has established Supplier Managed Inventory in Espoo Plant as specified in Schedule 1, which inventory SELLER is authorised and commits to control and replenish. The ordering and other communication between the BUYER and SELLER is managed by utilizing Web-solution or by other mutually agreed way.

Consigned Products are held on the BUYER’s premises but owned by the SELLER.

The title of all consigned Products shall transfer to the BUYER when the Product is removed from consignment inventory. All consigned Products held in the consignment stock at the BUYER’s premises longer than [*] from date of shipment from the SELLER will be purchased immediately by the BUYER. The SELLER will invoice the BUYER and the BUYER shall pay for all units held by the BUYER longer than [*] from date of shipment from the SELLER. BUYER shall not have any obligation to buy any consigned material in excess of the maximum stock level as defined in Schedule 1.

SELLER reserves the right to enter the BUYER’s consigned facilities with a 48-hour prior notice to BUYER and during normal business hours.

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Purchase Agreement No.ESLNST2676	5(11)
Logistics Appendix 4

The SELLER, at the BUYER’s consignment facilities, may perform quarterly inventory counts. At year-end, the BUYER shall supply the SELLER with a written confirmation of inventory balances. For quarterly confirmation purposes, inventory on hand at the BUYER’s consignment facilities as of 5:00 p.m. at BUYER’S time will be considered SELLER inventory.

4.2.2 Description of the mode of operation

The SELLER is responsible for evaluating the BUYER’s inventory parameters and current inventory on hand and making decisions whether SELLER needs to replenish the consigned inventory held on the BUYER’s premises or not. It is the responsibility of the SELLER to maintain inventory levels within the parameters. Inventory information is sent regularly by BUYER and contains Min/Max inventory parameters, inventory on Hand in the consignment and last receipts information. BUYER will endeavour to send Inventory Report on mutually agreed basis. For accounting and bookkeeping purposes the BUYER will raise a frame order/scheduling agreement for all Products held in the consignment.

The SELLER is responsible for creating serial numbers according to the parameters that have been previously mutually agreed to.

The BUYER will physically hold the consigned Products on its premises. BUYER shall take care of the day-to-day materials handling. The BUYER is responsible for insuring the consigned Products on behalf of SELLER.

4.2.3 Shipment of Products

At time of shipment, SELLER shall provide notice to BUYER of Product shipments. SELLER’s shipment notice to BUYER shall include at least the following information: date of shipping notice, SELLER’s name, quantity of pallets or transportation packages, type of transportation packages, number of bill of lading, forwarding agent, weight and dimensions of shipping, Scheduling Agreement/Frame Order number, quantity of Products, Product number(s), marking “Consignment Stock”.

The terms of delivery for the Products shall be [*]

5. FLEXIBILITY AND TERMS OF REPLENISHMENT

SELLER is committed to maintain its ability to replenish the Products according to the Flexibility Schedule agreed between BUYER and SELLER and specified in Schedule 1. The flexibility requirements define the quantity of Products above the given basic level the SELLER shall be ready to replenish.

Schedule 1 specifies the basic level flexibility requirement and the flexibility requirements for each Product governed by this Logistics Appendix.

The Products shall be taken from the SMI (Consumption) by using the first-in-first-out principle.

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	6(11)
Logistics Appendix 4

If SELLER cannot replenish the Products in accordance with the agreed replenishment times (Schedule 1) then SELLER shall as soon as SELLER becomes aware of the delay inform BUYER about:

(a) Identification of which kind and what quantities of the Products will be delayed;

(b) The anticipated duration of delay for each kind and quantity;

(c) The cause(s) of the delay;

(d) The actions that SELLER is taking and will take to remedy or shorten the delay; and

(e) A proposal, subject to mutual agreement, of a new replenishment date for each kind and quantity of the delayed Products.

In order to avoid any further replenishment delay, SELLER shall use best efforts (such as, but not limited to, expedited freight), at the cost of SELLER, to minimize the possible delay. If the consignment stock is reduced below the minimum level, due to a non-forecasted event, the replenishment time to get back to the minimum level will be mutually agreed to.

6. DISCONTINUANCE NOTICE

When BUYER determines that a Product will no longer be used by BUYER, or stored in SMI, then BUYER shall inform SELLER thereof by sending a discontinuance notice (hereinafter “Discontinuance Notice”). Notice of discontinuance shall provide no less than [*] weeks notice of Product removal from SMI. SELLER shall not be allowed to send such Product to SMI after the date in the notice, and the Product shall no longer after date in such Discontinuance Notice be covered by this Logistics Appendix. At the termination of a Product in SMI the Buyer shall purchase all material in consignment not above the maximum consignment levels within [*] months. Nokia shall not be liable for any obsolete Product SELLER may have after the discontinuance of SMI.

7. PACKING LIST REQUIREMENTS

All packing lists must include and all packaging must be bar-coded as defined in 6-72559 Nokia Requirements for Material Package Labeling , which specifications the SELLER has received from BUYER.

The packing list must include the following information:

1.	SELLER’s name and mailing address
2.	BUYER’s name and address:

delivery address.
mailing and invoicing address.
precise location (for example production line, door number or warehouse)

3.	BUYER Scheduling Agreement Number (in written and barcode form).
4.	Identification information for the goods:

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	7(11)
Logistics Appendix 4

BUYER code (in written and barcode form)
Manufacturer type

5.	Item quantity (in written and barcode form)
6.	Quantity of packages
7.	Terms of delivery (INCOTERMS 2000)
8.	Date of dispatch
9.	Production date or other traceable code (in written and barcode form)
10.	Packing list number (in written and barcode form)
11.	Customs tariff code (node & item level)
12.	Country of origin (Two letter country code)
13.	Marking “Consignment Stock material”

Only Products sharing the same Product code may be packed together in a single package; however, the delivery package (Master carton) may contain several separately packed single-Product code packages, provided that the delivery package also conforms to the requirements set forth in this Logistics Appendix. Further, only Products to be delivered to the same destination may be included in the same packing list and in the same package. The transportation package shall also be marked with visible sign “Consignment Stock material”.

8. TRANSPORTATION

BUYER’s forwarding agents / transportation companies are listed below.

	Forwarder / Transportation	Contact Details (Name,
Address	Company	Telephone, Fax)
Nokia Corporation	Emery Worldwide & CF Company	+1 888 724 3575 (USA)
Nokia Networks
Karaportti 8, FIN-02610
Espoo, Finland

SELLER’s forwarding agents / transportation companies are listed below.

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	8(11)
Logistics Appendix 4

	Forwarder / Transportation	Contact Details (Name,
Factory Address	Company	Telephone, Fax)
	Fed Ex

9. RETURN AND REJECTED MATERIALS

Defective Products (new built) can be found at the BUYER’s premises during incoming inspection, assembly and/or final testing. If the Products are returned to the SELLER they are referred to as Factory Returns. If the Products are found to be defective in the field (at final customer/user) they are returned to the BUYER or BUYER’s authorised services. If BUYER or BUYER’s authorised service returns those Products to the SELLER they are referred to as Field Returns. These two cases are to be handled separately.

SELLER and BUYER agree mutually on returning of defective Products found prior to Consumption.

Subject to terms and conditions of Purchase Agreement, where the BUYER discovers any Product being defective or non-conforming after Consumption, then BUYER shall return such Product to SELLER as defined here below:

9.1. Factory returns

In case of any factory return the BUYER reserves the right to instantly compensate any such return with a new Product from the consignment stock to prevent production losses.

9.1.1 Return of defective parts (Factory Returns)

The BUYER shall return the Product upon having proven it to fail to conform to the Specifications or the Quality Requirements. The Products return process is done separate from the consignment stock. In case of subsequent customer shipment of this Product the Product may have a new serial number issued by SELLER.

In an effort to minimize the cost of shipping, all shipments from BUYER will be no less than 10 units in size, unless otherwise agreed

The BUYER shall request a Return Material Authorization (RMA) number from SELLER and receive the RMA number prior to returning any Products. The RMA number shall be issued within two (2) days of request from BUYER.

The BUYER shall issue a RETURN NOTE and send a copy to the SELLER.

     The RETURN NOTE shall include the following information:

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	9(11)
Logistics Appendix 4

• SELLER’s Returned Goods (RG) reference number (if obtained without delay)

• SELLER’s RMA number

• BUYER’s contact information

• SELLER contact information

• BUYER’s Non-Conforming Materials (NCM) reference number (if applicable)

• Purchase order number or Agreement number under which the Products were bought (if applicable)

• Description of the returned material (BUYER’ s part number & description)

• Quantity of Products returned

• Quality Complaint Description of the defect

• Serial numbers of returned Products

• Total value of returned material to be compensated by the SELLER

• Packing information (quantities, weights, dimensions)

• Return order number for the credit note

The expense of the Products return shall be billed directly to SELLER via its specified carrier.

Following inspection by SELLER, should the Products be deemed to be No Fault Found or indisputably deemed to be damaged by BUYER, SELLER reserves the right to invoice BUYER for the shipping costs involved. Additionally, Seller reserves the right to negotiate compensation in cases where significant investigation costs are incurred by SELLER.

9.1.2 Compensation for defective parts (Factory Returns)

The compensation for defective Products returned by BUYER shall be by Credit Note issued by SELLER. The Credit Note shall be issued within [*] business days of the returned Products being received by SELLER and shall correspond to BUYER’s Return Note, referencing the Non-Conforming Material (NCM) number contained therein.

As the SELLER issues the Credit Note the title of Products is passed to the SELLER. All repaired Products shall be returned to the consignment stock according to the Quality Appendix and flexibility requirement as specified in this Logistics Appendix Schedule 1.

9.3 Field returns

As set forth in Appendix 6 — Support

10. SELFBILLING PROCESS

BUYER shall issue to SELLER a summary report of Consumption (hereinafter referred to as “Self-billing Report” or “Self-billing Invoice”) for invoicing purposes using method agreed in Schedule 2. The date of issuance (“Self-billing Date”) and period of each Self-billing Report is also specified in Schedule 2. SELLER shall immediately upon receiving the Self-billing Report check the contents and inform BUYER in writing of any discrepancy between Self-billing Report and SELLER’s own bookkeeping

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	10(11)
Logistics Appendix 4

The list of SELLER’s bank accounts, to which the payment of purchase price may be made are attached hereto as Schedule 2.

BUYER shall make the payment of purchase price based on such Self-billing Report within the time period agreed upon in the Purchase Agreement calculated from the date of such Self-billing Report. Therefore, no invoice shall be send by SELLER for purchase of Products under this Logistics Appendix. However, SELLER shall send a pro-forma invoice for customs clearance when so required.

11. FINAL PROVISIONS

11.1. Any modifications or amendments to the text of this Logistics Appendix must be made in writing and signed by authorised representatives of both Parties. However, the Parties acknowledge that the Schedules are intended to be revised from time to time and to the extent that such revisions do not conflict with the terms of the Purchase Agreement or this Logistics Appendix, updated versions of Schedules may be issued upon written agreement between the Parties and without requiring a formal amendment either to this Logistics Appendix or to the Purchase Agreement.

11.2 All times specified in this Logistics Appendix are based on BUYER’s time zone.

11.3 This Logistics Appendix, upon signature of both Parties, cancels and supersedes all prior forecasts, estimates or commitment schedules issued with regard to the Products covered by this Logistics Appendix.

11.4 This Logistics Appendix may be terminated by either Party with immediate effect upon written notice and without any liability towards the other Party, if the other Party essentially or continuously fails to fulfil its obligations under this Logistics Appendix. This Logistics Appendix may also be terminated together with the Purchase Agreement according to the terms and conditions of the Purchase Agreement. Where the termination is made due to reason not solely attributable to BUYER, then BUYER shall not be under any obligation to purchase any of such Products or to pay any other remedy. In case the termination is made due to reason solely attributable to BUYER then BUYER’s maximum liability shall be limited to the amount equal to the average of [*]

11.5 BUYER may also terminate this Logistics Appendix by twelve (12) weeks prior written notice to SELLER without any liability towards the other Party.

BUYER:		SELLER:
NOKIA CORPORATION		ENDWAVE CORPORATION
Nokia Networks
By:	/s/ Nils Nordman	By:	/s/ Steven Layton

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CONFIDENTIAL
Purchase Agreement No.ESLNST2676	11(11)
Logistics Appendix 4

Name:	Nils Nordman	Name:	Steven Layton
Title:	Purchasing Manager	Title:	V.P. + G.M.
Date:	December 29, 2005 Espoo, Finland	Date:	December 30, 2005
By:	/s/ Hemi Vander Stichele	By:
Name:	Hemi Vander Stichele	Name:
Title:	Director Networks Global Sourcing	Title:
Date:	December 29, 2005	Date:
	Espoo, Finland

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CONFIDENTIAL

SCHEDULE 1

     12/30/2005

Purchase Agreement number: ESLNST2676

LIST OF PARTS, METHODS FOR FORECASTING, ORDERING AND DELIVERING, FLEXIBILITY REQUIREMENTS FOR CONSIGNMENT STOCK

ENDWAVE

Commit-

Replenishment

Part

ment

Time

Ordering

Delivering

Flexibility

Freque

Packing

Consignment

Consignment

time (of minimum

Nokia code

Description

Frequency

existence

Forecastig

Content

frame

Frequency

Tool

Notification

Tool

Frequency

Method

Notification

requirements

ncy

size

min. qty

max. qty

stock)

[*]

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Commit-

Replenishment

Part

ment

Time

Ordering

Delivering

Flexibility

Freque

Packing

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Consignment

time (of minimum

Nokia code

Description

Frequency

existence

Forecastig

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frame

Frequency

Tool

Notification

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Frequency

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Notification

requirements

ncy

size

min. qty

max. qty

stock)

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Schedule 2 in Support of
Appendix 4 – Logistics Appendix

Nokia Production Agreement — ESLNST2676

UNCONTROLLED COPY

Except as may be otherwise provided by contract, this document or specification is the proprietary and confidential property of EndWave Corporation. It is issued in strict confidence and shall not be reproduced or copied or used (partially or wholly) in any manner without prior, express written authorization of EndWave Corporation.

	Steve Layton, GM, Commercial Telecommunications	DATE: 12/28/05
	Steve Choate, Senior Business Manager	DATE: 12/28/05
APPROVALS

REVISION HISTORY

REVISION	ECN	APPROVAL	DATE
01

REVISION: 06	Part Number: NA
	Page: 1 of 15

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

1.0	PURPOSE
	The purpose of this document is to better define and document the agreements to self billing timing and provide bank information for the transfer of funds from Nokia to Endwave.
2.0	SELF-BILLING INVOICE
	BUYER shall issue to SELLER a “Self-billing Invoice” via Nokia’s NGSW website. The period for billing shall be weekly ending on Friday at 11:59 PM. The invoice will posted to the website approximately 1 hour after closure of any period.
3.0	ENDWAVE BANK INFORMATION
	The following table provides the required bank information for transfer of credits to Endwave corporation:

Bank Name	Silicon Valley Bank
Account Number	[*]
Swift Code	[*]
Routing Number	[*]

REVISION: 06	Part Number: NA
	Page: 2 of 15

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		1 (5)
Purchase Agreement No. ESLNST2676	29.12.2005
Appendix 5	ID 6- 86691
Networks	v. 5.1

Environmental Appendix

to HW/ Microwave Products Purchase Agreement (“PA”) hereinafter (“Agreement”)

Table of Contents
1.  PURPOSE AND SCOPE	2
2. GENERAL	2
3. PRODUCT REQUIREMENTS	2
3.1 Substances Requirements	2
3.1.1 Lead Free Process and Solder Requirements	3
4. LABELLING AND MARKING REQUIREMENTS	3
4.1 Requirement of Symbol Indicating Need for Separate Collection	3
5. REQUIREMENT FOR PROVIDING INFORMATION	4
5.1 Material Content Information	4
5.2 Material Declaration for Re-use and Recycling	4
6. EXHIBITS	5

Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		2 (5)
Purchase Agreement No. ESLNST2676	29.12.2005
Appendix 5	ID 6- 86691
Networks	v. 5.1

1.	Purpose and Scope
	This document describes Nokia Corporation Networks business group’s (“NET”) environmental requirements. These environmental requirements are applicable to any and all hardware products (including but not limited to components, parts and modules) (the “Product(s)”) and hardware Product designs delivered to NET by the seller/supplier (“Supplier”). In case of discrepancy between this document and other prior written requirement of NET, the text of this document shall prevail, unless such other document includes requirements not less restrictive than this document. Further, in case of discrepancy between this document and the Product specification, the text of this document shall prevail unless otherwise separately and expressly agreed between the parties in writing.
2	General
	NET aims to minimise the environmental impacts its product portfolio by systematically considering environmental issues in product design. The mandatory environmental requirements described in this document are based on Nokia and NET environmental principles and codes of practices (e.g. environmentally relevant substances) and partly legislative requirements (such as but not limited to Directive 2002/95/EC of the European Parliament and of the Council of 27 January 2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment (“RoHS Directive”) and Directive 2002/96/EC of the European Parliament and of the Council of 27 January 2003 on waste electrical and electronic equipment (“WEEE Directive”)).
3	Product Requirements
	All the Products supplied to NET by Supplier shall be compliant with the document Environmental Requirements for Nokia Networks (NET) Products as attached hereto as Exhibit A. Any later version updated by NET and delivered to the Supplier shall be reviewed. For actions required for compliance to any legal and/or regulatory requirements, including without limitation, the RoHS or WEEE directives, Supplier shall provide an impact report, if impacts are realized, and a timeline to compliance. For non-legal/regulatory changes, Supplier and NET will review the changes and mutually agree on what actions will be made, if required to meet the new version. In addition, Supplier shall ensure the parallel volume availability of the Products delivered to NET and manufactured according to specifications in force prior to date of entering into this Appendix (i.e. Products which may not be RoHS compliant) until 1 April 2006 unless otherwise agreed in writing.
3.1	Substances Requirements

Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		3 (5)
Purchase Agreement No. ESLNST2676	29.12.2005
Appendix 5	ID 6- 86691
Networks	v. 5.1

	All the Products supplied to NET by Supplier shall be compliant with the Nokia Substance List as included in Exhibit A. Any later version updated by NET and delivered to the Supplier shall be reviewed. For actions required for compliance to any legal and/or regulatory requirements, including without limitation, the RoHS or WEEE directives, Supplier shall provide an impact report, if impacts are realized, and a timeline to compliance. For non-legal/regulatory changes, Supplier and NET will review the changes and mutually agree on what actions will be made, if required to meet the new version.
	Supplier shall, upon NET’s request, provide evidence of compliance with the Nokia Substance List and requirements of this Appendix.
	Subject to Nokia’s prior written acceptance, Supplier may take advantage of any exemption allowed by the RoHS Directive that applies to Products but warrants that it will use only those exemptions that are applicable to the Products and only to the extent permitted by RoHS Directive. However, Supplier shall not use the RoHS Directive exemptions for lead in solder unless and to the extent mutually agreed between the parties. Supplier shall promptly inform NET in writing which RoHS Directive exemptions they are using in Products, and the date(s) of ceasing of the use of such exemptions.
	Any and all change(s) in materials or substances of a the Product, even though such change is required by NET in Nokia Substance List or elsewhere, is always subject to change management process and a written notice to NET in accordance with the terms and conditions of the valid purchase agreement.
3.1.1	Lead Free Process and Solder Requirements
	Those Products that may undergo into NET’s production process (including NET’s contract manufacturer’s or supplier’s production process) shall in all respect be designed and manufactured to be compliant with lead-free soldering process. At start of a lead free Product production, Supplier shall provide NET a qualification report showing a qualified lead free process for production use. Once NET approves the process, Supplier will not be required to submit additional qualification reports on subsequent Products unless changes to the process occur.
	All other Products shall in all respect be designed and manufactured to be compliant with lead-free soldering process on 1 April 2006, at the latest, unless NET has agreed in writing to another date. Supplier shall inform NET in writing on Supplier’s time schedules relating to lead-free soldering process. In addition, any components containing Beryllium Oxide (BeO) shall be easily removable.
4	Labelling and marking requirements
4.1	Requirement of Symbol Indicating Need for Separate Collection

Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		4 (5)
Purchase Agreement No. ESLNST2676	29.12.2005
Appendix 5	ID 6- 86691
Networks	v. 5.1

	Products, which are as such part of the NET product entity targeted to consumer use or which are product entities themselves, and which are delivered to Nokia NET after 1st June 2005, shall be marked, at no cost to NET, with the symbol indicating separate collection for electrical and electronic equipment waste, and with a symbol informing that the product was placed on the market after 13 August, 2005. Products shall be marked according to the requirements defined in the WEEE Directive and in any relevant standards.
5	Requirement FOR Providing Information
5.1	Material Content Information
	Upon NET’s request, the Supplier shall provide NET with full material content information using the Material Data Form provided by NET substantially in the form as attached hereto the Exhibit B. The Supplier warrants that the information it provides NET with based on this requirement is correct and adequate.
	Upon NET’s request, the Supplier shall provide NET with full material content information using the Material Data Form provided by NET substantially in the form as attached hereto as Exhibit B unless and to the extent the parties have separately agreed in writing on certain material information that NET collects. The Supplier warrants that the information it provides NET with based on this requirement is correct and adequate.
	When the Material Data Form is to be filled by a subcontractor of the Supplier, all Nokia logos and other Nokia references must be deleted from the Material Data Form by the Supplier prior to delivery of the Material Data Form to such subcontractor.
	If any change(s) are made in Product material or substance, even though such change is required by NET in Nokia Substance List or elsewhere, Supplier shall deliver to NET a new Material Data Form immediately upon such change.
5.2	Material Declaration for Re-use and Recycling
	Upon NET’s request, the Supplier shall provide NET with information on disassembly, re-use and end-of-life treatment of Products using NET’s material declaration template substantially in the form as included into Exhibit A. The Supplier warrants that the information it provides NET with based on this requirement is correct and adequate.
	If any change(s) are made in Product that affects the Product disassembly, re-use and end-of-life treatment information, Supplier shall deliver to NET a new Material Data Form immediately upon such change.

Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

		5 (5)
Purchase Agreement No. ESLNST2676	29.12.2005
Appendix 5	ID 6- 86691
Networks	v. 5.1

6

Exhibits

These Nokia reference documents (“Exhibits”) are incorporated herein by reference and are an integral part of this Appendix. The following Exhibits will be updated from time to time during the term of this Appendix. The table below identifies each Exhibit that Supplier has received from Nokia by current title and version number (and electronic format, if applicable). Any later version updated by NET and delivered to the Supplier shall be reviewed. For actions required for compliance to any legal and/or regulatory requirements, including without limitation, the RoHS or WEEE directives, Supplier shall provide an impact report, if impacts are realized, and a timeline to compliance. For non-legal/regulatory changes, Supplier and NET will review the changes and mutually agree on what actions will be made, if required to meet the new version.

Exhibit	Short Title	ID	Version
A	Environmental Requirements for Nokia Networks (NET) Products (Except for reference document 6-130443, NET Lead Free Specification)	[*]	[*]]
B	Material Data Form	[*]	[[*]]

Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 1(7)

Support for Microwave Products

1.	REPAIRS AND REPLACEMENTS WITHIN THE WARRANTY PERIOD
1.1	The defective Products shall be delivered to SELLER for warranty repair or replacement. The Products may be sent to SELLER by BUYER or by any of BUYER’s 3rd party authorised services. After the warranty repair or in case of replacement, each repaired and/or replaced Product shall be delivered by SELLER to the address from where the Product was sent by BUYER., If BUYER or its authorised service requests the Products to be delivered to other address, this shall be agreed to by SELLER.
1.2	If SELLER proves that the defect is of the kind not covered by the warranty set forth under Clause 12 of the Purchase Agreement and/or Clause 11 of Addendum B, then SELLER shall inform BUYER thereof in writing within a period of [*] days from the date of receipt of the respective Product by SELLER. In this case SELLER reserves the right to invoice BUYER for the shipping costs involved and investigation fee as called out in Section 8 of this appendix.
1.3	If a total recall/retrofit of the Products is found to be necessary, the recalled Products can be sent back to SELLER by BUYER by any of BUYER’s authorised services, and the return of the Products by SELLER shall be made to the same address of BUYER and/or of the customer, from where the Products were sent to SELLER. If BUYER or its authorised service requests the Products to be delivered to other address, this shall be agreed to by SELLER.
1.4	Any delivery of the defective and repaired/replaced Products by BUYER to SELLER, and by SELLER to BUYER, shall be made at the cost of SELLER. In an effort to minimize the cost of shipping, all shipments from BUYER by any of BUYER’s authorised services will be no less than 10 units in size, unless otherwise agreed
2.	OUT OF WARRANTY REPAIRS AND REPLACEMENTS
2.1	SELLER shall provide repair/replacement service for the Products for a period of [*] years from the last delivery of the respective Product under Purchase Agreement and/or Addendum B.
2.2	The defective Products shall be delivered to SELLER for repair or replacement. The Products may be sent to SELLER by BUYER or by any of BUYER’s authorised services. After the repair or in case of replacement, each repaired or replaced Product shall be delivered by SELLER to the address from where the Product was sent by BUYER. If BUYER or its authorised service requests the Products to be delivered to other address, this shall be agreed to by SELLER.
2.3	Upon receipt of defective Product an analysis will be performed by SELLER to confirm Product failure or out of specification performance. After confirmation SELLER and BUYER or any of BUYER’s authorised services will mutually agree if best course of action is to repair or replace with an interchangeable Product. All repairs will be performed for the cost as indicated in Section 8 of this appendix. When a Product is

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 2(7)

	mutually agreed to be beyond economical repair, SELLER shall offer an interchangeable replacement at the current price of a new unit. If BUYER or any of BUYER’s authorised services elects not to procure the replacement unit, SELLER will scrap the failed Product and charge an investigation fee as indicated in Section 8 of this appendix. If a Product is determined as functioning and fully specification compliant (a.k.a. No Trouble Found), BUYER or BUYER’s authorised services will pay the investigation fee and no additional warranty will be provided. SELLER shall apply for approval from BUYER for each No Trouble Found Product before invoicing the investigation fee.
	For clarification, an interchangeable Product shall meet the Specifications and be qualified according to a mutually agreed plan.
2.4	The warranty period is as determined in the Purchase Agreement. Warranty determination for the field returns shall be made together with BUYER’s authorized service based on a receive date of a faulty radio at BUYER’s authorized premises. For clarity, the warranty shall cover all the faulty radio Products received at BUYER’s authorized premises within the warranty period, even though the related claim is made after the expiry of the warranty period. All units returned outside of warranty expiration must have a claim made within [*] days from expiration date and proof of field failure prior to warranty expiration shall be provided with the returned Product.
2.5	SELLER shall warrant the repaired/replaced Products for a period of [*] months from the delivery date of such repaired Product or until the end of the original warranty period, whichever is longer. However, the warranty period for any specific Product shall not be extended, as provided in the prior sentence, more than once.
2.6	After the Warranty Period, the transport, freight and packing/packaging costs, including local duties and fees, as well as the insurance costs to the given delivery address are to be borne by the sending party and are not to be charged from the receiving party.
	The term of delivery is [*] (INCOTERMS 2000).
3.	TURNAROUND TIME AND SERVICE LEVEL PERFORMANCE
3.1	All repaired or replaced Products shall be delivered to BUYER or to BUYER’s authorised service in accordance with Clause 1.1 and Clause 2.2 above within [*] calendar days (Standard Turnaround Time) from the date on which SELLER received the defective Products from BUYER. In the case where unplanned production demands from BUYER exceed SELLERS current production capacity the Parties may agree to reduce service level temporarily. The Seller shall report fault analysis and corrective actions to BUYER within [*] calendar days from date of receipt for all returned Products.
3.2	Without prejudice to any of the obligations of SELLER hereunder, SELLER undertakes to provide repair/replacement service in service level, which is more than [*] percent of all

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 3(7)

returns within [*] calendar days unless otherwise agreed. The service level performance is measured on monthly basis against agreed standard turnaround time.

	Standard Turnaround Time &
Service	Service Level Performance
Repair/replacement service	Within [*] calendar days in at least [*] of returns unless otherwise agreed
Complete Fault analysis and corrective actions reporting	Within [*] calendar days in at least [*] of all returns unless otherwise agreed

     Service Level = # of units repaired/replaced within standard turnaround time per month x 100

Performance        total # of units sent to be repaired/replaced per month

Standard

     Turnaround Time = the period from the date of receipt of faulty Product by SELLER to the date of shipment by SELLER of the repaired/replaced Product to BUYER

All remaining Products [*] shall be returned or replaced after [*] days from the return.

4.	TECHNICAL SUPPORT AND DOCUMENTS
4.1	SELLER shall offer support services to BUYER for a period of ten (10) years from the last delivery of each kind or Product. Such support services shall include, without limitation, the availability of continuous system engineer backup, of repair services, and of replacement services. The reasonable prices for (and the price validity of) the support services shall be mutually agreed. The provision of such services shall be subject to a specific order submitted by BUYER to SELLER and to a separate support contract.
	The prices, and the validity of such prices, for the repairs outside the warranty and replacement service, and for the spare parts supplied under this Appendix 6 shall be agreed separately.
	Seller shall provide test data to Buyer to make it possible to validate the repaired Products, if requested.

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 4(7)

	Seller shall provide all test data to Buyer reasonably required to validate performance of the potentially defective Products, if requested.
4.2	BUYER shall be entitled to purchase a tester or test equipment from SELLER for functional testing of the Products at a reasonable price.
5.	REPORTING OF THE REPAIRS AND REPLACEMENTS
5.1	For each repaired or replaced Product, the SELLER shall have an electronic repair report (RMA log) with the following information:
(1)	identification and the serial number of each repaired or replaced Product; and
(2)	fault analysis and corrective actions performed by SELLER on each Product; and
(3)	return received date; and
(4)	whether the repair or replacement performed by SELLER falls under the warranty or not; and
(5)	the applicable price, if the repair/replacement is performed outside the warranty; and
(6)	turn-around time
5.2	Each Service Report shall be posted on SELLER’s secure FTP site and made available to BUYER and BUYER’s authorised service within a period of [*] days from the end of the respective reporting period.
5.3	The Service Report shall include:
(1)	the quantity of Products repaired during the reporting period; and
(2)	the quantity of Products replaced during the reporting period; and
(3)	the quantity of Products waiting to be repaired or replaced; and
(4)	the turn-around times for the repairs and replacements hereunder; and
(5)	Service Level Performance indicator
5.4	At any time, upon request by BUYER or BUYER’s authorised service, SELLER shall be able to check and report to BUYER or BUYER’s authorised service the status and estimated return date of any Product sent by BUYER to be repaired or replaced by SELLER.
5.5	In case of a critical quality complaint from Nokia’s end customer due to possible systematic field failure, SELLER shall provide a preliminary fault analysis on returned Products to BUYER within [*] weeks after receiving the Products.
6.	SPARE PARTS
6.1	Spare parts to each kind of Product are warranted to be available for a period of [*] years from the date the individual Product was shipped from SELLER to BUYER. Without prejudice to the above warranty, if SELLER discontinues the manufacture of any spare part, it shall inform BUYER in writing thereof at least [*] months prior to the

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 5(7)

	discontinuation.  At the time of notice, BUYER and SELLER shall mutually agree on the number of spare parts to be available for possible later procurement.
6.2	In the event of termination of the Purchase Agreement and/or Addendum B for any reason, BUYER may order adequate quantities of spare parts.
6.3	SELLER shall always keep a sufficient inventory of the Products and/or sub-units in order to comply with the turnaround times set forth in this Appendix 6. The sufficient inventory depends on the reliability and availability values of the Products. The MTBF (Mean Time Between Failure) figures for the Products are set forth in Appendix 2 (Specifications) of Addendum B.
7.	FIELD RETURN PROCESS
7.1	Return of defective Products (Field Returns)
	BUYER’s authorised service returns the Products to SELLER upon having proven them to be defective.
	The BUYER shall request a Return Material Authorization (RMA) number from SELLER and receive the RMA number prior to returning any Products. The RMA number shall be issued within [*] days of request from BUYER.
	No Credit Notes will be issued for any Field Return Products.
	The BUYER shall issue a RETURN NOTE (Proforma Invoice and Nokia Quality Complaint) and send a copy to the SELLER.
	The RETURN NOTE shall include the following information:

• SELLER’s RMA number

• BUYER contact information

• SELLER contact information

• BUYER’s Non-Conforming Materials (NCM) reference number (if applicable)

• Purchase order number under which the Products were bought (if applicable)

• Description of the returned material (BUYER’s part number & description)

• Quantity of Products returned

• Serial numbers of returned Products (in Nokia Quality Complaint)

• Warranty status (in Nokia Quality Complaint)

• Description of the defect (in Nokia Quality Complaint)

• Total value of returned material

• Packing information (quantities, weights, dimensions)

• Country of Origin

8.	COMPENSATION FOR FIELD RETURN REPAIRS OUTSIDE THE WARRANTY TIME
	All payments for any field return repairs shall be made within forty five (45) days from time of issuing the invoice for out of warranty repair.

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 6(7)

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 7(7)

     Exhibit

     1) Prices

	Nokia
	Item	Repair	Investigation
Unit Description	Code	price	Fee
MWU 23 GHz class1 low	[*]	[*]	[*]
MWU 23 GHz class1 high	[*]	[*]	[*]
MWU 26 GHz class1 low	[*]	[*]	[*]
MWU 26 GHz class1 high	[*]	[*]	[*]
MWU 38 GHz class1 low	[*]	[*]	[*]
MWU 38 GHz class1 high	[*]	[*]	[*]
MWU 18 GHz class1 high	[*]	[*]	[*]
MWU 18 GHz class1 low	[*]	[*]	[*]
MWU 23 GHz screened low	[*]	[*]	[*]
MWU 23 GHz screened high	[*]	[*]	[*]
MWU 23GHz class2 low	[*]	[*]	[*]
MWU 23GHz class2 low	[*]	[*]	[*]
MWU 26 GHz class2 low	[*]	[*]	[*]
MWU 26 GHz class2 high	[*]	[*]	[*]
MWU 18 GHz class2 low	[*]	[*]	[*]
MWU 18 GHz class2 high	[*]	[*]	[*]
MWU 38 GHz class2 low	[*]	[*]	[*]
MWU 38 GHz class2 high	[*]	[*]	[*]

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

APPENDIX 6 to Addendum B of Purchase Agreement ESLNST2676 8(7)

2)	Contact information for BUYER’s authorised service:
	[*]
	Contact person:

Ms. Anita Fabian (Buyer)
- e-mail address is:	[*]
-Phone number is:	[*]
-Mobile phone number:	[*]
-Fax number:	[*]

Support Appendix                                        Proprietary and Confidential

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-10.25

CONFIDENTIAL 1 of 29

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 10.25

Frame Purchase Agreement

hereinafter called “FPA”

by and between

Endwave Corporation
Represented from Complete srl
hereinafter referred to as “SUPPLIER“

and

Siemens Mobile Communications Spa
with offices at via Piero e Alberto Pirelli, 10
20126 Milan

Italy

hereinafter referred to as “PURCHASER“

SUPPLIER and PURCHASER are hereinafter referred to
individually as “PARTY” and collectively as “PARTIES”

Contract No: 5/90010
Effective Date: January 16, 2006

FPA Endware	[*]
	[*]

CONFIDENTIAL 2 of 29-

TABLE OF CONTENT:

1	Definitions	4
2	Scope of FPA	6
3	Business Relationship	6
4	Prices, Taxes and Currency	7
4.1	Prices	7
4.2	Taxes	7
4.3	Currency	7
5	Payment	7
6	PURCHASE ORDERS, Delivery and Cancellation	8
6.1	PURCHASE ORDERS	8
6.2	PURCHASE ORDER Acceptance	9
6.3	Cancellation	9
6.4	Delivery	9
6.5	Transfer of Risk and Title	10
6.6	Incoming Goods Inspection	10
7	PRODUCT Life Cycle Support	10
7.1	Commitment to Deliver, Maintain and Enhance	10
7.2	PRODUCT Changes	10
7.3	Component’s End of Life	11
7.4	SERVICE LEVEL AGREEMENT	11
7.5	PRODUCT DOCUMENTATION	12
8	Quality Assurance	12
9	Logistics	13
10	SUPPLIER Rating and Improvement Program (Goal Agreement)	13
11	Open Book Policy	13
11.1	Disclosure of PRODUCT Data	13
11.2	Cost Reduction	13
12	Protection of PURCHASER´s IPR and License Grant	13
12.1	Exclusivity	13
12.2	License Grant to SUPPLIER	14
13	Software License Grant by SUPPLIER	15
14	Confidential Information	15
15	Term and Termination	17
15.1	EFFECTIVE DATE	17
15.2	Renewal	17
15.3	Termination	17
15.4	Effect of Termination	18
15.5	Survival	18
16	Liability	18
16.1	Product Liability	18
16.2	Late Delivery	19
16.3	Infringement Indemnification	20
16.4	Insurance	20
17	Warranty	21
17.1	General	21
17.2	Warranty Period	21

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 3 of 29-

17.3	Defects of PRODUCTS (Non-Conforming Units)	21
17.4	Liability for Expenses	22
17.5	Exchange of Information	22
17.6	Other Rights	22
18	General Provisions	23
18.1	Notices	23
18.2	Compliance with Laws	24
18.3	Assignment	24
18.4	Force Majeure	24
18.5	Waiver	25
18.6	Captions	25
18.7	General Terms and Conditions	25
18.8	Press Releases	25
18.9	Export Control-, Customs Regulations	26
18.10	Severability	27
18.11	Governing Law	27
18.12	Mediation	27
18.13	Entire FPA	28
18.14	PURCHASER’s Divisions	28
18.15	No Agency or Joint Venture	28
18.16	Order of Precedence	28

LIST OF EXHIBITS:

EXHIBIT A1	PRODUCT AGREEMENT #1 (PA1)
EXHIBIT A2	PRODUCT AGREEMENT #2 (PA2)
	...
EXHIBIT An	PRODUCT AGREEMENT #n (PAn)
EXHIBIT B	LOGISTICS SERVICE AGREEMENT (LSA)
EXHIBIT D	QUALITY ASSURANCE AGREEMENT (QAA)
EXHIBIT E	Template: ADOPTION AGREEMENT (AA)

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 4 of 29-

WHEREAS, PURCHASER has manufacturing sites worldwide and wishes to strengthen its strategic purchasing activities with respect to certain PRODUCTS for worldwide delivery to certain ORDERING PARTIES; and

WHEREAS, PURCHASER intends to market the PRODUCTS either in combination with, or as an integral part of its mobile communication product range, and

WHEREAS, SUPPLIER wishes to cooperate with PURCHASER in order to fulfill PURCHASER’s worldwide requirements and to provide preferred purchasing conditions to any ORDERING PARTY;

NOW, THEREFORE, the PARTIES agree as follows:

1 Definitions

The following terms are integral to this FPA and any INDIVIDUAL AGREEMENT and shall have the following meaning:

1.1	“AA” or “ADOPTION AGREEMENT” means a separate bilateral agreement by which ORDERING PARTIES and DESIGNATED SUBSIDIARIES participate in the terms and conditions of this FPA, including its EXHIBITS, and which is to be signed by the respective parties concerned. A template of such AA is attached as EXHIBIT E.
1.2	“CONFIDENTIAL INFORMATION” shall have the meaning as described in Section 15.
1.3	“CONTRACT MANUFACTURER” means any subcontractor of PURCHASER, listed in EXHIBIT B (LSA), which is not a SUBSIDIARY of PURCHASER.
1.4	“DELIVERY DATE” means the date of delivery as indicated in the PURCHASE ORDER and/or as derived from provisons of EXHIBIT B (LSA) or from the respective EXHIBIT Ax (PA).
1.5	“DESIGNATED SUBSIDIARY” means any SUBSIDIARY of SUPPLIER as listed in EXHIBIT B (LSA) designated by SUPPLIER to accept and carry through PURCHASE ORDERS for SUPPLIER.
1.6	“DOCUMENTATION“ means all documentation of a PRODUCT as detailed in this FPA and required by PURCHASER to use such PRODUCT in accordance with this FPA. DOCUMENTATION shall include all future updates.
1.7	“EDI” means Electronic Data Interchange as specified in EXHIBIT B (LSA

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 5 of 29-

1.8	“EFFECTIVE DATE” shall mean the date first mentioned above.
1.9	“EPIDEMIC FAILURE” means the occurrence of complained or returned units caused by identical mistakes, as more specifically defined in EXHIBIT C (QAA).
1.10	“FORCE MAJEURE EVENT” shall have the meaning as described in Section 19.4 below.
1.11	“FPA” means this Frame Purchase Agreement, including any EXHIBITS and ANNEXES, which are incorporated by reference.
1.12	“FRAME ORDER” means a pro forma purchase order placed per part and fiscal year or PRODUCT life cycle. The sole purpose of such FRAME ORDER is to serve as a document for the electronic order processing used by PURCHASER. It is not legally binding and does not represent a volume/price commitment.
1.13	“INDIVIDUAL AGREEMENT” means any PRODUCT AGREEMENT, confirmed PURCHASE ORDER or FRAME ORDER, as part of or with reference to this FPA.
1.14	“LSA” or “LOGISTICS SERVICE AGREEMENT” means the logistics service agreement as specified in EXHIBIT B
1.15	“ORDERING PARTY” means PURCHASER or any of PURCHASER’s worldwide SUBSIDIARIES or CONTRACT MANUFACTURERS listed in EXHIBIT B (LSA). PURCHASER may at its option change EXHIBIT B (LSA) with prior written notice to SUPPLIER.
1.16	“PA” or “PRODUCT AGREEMENT” means the product agreement(s) as specified in EXHIBIT(S) A(x).
1.17	“PRODUCT(S)” means the commodity or commodities as specified in EXHIBIT A (PA). For the avoidance of doubt, PRODUCT(S) shall include hardware, firmware and software of the respective PRODUCT(S), as far as applicable.
1.18	“PURCHASE ORDER” means the document or a written process defined in EXHIBIT B (LSA) or in an INDIVIDUAL AGREEMENT used by an ORDERING PARTY to acquire PRODUCTS under this FPA.
1.19	“QAA” or “QUALITY ASSURANCE AGREEMENT” means the quality assurance agreement as specified in EXHIBIT D.
1.20	“SLA” or “SERVICE LEVEL AGREEMENT” means the service level agreement as specified in EXHIBIT C.
1.21	“SOFTWARE” means the software and/or firmware in machine readable format and, if and to the extent agreed, the source code, which run on the PRODUCT.

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 6 of 29

1.22	“SUBSIDIARY” means any company which any PARTY directly or indirectly owns or controls or which is directly or indirectly owned or controlled by a SUBSIDIARY of any PARTY. Ownership or control shall exist through the direct or indirect ownership of more than fifty per cent (50%) of the nominal value of the issued equity share capital or more than fifty per cent (50%) of the shares giving entitlement to vote at the election of directors or persons performing similar functions, or the right by any other means to elect or appoint directors or persons performing similar functions.
2	Scope of FPA
2.1	SUPPLIER shall supply to ORDERING PARTY the PRODUCTS as specified in the relevant EXHIBIT Ax (PA), and provide services in accordance with the terms and conditions of this FPA.
2.2	This FPA does not constitute and shall not be interpreted as any obligation to purchase any PRODUCT(S). Any such obligation shall only result from PURCHASE ORDERS issued by an ORDERING PARTY and duly accepted by SUPPLIER or a DESIGNATED SUBSIDIARY.
2.3	SUPPLIER assures PURCHASER

(i)	of the allocation of the forecasted quantities of PRODUCTS up to the agreed maximum bandwidth, as defined in   EXHIBIT B (LSA), and
(ii)	of the validity of the prices as defined in the relevant EXHIBIT Ax (PA), as the maximum price which may be   renegotiated on a regular basis according to the respective market situation.

3 Business Relationship

If, under a PURCHASE ORDER/FRAME ORDER, a breach of any of the terms and conditions of this FPA occurs

(i) subject to Section (ii) below, such breach shall only be in respect of the parties to such PURCHASE ORDER/FRAME ORDER and shall not be considered as a breach by one PARTY towards the other PARTY. All contractual rights and remedies under this FPA and/or the respective PURCHASE ORDER/FRAME ORDER can only be exercised between the parties of the respective PURCHASE ORDER/FRAME ORDER.

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 7 of 29-

(ii)	if a breach referred to in Section 3 (i) above materially and adversely affects the overall cooperation between the PARTIES, the matter may be referred to the senior management level of each PARTY for consideration. If the senior managers cannot agree upon a remedial course of action to the reasonable satisfaction of the SUPPLIER or PURCHASER within [*] days of their first convening for this purpose, the impaired PARTY shall be entitled to terminate this FPA and the foregoing Section 3 (i) shall not apply.
4	Prices, Taxes and Currency
4.1	Prices
	Unless otherwise agreed in writing by PURCHASER and SUPPLIER, ORDERING PARTY shall purchase PRODUCTS from SUPPLIER and SUPPLIER shall grant licenses in accordance with the provisions of the FPA at the prices shown in the relevant EXHIBIT A (PA). SUPPLIER agrees and understands that the prices are determined by the cumulative purchase quantities of all ORDERING PARTIES hereunder
4.2	Taxes
	The prices as listed in the relevant EXHIBIT A (PA) are net prices, i.e. all taxes, duties and similar charges imposed shall be borne by SUPPLIER, except VAT (Value Added Tax) or sales tax and shipping charges, which shall be calculated on [*] per Incoterms 2000. If VAT or sales tax is applicable, SUPPLIER shall bill such VAT or sales tax as a separate line item on the invoice. Where supplies are tax exempt, SUPPLIER shall not charge any VAT or sales tax. If necessary, ORDERING PARTY shall furnish a valid tax exemption certificate in order to enable SUPPLIER to make use of the tax exemption.
4.3	Currency
	The currency under this FPA is the US dollar., unless otherwise stated in the relevant EXHIBIT A (PA).
5	Payment
	Prices for PRODUCTS will be invoiced to ORDERING PARTY or credited to SUPPLIER in line with the respective EXHIBIT Ax (PA) and EXHIBIT B (LSA).

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 8 of 29-

	Payments or credits shall be due no later than [*] days end of current month from the date of invoice. If the delay in receipt of proper payment by SUPPLYING PARTY will be more than [*] then SUPPLIER shall have the right to withhold future shipments.
	If an invoice or credit note is disputed, ORDERING PARTY shall pay or credit the amount not in dispute. ORDERING PARTY shall not be obliged to pay or credit the amount in dispute until the dispute is resolved. No late payment charges shall be applied with regard to the disputed portion of the payment/credit.
6	PURCHASE ORDERS, Delivery and Cancellation
6.1	PURCHASE ORDERS
	ORDERING PARTY shall order PRODUCTS in writing or by telefax or electronic mail (e-mail) or by Electronic Data Interchange (EDI), i2-based order management (if agreed upon), or if both PARTIES agreed to vendor managed inventory, call-off via consumption data as defined in EXHIBIT B (LSA). If not otherwise agreed and defined in this FPA, the PURCHASE ORDER shall include the following:

• Date of issuance

• PURCHASE ORDER number

• SUPPLIER part number and/or SIEMENS part number

• Quantity

• Price

• DELIVERY DATES

• Shipping instructions and destination

• Reference to this FPA

• Invoice address

• Contact person on ORDERING PARTY`s side

In case a vendor managed inventory regime is agreed in EXHIBIT B (LSA), a special PURCHASE ORDER is not needed, however, a FRAME ORDER shall be placed for electronic order-processing purposes. The agreed stock level

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 9 of 29-

	with an additional call-off via consumption data shall be deemed a PURCHASE ORDER with all related consequences thereof.
6.2	PURCHASE ORDER Acceptance
	All PURCHASE ORDERS are subject to acceptance. SUPPLIER shall itself accept, as well as cause any of its DESIGNATED SUBSIDIARIES to accept, any PURCHASE ORDER which is in conformity with this FPA, and to fully comply with any and all terms and conditions set out in this FPA, as if such DESIGNATED SUBSIDIARY were a PARTY to this FPA and as if any obligations were direct obligations of such DESIGNATED SUBSIDIARY. PURCHASE ORDER acceptance may only be withheld due to reasons of non-conformity with this FPA, or due to a FORCE MAJEURE EVENT. Each PURCHASE ORDER shall be deemed to be accepted unless notice of non-acceptance is communicated to ORDERING PARTY in writing or electronically via email within [*] calendar days after receipt of the PURCHASE ORDER. Notwithstanding the foregoing, in case of non-acceptance, ORDERING PARTY and SUPPLIER shall promptly discuss the further procedure.
6.3	Cancellation
	ORDERING PARTY shall have the right to

(i)	postpone any PURCHASE ORDER up to 90 days without charge to ORDERING PARTY, or
(ii)	cancel any PURCHASE ORDER, wholly or partially, but SUPPLIER and ORDERING PARTY shall mutually agree on   the cancellation charges for long lead time parts as indicated in LSA .

6.4	Delivery
6.4.1	The DELIVERY DATE shall indicate the date the PRODUCTS are to be received at the place of destination named by ORDERING PARTY.
6.4.2	If a vendor managed inventory regime is agreed for a PRODUCT in EXHIBIT B (LSA), delivery terms for such PRODUCT shall be [*].
6.4.3	Packing details shall be defined in the respective EXHIBIT Ax (PA). Generally, packing of PRODUCTS for transport (including overseas shipment) and storage shall be made by SUPPLIER in such a manner as to protect PRODUCTS from damage. Such packing shall be included in the agreed prices and shall

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 10 of 29-

	comply with all applicable laws and regulations. If special packing is required for storage or extreme conditions, such requirements shall be advised to SUPPLIER with the PURCHASE ORDER and may be priced separately. The dimensions of packing shall be fundamentally suited to its contents in order to avoid unused freight space.
6.5	Transfer of Risk and Title
	Risk of loss, damage or destruction of PRODUCTS shall pass to ORDERING PARTY according to the Incoterms as stated in Section 6.4 above. Title to PRODUCTS, except SOFTWARE provided pursuant to the licensing provisions of this FPA, shall pass to ORDERING PARTY simultaneously with transfer of risk.
6.6	Incoming Goods Inspection
	ORDERING PARTY may, at its discretion, perform an incoming goods inspection. However, the absence of any incoming goods inspection shall in no way affect or limit ORDERING PARTIES rights under this FPA.
7	PRODUCT Life Cycle Support
	Both PARTIES agree that high quality, reliability, and supply-chain excellence can only be achieved through fostering cooperation and close collaboration at all process levels in the spirit of partnership and open-book relationship.
7.1	Commitment to Deliver, Maintain and Enhance
	SUPPLIER undertakes to maintain the capability to manufacture and supply each PRODUCT over a period of at least seven (7) years following the effective date of the respective EXHIBIT Ax (PA) according to the terms stipulated therein and to deliver each PRODUCT to ORDERING PARTIES at then agreed prices.
7.2	PRODUCT Changes
	PRODUCTS shall be fully compliant with the specifications in the relevant EXHIBIT Ax (PA) and with the requirements defined in EXHIBIT D (QAA).
	If SUPPLIER intends to make changes to a PRODUCT which may affect form, fit, function, safety, reliability, performance, maintainability or any type-approval issue, SUPPLIER shall notify PURCHASER. Thereupon, the PARTIES shall in good faith

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 11 of 29-

	discuss the consequences of such changes. Notwithstanding the aforesaid, SUPPLIER is only allowed to make such changes of the PRODUCT specifications after a written approval of PURCHASER.
	If PURCHASER requests a technical change in writing to a PRODUCT, SUPPLIER shall implement such change following reconciliation between the PARTIES. Upon mutual agreement between the Parties, any changes requested by the PURCHASER will require PURCHASER to pay all costs related to implementing such changes, including tooling and associated fixturing. Furthermore, any work in process (WIP) or finished good inventory (FGI) that has been effectively obsoleted as a result of such change by PURCHASER shall be the sole responsibility of the PURCHASER.
	In case any such change to a PRODUCT does affect one or more specifications of the relevant EXHIBIT Ax (PA), such specifications need to be updated by the originating PARTY prior to performing changes to the PRODUCT itself. Further, all changes in respect of the PRODUCT must be proven by sufficiently complete DOCUMENTATION commensurate with the nature of the change (e.g. by a block or circuit diagram, calculation of performance relevant parameters, field change bulletin relating to engineering, manufacturing or retrofitting).
	In no event shall the delivery of a changed PRODUCT be made by SUPPLIER prior to PURCHASER’s and SUPPLIER’s written consent to such changes. Such acceptance shall result from PURCHASER’s compliance and type approval testing of corresponding prototypes, as well as from review of all DOCUMENTATION related hereto.
7.3	Component’s End of Life
	SUPPLIER agrees to notify PURCHASER in writing [*] months in advance of the end of life of components incorporated in a PRODUCT, or to the best of SUPPLIER’s ability to notify. This notification shall include clarification of technical alternatives to such components, as well as PRODUCT availability.
7.4	SERVICE LEVEL AGREEMENT
	SUPPLIER shall undertake to support and maintain each PRODUCT over a time period of [*] years, following the date of delivery of the PRODUCT last delivered. For such time period the regulations of Section 7.2 shall apply. The Parties shall

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 12 of 29-

	mutually agree to the scope of Maintenance and support for this time period in a separate agreement.
7.5	PRODUCT DOCUMENTATION
	For BTP manufacturing of PURCHASER’s design, and at PURCHASER’s request, SUPPLIER shall make available, free of charge, in the English language, all DOCUMENTATION which will enable PURCHASER to produce its own set of documentation. Such DOCUMENTATION shall comprise of one

(1)	set of electronic files of at least the following documents:
(i)	[*]
(ii)	[*]
(iii)	[*]
(iv)	[*]
(v)	[*]
(vi)	[*]
(vii)	[*]

	All DOCUMENTATION requested by PURCHASER shall comply both in form and in content with the latest technical standards of the PRODUCT in question and shall be updated accordingly in the event of changes.
	PURCHASER shall be entitled to pass on to its customers all DOCUMENTATION received within the scope of this FPA, as well as to use, to modify or adapt, to translate, to copy and to supply such DOCUMENTATION.
8	Quality Assurance
	General Global Quality Objectives:

(i)	EXHIBIT D (QAA) shall be valid for world-wide material sourcing of PURCHASER.
(ii)	The quality of PRODUCTS delivered to each ORDERING PARTY shall be guaranteed by SUPPLIER.
(iii)	Total Quality Management and continuous quality improvement shall be an essential element of the fundamental rules of SUPPLIER.

All further details are specified in EXHIBIT D (QAA).

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 13 of 29-

9	Logistics
	Both PARTIES agree that high quality, reliability, and supply-chain excellence can only be achieved through fostering cooperation and close collaboration at all process levels in the spirit of partnership and open-book relationship. EXHIBIT B (LSA) sets out the regulations for such a partnership between PURCHASER and SUPPLIER. It defines the steps needed to streamline and optimize planning and logistics.
10	SUPPLIER Rating and Improvement Program (Goal Agreement)
	Not applicable
11	Open Book Policy
11.1	Disclosure of PRODUCT Data
	SUPPLIER shall provide, upon PURCHASER’s request, the following data for each individual PRODUCT under this FPA:

(i)	[*]
(ii)	[*]
(iii)	[*]
(iv)	[*]

11.2	Cost Reduction
	Savings from cost reduction activities by the Parties with respect to any products shall be mutually negotiated and shared by the PARTIES.
12	Protection of PURCHASER ´s IPR and License Grant

For PRODUCTS containing IPRs of PURCHASER the following shall apply:

12.1 Exclusivity

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 14 of 29-

	SUPPLIER, within the limitations contained in, and in accordance with, the terms of this FPA, agrees to manufacture PRODUCTS exclusively for sale and delivery to ORDERING PARTIES. Subject to the terms of this FPA, SUPPLIER specifically agrees and warrants not to sell to any third party PRODUCTS.
12.2	License Grant to SUPPLIER
	SUPPLIER is aware and acknowledges that the technical specifications provided by or on behalf of PURCHASER contain patented and non patented Intellectual property rights (“IPRs”) of PURCHASER and its licensors and that manufacturing of PRODUCTS according to such technical specifications is only possible by making use of such IPR.
	Subject to the terms and conditions of this FPA, PURCHASER grants to SUPPLIER a non-exclusive, non-transferable, royalty-free license, without the right to sublicense, in such IPRs only for the purpose of manufacturing PRODUCTS for ORDERING PARTIES. All other rights not expressly granted in this FPA are reserved. SUPPLIER shall not use or employ such IPRs on any other product for any other purchaser except those products sold to ORDERING PARTIES and/or third party beneficiaries as approved in advance by PURCHASER in writing.
	SUPPLIER agrees and acknowledges that violation of this Section 12 is a material breach of this FPA.
	PURCHASER and its licensors shall retain full title to the IPRs and all copies thereof, and SUPPLIER and its DESIGNATED SUBSIDIARIES may use the IPRs in accordance with this limited license grant as contained in this Section 12. Without the prior written consent of PURCHASER, SUPPLIER shall not make available to any third party IPRs that PURCHASER may, in its sole discretion, deliver to SUPPLIER. SUPPLIER agrees that it will not modify, decompile, reverse engineer, or otherwise use the IPRs without the express prior written consent of PURCHASER.
	PURCHASER is also aware and acknowledges that the products provided by SUPPLIER contain patented and non patented Intellectual property rights (“IPRs”) of SUPPLIER and its licensors and that manufacturing of PRODUCTS according to such technical specifications is only possible by making use of such IPR. Subject

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 15 of 29-

	to the terms and conditions of this FPA, SUPPLIER grants to PURCHASER a non-exclusive, non-transferable,non-revocable, royalty-free license, without the right to sublicense, in such IPRs only for the purpose of utilizing such PRODUCTS in systems provide by the ORDERING PARTIES. All other rights not expressly granted in this FPA are reserved. PURCHASER shall not use or employ such IPRs or share these SUPPLIER IPRs with OTHER SUPPLIERS. PURCHASER agrees and acknowledges that violation of this Section 12 is a material breach of this FPA.
	In the event Purchaser desires to transfer IPR rights to an outsorced Contract and enable third party use of SUPPLIER’s IPR, SUPPLIER shall have advance consent rights, which shall however not be unreasonably withheld, and shall be intitled to negotiate differing supply terms with the proposed third party transferee .
13	Software License Grant by SUPPLIER
	SUPPLIER/DESIGNATED SUBSIDIARY hereby grants to ORDERING PARTY a non-exclusive, non-transferable license, to copy and use the SOFTWARE for development, manufacturing, installation, commissioning, testing purposes (also by SUBSIDIARIES, CONTRACT MANUFACTURERS or subcontractors) and to distribute copies of the SOFTWARE as a component of a PRODUCT in object code form.
	Sale of a PRODUCT (and licensing of each copy of the SOFTWARE component of a PRODUCT) by ORDERING PARTY will carry with it an implied license under the SOFTWARE [*] in a PRODUCT.
	All right, title and interest in and to the SOFTWARE portions of the PRODUCTS remain in SUPPLIER and its licensors. No title to or ownership of such SOFTWARE, or any modified part thereof, is transferred to PURCHASER or any ORDERING PARTY under this FPA.
14	Confidential Information
	Each PARTY agrees that all business and technical information received from the other PARTY in connection with this FPA and which this other PARTY expressly states to be confidential or the confidential nature of which can be assumed on the

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 16 of 29-

basis of the circumstances (CONFIDENTIAL INFORMATION), will be maintained by the receiving PARTY in confidence and not disclosed to any third party, provided, however, that such receiving PARTY may use such CONFIDENTIAL INFORMATION for the purposes of this FPA or its EXHIBITS and may disclose such CONFIDENTIAL INFORMATION to its officers, and those of its employees and others under its control to whom disclosure is required for the purposes of this FPA, all of whom, if not already done, will be bound in writing to undertake such PARTY’s obligations hereunder.

The receiving PARTY additionally agrees to take all reasonable precautions to safeguard the confidential nature of the disclosing PARTY’s CONFIDENTIAL INFORMATION, provided however, that such receiving PARTY’s normal procedures for protecting its own confidential information shall be deemed reasonable precautions, so long as such normal procedures amount to no less than a commercially reasonable degree of care.

The receiving PARTY shall not be liable for disclosure and/or any use of such CONFIDENTIAL INFORMATION insofar as such CONFIDENTIAL INFORMATION

• is in, or becomes part of, the public domain other than through a breach of this FPA by such PARTY; or

• is already known to the receiving PARTY at or before the time it receives the same from the disclosing PARTY or is disclosed to the receiving PARTY by a third party as a matter of right; or

• is independently developed by the receiving PARTY without the benefit of such information received from the disclosing PARTY; or

• is disclosed and/or used by the receiving PARTY with the prior written consent of the disclosing PARTY; or

• is required to be disclosed by law or by any judicial order or decree, provided that, so far as possible the receiving PARTY shall consult with the disclosing PARTY prior to such disclosure and take such steps as the disclosing PARTY may reasonably require to eliminate or reduce the scope of such requirement or to improve the conditions upon which such disclosure is to be made.

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 17 of 29-

Notwithstanding the above, the receiving PARTY has the right to disclose the disclosing PARTY’s CONFIDENTIAL INFORMATION received under this FPA to

• ORDERING PARTIES, including CONTRACT MANUFACTURERS, and DESIGNATED SUBSIDIARIES; or

• its licensees and sublicensees insofar as it has the right to license or sublicense same as set forth in this FPA and provided that the receiving PARTY requires such licensee or sublicensee to undertake in writing secrecy and non-use obligations which are at least as stringent as the ones set forth in this Section; or

• its subcontractors insofar as it has the right to appoint the same as set forth in this FPA and provided that the receiving PARTY requires such subcontractor to undertake in writing secrecy and non-use obligations which are at least as stringent as the ones set forth in this Section; or

• its end customers insofar and to the extent and subject to such conditions (if any) as is customary in this industry.

15	Term and Termination
15.1	EFFECTIVE DATE
	This FPA shall commence on the EFFECTIVE DATE and shall apply to all PURCHASE ORDERS and FRAME ORDERS issued during the term of this FPA.
15.2	Renewal
	This FPA shall expire three (3) years after the EFFECTIVE DATE. At the end of the fixed term, this FPA shall extend automatically for further one (1) year periods without prior written notice, unless nine (9) months prior to the end of the fixed term or any further one year period, one PARTY notifies the other PARTY in writing that the FPA shall not be automatically extended.
15.3	Termination
15.3.1	This FPA and any INDIVIDUAL AGREEMENT may be terminated at any time prior to expiration by mutual consent of the PARTIES.
15.3.2.	This FPA and any INDIVIDUAL AGREEMENT may be terminated immediately

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 18 of 29-

	at any time by any PARTY in the event that the other PARTY becomes the subject of any bankruptcy, insolvency or similar proceedings or is declared bankrupt or insolvent or otherwise cannot fulfill its financial obligations.
15.3.3	Either PARTY may terminate this FPA and/or any INDIVIDUAL AGREEMENT for material breach subject to a prior written notice to the other PARTY. Such notice shall specify the breach complained of and allow the alleged defaulting PARTY to cure such default within [*] calendar days. Failure to effect a cure within this [*] calendar days notice period shall give the non-defaulting PARTY the right to immediately terminate this FPA and/or the respective INDIVIDUAL AGREEMENT.
15.3.4	This FPA and/or any INDIVIDUAL AGREEMENT may be terminated at any time by PURCHASER by giving notice to SUPPLIER or its respective SUBSIDIARIES, if the SUPPLIER and/or its respective SUBSIDIARIES come under direct or indirect control or direction or determinative influence of any other entity competing with PURCHASER;
15.3.5	This FPA may be terminated by PURCHASER if within a reasonable timeframe no mutual agreement can be achieved regarding one or more of the following EXHIBITS:

• LSA

• QAA

15.3.6	Any termination shall be made in writing according to Section below.
15.4	Effect of Termination
	Notwithstanding any termination or expiry, this FPA shall remain in effect as to any outstanding PURCHASE ORDERS accepted by SUPPLIER or any other obligations accrued prior to the time of termination or expiry.
15.5	Survival
	All provisions and obligations which shall survive by their nature shall remain applicable and in full force after termination or expiry of this FPA.
16	Liability
16.1	Product Liability

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 19 of 29-

	Subject to the limitation of liability in the insurance clause herein, in the event a proven defective product wholly the responsibility of SUPPLIER causes death or bodily injuries, to third parties, SUPPLIER shall at its own expenses indemnify and hold harmelss Purchaser and Ordering parties as provided by law. If a claim is made, Purchaser shall promptly notify SUPPLIER in writing within [*] days and shall thereafter permit SUPPLIER to control the litigation defense . Failure to promptly notify shall void this indemnity if it compromises the defense.
16.2	Late Delivery
	Time shall be of the essence in relation to all delivery deadlines. If SUPPLIER fails to meet a DELIVERY DATE, ORDERING PARTY may, claim liquidated damages in the amount of [*] of the value of the affected PURCHASE ORDER for each calendar week of delay, computed from the DELIVERY DATE plus [*] days grace period, up to an aggregated payment per individual PURCHASE ORDER of [*] of the value of the affected undelivered PURCHASE ORDER items. In addition, SUPPLIER shall use the fastest way of transportation (i. e. express courier service or the like) for the delayed delivery. Such transportation shall be arranged by and the cost shall be borne by SUPPLIER
16.2.2	Cancellation due to Late Delivery
	After [*] calendar days of delay, unless the delay is a result of changes/modifications imposed by the PURCHASER, the ORDERING PARTY may cancel the affected PURCHASE ORDER without setting a time limit or grace period. Upon request of ORDERING PARTY or PURCHASER such quantities will be deducted from the forecasted and/or fixed volume of PRODUCTS.
16.2.3	Compensation of Damages due to Late Delivery
	In case of cancellation as set out in Section 16.2.2, ORDERING PARTY shall be entitled to receive, at SUPPLIER’s election, either :

(i)	the difference in price between the PRODUCT to be delivered and an acceptable alternative product of another source, including freight, packing and insurance; or
(ii)	the design and manufacturing documentation package from the escrow established at SUPPLIER expense Escrow DOCUMENTATION shall be in

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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English, in electronic format and such that competent second source manufacturer can successfully manufacture the products.

16.3

Infringement Indemnification

SUPPLIER, at its own expense, shall indemnify and hold harmless PURCHASER and ORDERING PARTIES against any direct or indirect loss or damages sustained by PURCHASER or any ORDERING PARTY as a result of a claim or action brought by any third party for infringement of any intellectual property rights (patent right, copyright, mask work right, trademark, trade secret or other intellectual property right of any third party) by reason of the possession, manufacture, use, offer, import, export, or sale of the PRODUCT, provided that PURCHASER/ORDERING PARTY

• gives SUPPLIER, without undue delay, written notice of such claim;

• permits SUPPLIER to defend or settle the claim; and

• provides SUPPLIER with assistance, information and authority necessary to defend or settle the claim (SUPPLIER shall reimburse PURCHASER and/or ORDERING PARTY for reasonable expenses incurred in providing such assistance and information).

In the event that an adverse judgement or injunction is rendered or in the opinion of SUPPLIER is likely to be rendered, SUPPLIER shall in addition to the aforesaid, at its option,

• procure for ORDERING PARTY the right to continue to use the PRODUCTS; or

• modify the PRODUCTS so they become non-infringing; or

• provide replacements that perform the same functions as the PRODUCTS; or

• [*].

	PURCHASER’s rights under this Section 16.3 are in addition to, and not in lieu of, any other rights PURCHASER or ORDERING PARTY may have under this FPA, including any EXHIBIT, as well as any INDIVIDUAL AGREEMENT and/or at applicable law.
16.4	Insurance
	SUPPLIER shall, for the lifetime of the PRODUCTS, secure and maintain a third

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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	party liability insurance, including product liability insurance, providing coverage for product liability exposure for a maximum amount of [*] USD cumulative across all products , including negligence and strict liability, to third parties resulting from defective PRODUCTS (such as design-, manufacture) supplied by SUPPLIER to ORDERING PARTY. On request of PURCHASER, SUPPLIER shall provide a copy of the insurance policy.
17	Warranty
17.1	General
	SUPPLIER represents and warrants that the PRODUCTS shall be in conformance with the agreed specifications, as described in the relevant EXHIBIT Ax, (PA) and with EXHIBIT D (QAA). SUPPLIER further represents and warrants that the PRODUCTS are state of the art, newly manufactured solely from new parts and are free from defects in design, material and workmanship.
	If SUPPLIER has doubts regarding the correctness of the specifications and/or the quality requirements as defined in EXHIBIT C (QAA) for the PRODUCT, it shall inform PURCHASER immediately in writing of the reservations.
17.2	Warranty Period
	Due to the special requirements in the telecommunication industry the warranty period shall run for [*] months from the receipt date of the PRODUCTS at the place of destination
17.3	Defects of PRODUCTS (Non-Conforming Units)
	If PRODUCTS fail to conform with the defined specifications or the warranties, at option of ORDERING PARTY and at no cost to ORDERING PARTY

(i)	ORDERING PARTY may return non-conforming units to SUPPLIER and SUPPLIER shall at ORDERING PARTY’s option repair or replace such non-conforming units or
(ii)	ORDERING PARTY may replace the non-conforming units with PRODUCTS in stock and SUPPLIER shall promptly replenish such stock; or
(iii)	ORDERING PARTY may return the non-conforming units to SUPPLIER either for credit or, upon ORDERING PARTY’s request, for a prompt refund of the purchase price ; or

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(iv)	ORDERING PARTY may claim prompt replacement of the complete delivery lot if the Failure Rate of Delivery Lot exceeds more than the agreed maximum stated in EXHIBIT C (QAA); or
(v)	ORDERING PARTY may, if PARTYs agree that an epidemic failure is occurred, return all units of the PRODUCT affected by such EPIDEMIC FAILURE, whether non-conforming or not, to SUPPLIER either for credit or, upon ORDERING PARTY’s request, for a prompt refund of the purchase price.

	In addition, ORDERING PARTY may itself repair PRODUCTS [*]. Generally, such repair shall be carried out by ORDERING PARTY/[*] only to avoid or reduce further damages or disadvantages for ORDERING PARTY, its customers or to avoid or reduce any obligation on the part of SUPPLIER to provide compensation. In such cases, PURCHASER agrees that having a third party modify PRODUCTS originally manufactured by the SUPPLIER shall immediately make the warranty in Section 17 null and void.
17.4	Liability for Expenses
	If ORDERING PARTY, due to defective PRODUCTS, incurs damages and expenses including costs for notification, compensation, stoppages in production, installation and removal work, defect tracing, tests, transport, business trips, recalls, labor, destruction and/or improvement of inventory, SUPPLIER shall reimburse ORDERING PARTY subject to limitation of liability or the the value of the affected PURCHASE ORDERS, whichever shall be lower .
17.5	Exchange of Information
	The PARTIES undertake to exchange immediately any information concerning possible damage risks and any cases of damage that have already occurred. They undertake to work together cooperatively in measures taken to avert risks to ensure that these measures are carried out smoothly.
17.6	Other Rights
	PURCHASER’S rights under this Section 17 shall not prejudice any other rights PURCHASER or ORDERING PARTY may have under this FPA including any EXHIBITS, as well as INDIVIDUAL AGREEMENTS and/or applicable law.

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 23 of 29

18	General Provisions
	The following general provisions shall apply to this FPA, including its EXHIBITS, as well as any INDIVIDUAL AGREEMENT hereunder:
18.1	Notices
	All notices or other communications required or permitted hereunder with regard to the existence, interpretation, validity, termination etc. of this FPA to either PARTY shall be deemed to have been duly given if in writing and delivered personally or mailed first class, registered or certified mail, postage prepaid, to the PARTY’s addresses below:

if to SUPPLIER:

[*] Endwave Corporation
[*] Headquarters
or delegate
[*] 776 Palomar Avenue
[*] Sunnyvale, California 94085
[*] USA

with a copy to: Endwave Corporation
[*] Northeast Operation
[*]
or delegate
[*] 1 Technology Drive, Suite 310
[*] Andover, Massachusetts 01810
[*] USA

with a copy to: [*]
[*] Milan Office
[*]
or delegate
[*] [*]
[*] [*]
[*] Italia

if to Siemens:

Siemens Mobile Communications Spa
Mario Donati
Material Group Manager
SS. Padana Superiore km 158 20060 Cassina de’ Pecchi
Milan
Italy

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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with a copy to:
Siemens Mobile Communications Spa
Legal Department
Dr. Bruno Felice Duina
Via Piero e Alberto Pirelli, 10
20126 Milan
Italy

	The PARTIES hereby agree that with regard to this Section 19.1 in case of a change in legislation, “in writing” shall only mean first class, registered or certified mail, postage prepaid, unless otherwise explicitly agreed upon by the PARTIES.
18.2	Compliance with Laws
	SUPPLIER represents and warrants that the PRODUCTS conform to the relevant legal provisions and the regulations and guidelines of authorities. If, in individual, cases deviations from these regulations become necessary, SUPPLIER must obtain written permission from PURCHASER. In such case, SUPPLIER’s warranties shall apply to the changed requirements.
18.3	Assignment
	Neither PARTY shall assign its rights or delegate its duties hereunder without the prior written consent of the other PARTY, except to a third party pursuant to a merger, sale of all or substantially all assets, or other corporate reorganization (however, save to Section 16.3.4). Any attempted assignment or delegation not permitted hereunder shall be void and of no effect.
18.4	Force Majeure
	A PARTY shall not be in a material breach of any obligation under this FPA to the extent that its performance is prevented by a FORCE MAJEURE EVENT. If a PARTY claims that a FORCE MAJEURE EVENT has occurred affecting its performance, it shall promptly notify the other PARTY in writing.
	For the purpose of this FPA, “FORCE MAJEURE EVENT” shall be deemed to be any cause affecting the performance of this FPA arising from or attributable to acts, events, omissions or accidents beyond the reasonable control of the PARTY to perform and without limiting the generality thereof shall include the following:

• strikes, lock-outs or other industrial action;

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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• civil commotion, riot, invasion, war threat or preparation for war;

• fire, explosion, storm, flood, earthquake, subsidence, epidemic or other natural physical disaster;

• general impossibility of the use of railways, shipping, aircraft, motor transport or other means of public or private transport;

• political interference with the normal operations of any PARTY, including export restrictions.

	If the FORCE MAJEURE EVENT continues for a cumulative period of [*] days or more, either PARTY may terminate this FPA and / or any INDIVIDUAL AGREEMENT immediately by giving the other PARTY a written notice. Termination shall be effective upon receipt of the notice. If PURCHASER terminates, PURCHASER’s sole liability and SUPPLIER’s exclusive remedy under this FPA or any INDIVIDUAL AGREEMENT will be payment by PURCHASER of any balance due for PRODUCTS delivered by SUPPLIER before receipt of PURCHASER’s termination notice.
18.5	Waiver
	The duly authorized waiver of the breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition.
18.6	Captions
	The captions in this FPA are inserted only for the purpose of convenient reference and in no way define or limit the scope or intent of this FPA or any part of this FPA.
18.7	General Terms and Conditions
	The terms and conditions of this FPA shall be applicable to and shall govern all INDIVIDUAL AGREEMENTS entered into hereunder regardless of any reference whatsoever. General terms and conditions as well as other pre-printed provisions on documents of either PARTY, including, without limitation, PURCHASE ORDERS, acknowledgments of PURCHASE ORDERS (“General Terms and Conditions”), shall not apply to this FPA and any agreement regarding its performance.
18.8	Press Releases

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 26 of 29-

	Press Releases containing informations about this FPA or its EXHIBITS are only allowed to SUPPLIER after written permission by PURCHASER.
18.9	Export Control-, Customs Regulations
18.9.1	General
	PRODUCTS and services are subject to customs regulations and to export control in accordance with the export regulations, including but not limited to the export control regulations of the Federal Republic of Germany, the European Union (EU), and/or the USA. The requirements of export control cover also software, technology and know-how. The PARTIES agree to comply with all applicable laws and regulations in that regard. The PARTIES shall provide mutual assistance as required to comply with all such laws and regulations.
18.9.2	Export by SUPPLIER
	SUPPLIER shall be responsible for taking appropriate steps to obtain necessary export licenses, if any, relating to the export of PRODUCTS to the location of ORDERING PARTY and/or to the place of destination stated in the PURCHASE ORDER. SUPPLIER shall provide ORDERING PARTY with copies of relevant export licenses.
18.9.3	Re-export by PURCHASER/ORDERING PARTY
	SUPPLIER shall provide to PURCHASER/ORDERING PARTY, on request of PURCHASER/ORDERING PARTY, without undue delay, for each PRODUCT any data/documents PURCHASER/ORDERING PARTY needs in order to comply with the laws and regulations above.
	Data and documents requested refer to the conditions of export-/re-export licenses (classifications in German / EU / US export regulations, so called AL No, ECCN No), the customs commodity code, net and gross weight, the origin of PRODUCTS (LKZ) (including certificates of origin) and, from case to case, to customs preference regulations (e.g. FORM A, EUR1).
	In case of phase in or modifications of a PRODUCT or a part thereof, SUPPLIER shall provide all PRODUCT data and export control data to PURCHASER/ORDERING PARTY in advance.

FPA Endware	[*]
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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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	In case of change of any PRODUCT data or export control data PURCHASER/ORDERING PARTY shall be informed immediately by SUPPLIER.
	In case of changes to the certificate of origin, SUPPLIER shall send an updated certificate immediately or if requested by PURCHASER within [*] hours in written form. Such certificate shall be provided by SUPPLIER yearly automatically. In case of an emergency situation, if data were not already provided by SUPPLIER within the regular procedure as described above, SUPPLIER shall provide such missing data, upon PURCHASER`s/ORDERING PARTY`s request, within [*] electronically.
	SUPPLIER shall be held liable for any expenses or damages incurred by ORDERING PARTY due to the culpable lack, or inaccuracy or delay of said data and documents, if such expenses or damages are attributable to SUPPLIER.
18.10	Severability
	If any provision of this FPA is held invalid or unenforceable under any applicable law or be so held by applicable court decision, the PARTIES agree that such invalidity or unenforceability shall not affect the validity and enforceability of the remaining provisions and further agree to substitute for the invalid or unenforceable provision a valid or enforceable provision which most closely approximates the intent and economic effect of the invalid provision within the limits of applicable law or applicable court decisions.
18.11	Governing Law
	This FPA as well as any individual PURCHASE ORDER entered into thereunder shall be governed by and construed in accordance with the laws of the [*] without any reference to the conflict of law rules. The PARTIES agree that the provisions of the Convention on Contracts for the International Sale of Goods (CISG) shall not apply to this FPA.
18.12	Mediation
	In the event of any dispute arising out of or in connection with the present contract, the parties agree to submit the matter to settlement proceedings under the ICC ADR Rules of the ICC Paris. If the dispute has not been settled pursuant to the said Rules within 45 days following the filing of a Request for ADR or within such other period as the parties may agree in writing, such dispute shall be finally settled under the Rules of Arbitration of the

FPA Endware	[*]
	[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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	International Chamber of Commerce in Paris by one or more arbitrators appointed in accordance with the said Rules of Arbitration.
	The seat of the Mediation and Arbitration shall be Zurich, Switzerland. The procedural law of Switzerland shall apply where the Rules are silent. The language to be used in the mediation or the arbitration shall be English. The mediation agreement and/or the arbitral award shall be substantiated in writing.
18.13	Entire FPA
	This FPA (including its EXHIBITS) sets forth the entire agreement and understanding between the PARTIES as to the subject matter hereof and merges all prior discussions between them. Neither of the PARTIES shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date of acceptance hereof in writing and signed by an authorized representative of the PARTY to be bound thereby.
18.14	PURCHASER’s Divisions
	The PARTIES understand and agree that this FPA shall not affect any existing or future business relationship SUPPLIER may have or may enter into with other Siemens Groups. SUPPLIER shall inform PURCHASER promptly of any such currently existing or future relationship(s).
18.15	No Agency or Joint Venture
	Neither of the PARTIES nor any of their respective agents, employees, independent contractors, or representatives shall:

• be considered an agent, employee or representative of the other PARTY for any purpose whatsoever,

• have authority to make any agreement or commitment for the other PARTY, or to incur any liability or obligation in the other PARTY’s name or on its behalf, or

• represent to third parties that they have any right so to bind the other PARTY hereto.

	Nothing contained in this Agreement shall be construed as creating an agency, partnership or joint venture relationship between the PARTIES.
18.16	Order of Precedence
	The documents listed below form part of this FPA and in the event of discrepancies shall be valid in the following order of precedence:

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL 29 of 29-

• [*]

• [*]

• [*]

• [*]

FPA Endware	[*]
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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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IN WITNESS WHEREOF, each of the PARTIES hereto have caused this FPA to be signed in duplicate by its respective duly authorized representatives on the dates and at the places mentioned below.

Place, Date :Sunnyvale, California 10/13/05	Place, Date : Milano, 12/1/06
Endwave Corporation	Siemens Mobile Communications Spa
/s/ Steve Layton		/s/ Iannetti Pratschke
signature(s)		signatures
S. Layton		IANNETTI PRATSCHKE
printed name(s) printed names
Vice-President & General Manager
title(s)		titles

FPA Endware	[*]
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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) CONFIDENTIAL 1 of 16

EXHIBIT B            LOGISTICS SERVICE AGREEMENT (“LSA”)

to the

Frame Purchase Agreement

(“FPA”)

(Contract No.: A.Q. 5.90010)

LSA EFFECTIVE DATE: January 16^th, 2006

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) CONFIDENTIAL 2 of 16

TABLE OF CONTENT:

1	DEFINITION	4
2	SCOPE OF THIS LSA	6
3	TERM AND TERMINATION OF THIS LSA	6
3.1	LSA EFFECTIVE DATE	6
3.2	TERMINATION	6
4	PRODUCT(S) COVERED BY THIS LSA	6
5	LOCATIONS OF THE PARTIES	7
5.1	SUPPLIER LOCATIONS	7
5.2	ORDERING PARTY LOCATIONS	7
6	TERMS OF THIS LSA	7
6.1	SUPPLY CLASSES	7
6.2	SERVICE LEVELS	9
6.3	FORECAST	11
6.4	BUFFERING	12
6.5	ORDER PROCESSING, CALL-OFF AND REPLENISHMENT	13
6.6	MANAGING EXCEPTIONS	15
6.7	PHASE-IN AND PHASE-OUT	15
6.8	PROCESS AND OPERATIONS MODEL	16
6.9	CONTACT AND STAND-IN REGULATIONS	16
7	COMPONENTS OF THIS LSA	16

LIST OF ANNEXES:

GENERAL ANNEXES

ANNEX A CONTACT PERSONS
ANNEX B FORECAST AND FLEXIBILITY CORRIDOR
ANNEX C PROCESS AND OPERATIONS MODEL
ANNEX D MINIMUM DOCUMENTATION REQUIREMENTS
ANNEX E LOCATIONS OF THE PARTIES
ANNEX F CONSIGNMENT STOCK TERMS

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SPECIFIC ANNEXES PER ORDERING PARTY LOCATION

ANNEX G STAND-IN REGULATIONS
ANNEX H LIST OF SR PRODUCTS
ANNEX I LIST OF DR-1 PRODUCTS
ANNEX J LIST OF DR-2 PRODUCTS
ANNEX K STOCK LEVELS RELATED TO SR PRODUCTS
ANNEX L STOCK LEVELS RELATED TO DR-1 PRODUCTS
ANNEX M STOCK LEVELS RELATED TO DR-2 PRODUCTS
ANNEX N GOODS RECEIVING
ANNEX O LOCATION SPECIFIC AMENDMENT

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EXHIBIT B (LSA) CONFIDENTIAL 4 of 16

WHEREAS, the PARTIES have signed a FPA regarding the delivery of PRODUCT(S) by SUPPLIER to ORDERING PARTY, and

WHEREAS, the SUPPLIER is known by PURCHASER to be a quality-conscious and reliable manufacturer of products for mobile radio infrastructure, and

WHEREAS, the PARTIES agree that high quality, reliability and supply-chain excellence can only be achieved through fostering cooperation and close collaboration at all process levels in the spirit of partnership and open-book relationship, and

WHEREAS, the PARTIES agree that by implementing this agreement they will move towards supply-chain excellence through defining service levels, stock and forecasting rules, logistic requirements and performance measurements;

NOW, THEREFORE, the PARTIES agree as follows:

1 DEFINITION

The following terms are integral to this LSA and to any PURCHASE ORDER or FRAME ORDER related to this LSA and shall have the following meaning:

1.1	The term “ANNEX” shall mean any annex attached to this LSA, thus representing an integral part thereof.
1.2	The term “CONSIGNMENT STOCK” also named as “CS” shall mean a stock of PRODUCTS owned by SUPPLIER or by a DESIGNATED SUBSIDIARY and located near by or at a ORDERING PARTY LOCATION as specified in ANNEX K (Stock Levels) and ANNEX F (CONSIGNMENT STOCK Terms).
1.3	The term “DIRECT REPLENISHMENT 1” also named as “DR-1” shall mean a specific logistic supply class as defined in this LSA.
1.4	The term “DR-1 PRODUCT” shall mean a PRODUCT for which the supply class DIRECT REPLENISHMENT 1 is defined by this LSA.
1.5	The term “DIRECT REPLENISHMENT 2” also named as “DR-2” shall mean a specific logistic supply class as defined in this LSA.
1.6	The term “DR-2 PRODUCT” shall mean a PRODUCT for which the supply class DIRECT REPLENISHMENT 2 is defined in this LSA.
1.7	The term “DISTRIBUTION CENTER” also named as “DC” shall mean a stock of PRODUCTS owned by SUPPLIER or by a DESIGNATED SUBSIDIARY from which PRODUCTS are supplied to at least one ORDERING PARTY LOCATION. Such DC shall be located in the geographical area of the ORDERING PARTY LOCATIONS it supplies to and there shall be no customs duty handling required for such supply.

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1.8	The term “FLEXIBILITY CORRIDOR” shall mean a limited area of delivery flexibility versus time and shall be calculated in accordance with ANNEX B of this LSA.
1.9	The term “FORECAST° shall mean the forecast procedure as described in this LSA
1.10	The term “EDI” shall mean a specific way of electronic data interchange between ORDERING PARTY and SUPPLIER or DESIGNATED SUBSIDIARY as required by this LSA.
1.11	The term “LOCAL BUFFER” shall mean a stock of PRODUCTS owned by ORDERING PARTY and located near by or at ORDERING PARTY LOCATION.
1.12	The term “LSA EFFECTIVE DATE” shall mean the date mentioned first above.
1.13	The term “PHASE IN” also named as “RAMP UP” shall mean the limited time period agreed by the PARTIES during which SUPPLIER and/or DESIGNATED SUBSIDIARY prepares itself for production and delivery of a PRODUCT as defined by a service level of this LSA.
1.14	The term “PHASE OUT” also named as “RAMP DOWN” shall mean the time period during which the delivery quantity of a PRODUCT decreases to zero (0) either planned by PURCHASER and agreed by the PARTIES or due to unforeseeable requirements of PURCHASERS market.
1.15	The term “ORDERING PARTY LOCATION” shall mean any location of ORDERING PARTY relevant for the implementation of the replenishment classes.
1.16	The term “STANDARD REPLENISHMENT” also named as “R” shall mean a specific logistic supply class as defined in this LSA.
1.17	The term “SUPPLIER DELIVERY LEAD TIME” also named as “SDLT” shall mean the time in calendar days between the date of the receipt of PURCHASE ORDER at SUPPLIER or call off from SUPPLIER STOCK by ORDERING PARTY and the receipt of the PRODUCT at the ORDERING PARTY location or the PRODUCT arrival at the place of consumption.
1.18	The term “SR PRODUCT” shall mean a PRODUCT for which the supply class STANDARD REPLENISHMENT is defined by this LSA.
1.19	The term “SUPPLIER LOCATION” shall mean any location of SUPPLIER or DESIGNATED SUBSIDIARIES accepted by PURCHASER for manufacturing, stocking and/or distribution of the PRODUCT(S) under the FPA.
1.20	The term “SUPPLIER STOCK” shall mean a stock of PRODUCT(S) owned by SUPPLIER or by a DESIGNATED SUBSIDIARY and located near by or at a SUPPLIER LOCATION. Such SUPPLIER STOCK shall buffer PRODUCT(S) in higher quantity than the cumulated PRODUCT quantity pulled by all ORDERING PARTYS.

In addition to the above Definitions, all Definitions made in the FPA shall apply to this LSA.

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2 SCOPE OF THIS LSA

2.1	To define the contribution of the PARTIES to an integrated supply chain with best-in class performance levels.
2.2	The formalization of all logistic processes between SUPPLIER and/or DESIGNATED SUBSIDIARY and PURCHASER and/or ORDERING PARTY and all information related hereto shall be subject to the terms and conditions of this LSA.
2.3	To set-up collaboration rules for such logistic processes.

3 TERM AND TERMINATION OF THIS LSA

3.1 LSA EFFECTIVE DATE

This LSA shall commence on the LSA EFFECTIVE DATE and shall apply to all PURCHASE ORDERS and FRAME ORDERS issued after the LSA EFFECTIVE DATE.

3.2 Termination

In case of termination of the FPA this LSA shall automatically also terminate at the same time. The regulations of Article 16 of the FPA shall correspondingly apply to this LSA.

4 PRODUCT(S) COVERED BY THIS LSA

This LSA covers all PRODUCTS listed in ANNEX H, ANNEX I and ANNEX J hereto. A new PRODUCT will be added to this LSA only after the appropriate service level has been agreed between PURCHASER and SUPPLIER.

The criteria for application of the regulations of this LSA to a PRODUCT are as following:

(i)	Existence of a respective PA
(ii)	Qualification by PURCHASER for series production achieved

PURCHASER and SUPPLIER will review, at least on a quarterly basis, the status of PRODUCTS included in this LSA.

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5 LOCATIONS OF THE PARTIES

5.1 SUPPLIER LOCATIONS

All SUPPLIER LOCATIONS shall be listed in ANNEX E of this LSA.

A new SUPPLIER LOCATION shall be added to this LSA only after mutual agreement between the PARTIES and acceptance of such SUPPLIER LOCATION by PURCHASER.

Deletion of a SUPPLIER LOCATION from this LSA shall be based on a mutual agreement between the PARTIES.

5.2 ORDERING PARTY LOCATIONS

All ORDERING PARTY LOCATIONS (including CONSIGNMENT STOCK locations) shall be listed in ANNEX E of this LSA.

PURCHASER shall be allowed to add a new ORDERING PARTY LOCATION to and to delete an existing ORDERING PARTY LOCATION from ANNEX E of this LSA at any time. In case of such adding or deletion SUPPLIER shall be informed by PURCHASER at least six (6) weeks in advance and the PARTIES shall discuss in good faith all influence on the integrated supply chain.

6 PROVISIONS OF THIS LSA

6.1 Supply Classes

Different supply processes shall be put in place between PURCHASER and SUPPLIER to provide the agreed service levels as described in Article 6.2 below. Such different supply processes are defined by supply classes as following:

6.1.1 Supply Class STANDARD REPLENISHMENT

[*]

Operating principles for a SR-PRODUCT shall be:

• vendor managed inventory

• issuance of a FRAME ORDER

• FORECAST from PURCHASER as per Article 6.3 below

• ship to stock delivery by SUPPLIER into a CONSIGNMENT STOCK as specified in ANNEX F

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EXHIBIT B (LSA) CONFIDENTIAL 9 of 16

• SUPPLIER calculates the trigger for on time replenishment (replenishment planning) via consumption data and stock level from the CONSIGNMENT STOCK (Min/Max Levels)

• SUPPLIER DELIVERY LEAD TIME no longer than one (1) week

• defined service level as per Article 6.2.1 below

• performance measurement as per Article 6.2.1 below

• payment as per ANNEX C

6.1.2 Supply Class DIRECT REPLENISHMENT 1

[*]

Operating principles for DR-1 PRODUCTS shall be:

• vendor managed inventory

• issuance of a FRAME ORDER or call-of via PURCHASER ORDER

• FORECAST from PURCHASER as per Article 6.3 below

• SUPPLIER STOCK and/or DISTRIBUTION CENTER

• ship to stock delivery by SUPPLIER into a LOCAL BUFFER

• regular delivery frequency

• defined service level as per Article 6.2.2 below

• performance measurement as per Article 6.2.2 below

• payment as per ANNEX C

6.1.3 Supply Class DIRECT REPLENISHMENT 2

[*]

Operating principles for a DR-2 PRODUCT shall be:

• FORECAST from PURCHASER as per Article 6.3 below

• delivery by SUPPLIER at the location specified in the respective PURCHASE ORDER

• call-off via PURCHASE ORDERS

• confirmation of PURCHASER ORDERS by SUPPLIER

• no specific stocks defined by this LSA

• defined service level as per Article 6.2.3 below

• performance measurement as per Article 6.2.3 below

• payment as per ANNEX C

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EXHIBIT B (LSA) CONFIDENTIAL 10 of 16

6.2 Service Levels

6.2.1 Service Level for STANDARD REPLENISHMENT

SUPPLIER shall meet the following criteria and both PARTIES agree to monitor the following performance metrics each month:

Material/replenishment planning	under full responsibility of SUPPLIER
Contact Persons and stand-in regulation in place	according to ANNEX A and ANNEX I
Early-warning system in place	according to Article 6 6.1 below

Metric	SUPPLIER Commitment
CONSIGNMENT STOCK	SUPPLIER maintains the stock level at any time within the minimum and maximum stock level defined in ANNEX K by refilling the CONSIGNMENT STOCK up to the maximum stock level on each delivery
Caused line-breakdown	zero (0) times at ORDERING PARTY
Minimum inventory violation	zero (0) times at CONSIGNMENT STOCK, meaning the stock level must not fall below the minimum stock level defined in ANNEX K

Any violation of the minimum stock level at CONSIGNMENT STOCK or any caused line-break-down at ORDERING PARTY shall be deemed as a DELIVERY DATE not met by SUPPLIER and thus shall be regarded as a late delivery like provided for in the FPA.

6.2.2 Service Level for DIRECT REPLENISHMENT 1

SUPPLIER shall meet the following criteria and both PARTIES agree to monitor the following performance metrics each month:

Material/replenishment planning	under full responsibility of SUPPLIER
Contact Persons and stand-in regulation in place	according to ANNEX A and ANNEX I
Early-warning system in place	according to Article 6.6.1 below

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Metric	SUPPLIER Commitment
Maximum SDLT	as defined in ANNEX L.
LOCAL BUFFER	SUPPLIER maintains the stock level at any time within the minimum and maximum stock level defined in ANNEX L by refilling the LOCAL BUFFER up to the maximum stock level on each delivery or delivers according to the call-offs via PURCHASER ORDERS
On-time delivery
Emergency replenishment	meet the determined delivery time slot at each day of delivery as specified in ANNEX L
SUPPLIER STOCK and/or DC	SUPPLIER maintains the stock level at any time according to ANNEX L
Caused line-break-down	zero (0) times at ORDERING PARTY
Minimum inventory violation	zero (0) times at BUFFER STOCK, meaning the stock level must not fall below the minimum stock level defined in ANNEX L

Any violation of the minimum stock level at LOCAL BUFFER, any caused line-break-down at ORDERING PARTY or any non-successful emergency replenishment shall be deemed as a DELIVERY DATE not met by SUPPLIER and thus shall be regarded as a late delivery like provided for in the FPA.

6.2.3 Service Level for DIRECT REPLENISHMENT 2

SUPPLIER shall meet the following criteria and both PARTIES agree to monitor the following performance metrics each month:

Ordering/replenishment planning Stock	under full responsibility of each ORDERING PARTY according to ANNEX M
Contact Persons and Stand-in regulation in place	according to ANNEX A and ANNEX I
Early-warning system in place	according to Article 6.6.1 below

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Metric	SUPPLIER Commitment
Maximum SDLT	according to ANNEX M
On-time delivery	to meet the DELIVERY DATE as per PURCHASE ORDER
Material availability	according to FORECAST and FLEXIBILITY CORRIDOR
Caused line-break-down	zero (0) times at ORDERING PARTY

Any missed on-time delivery or any caused line-break-down at ORDERING PARTY shall be deemed as a DELIVERY DATE not met by SUPPLIER and thus shall be regarded as a late delivery like provided for in the FPA.

6.3 FORECAST

A FORECAST is a planning tool intended to improve the demand visibility for a period of at least six (6) months. The FORECAST together with the respective FLEXIBILITY CORRIDOR as defined in ANNEX B shall reflect the cumulative demand of a PRODUCT by all ORDERING PARTIES as predicted by PURCHASER, status as of the date of issue.

PURCHASER shall issue such FORECAST at least [*] and shall send it to SUPPLIER electronically. The FORECAST last issued by PURCHASER shall supersede all FORECASTS issued before.

SUPPLIER shall give feedback to PURCHASER regarding feasibility of the FORECAST via e-mail within [*] working days from receipt of such FORECAST, otherwise such FORECAST shall be deemed as accepted.

In case the demand of PURCHASER/ORDERING PARTIES is higher than specified by the FLEXIBILITY CORRIDOR both PARTIES shall mutually agree on a solution.

6.3.1 FORECAST for SR PRODUCTS

The quantities shown in the FORECAST as per ANNEX B are planned gross demands. The FORECAST together with the respective FLEXIBILITY CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production and to replenish each CONSIGNMENT STOCK. The FORECAST is binding with regard to the quantities and the validity of defined flexibility, but is not binding with regard to the chronological demand. SUPPLIER must take the flexibility range shown in ANNEX B into consideration when using the FORECAST.

The replenishment of a CONSIGNMENT STOCK shall be consumption driven only.

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6.3.2 FORECAST for DR-I PRODUCTS

The quantities shown in the FORECAST as per ANNEX B are planned gross demands. The FORECAST together with the respective FLEXIBILITY CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production, his SUPPLIER STOCK and/or DISTRIBUTION CENTERS and to replenish each LOCAL BUFFER. The FORECAST is binding with regard to the quantities and the validity of defined flexibility, but is not binding with regard to the chronological demand. SUPPLIER must take the flexibility range shown in ANNEX B into consideration when using the FORECAST.

The replenishment of a LOCAL BUFFER shall be consumption driven only.

6.3.3 FORECAST for DR-2 PRODUCTS

The quantities shown in the FORECAST as per ANNEX B are planned gross demands. The FORECAST together with the respective FLEXIBILITY CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production and to guarantee the defined SDLT. SUPPLIER must take the FLEXIBILITY CORRIDOR shown in ANNEX B into consideration when using the FORECAST. Delivery shall be based on individual PURCHASE ORDERS only.

6.4 Buffering

6.4.1 Buffering for SR PRODUCTS

SUPPLIER agrees to build up and maintain an agreed stock level of SR PRODUCTS on each CONSIGNMENT STOCK. The stock levels agreed for each CONSIGNMENT STOCK are listed in ANNEX K.

Both PARTIES agree to revise and adjust ANNEX K at least quarterly in order to adapt the stock levels to changes in demand requirements.

6.4.2 Buffering for DR-1 PRODUCTS

SUPPLIER agrees to build and carry a SUPPLIER STOCK and/or at least one DISTRIBUTION CENTER dedicated to DR-1 PRODUCTS. The agreed stock levels are listed in ANNEX L.

SUPPLIER agrees to maintain the stock levels in the SUPPLIER STOCK and/or DISTRIBUTION CENTERS, as listed in ANNEX L, at all times. SUPPLIER is responsible for all aspects of managing the SUPPLIER STOCK and/or DISTRIBUTION CENTERS including, but not limited to, planning, carrying costs and replenishment.

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SUPPLIER shall report the stock levels held in the SUPPLIER STOCK and DISTRIBUTION CENTERS to PURCHASER and ORDERING PARTY at least once a month. This data is necessary for PURCHASER and ORDERING PARTY to execute material availability calculations. PURCHASER reserves the right to inspect the SUPPLIER STOCK and the DISTRIBUTION CENTERS at any time with twenty four (24) hour prior written notice to SUPPLIER.

Furthermore, SUPPLIER guarantees to replenish and maintain the agreed stock levels of each LOCAL BUFFER, as per ANNEX L, at all times.

Both PARTIES agree to revise and adjust ANNEX L at least quarterly in response to changes in demand requirements. Notwithstanding the above, ORDERING PARTY shall be allowed to revise and adjust the stock levels of each LOCAL BUFFER monthly.

6.4.3 Buffering for DR-2 PRODUCTS

No specific SUPPLIER STOCK is defined in this LSA, see ANNEX M.

6.5 Order Processing, Call-Off and Replenishment

6.5.1 Order Processing, Call-Off and Replenishment for SR

ORDERING PARTY shall place a FRAME ORDER per each SR PRODUCT. Such FRAME ORDER shall be for order-processing purposes only, and shall not represent a volume/price commitment on the part of ORDERING PARTY.

The call-off of a SR PRODUCT shall be initiated by consuming such SR PRODUCT from the CONSIGNMENT STOCK, i.e. by decreasing the stock level. ORDERING PARTY shall daily provide consumption and inventory data per each SR PRODUCT. Such data shall be exchanged electronically between SUPPLIER and ORDERING PARTY. SUPPLIER shall manage the delivery process in such way that the stock level of the CONSIGNMENT STOCK will never fall below the agreed minimum stock level. The CONSIGNMENT STOCK must not be replenished beyond the agreed maximum stock level listed in ANNEX K.

If the quantity of a SR PRODUCT consumed from the CONSIGNMENT STOCK is not covered by the respective FORECAST and FLEXIBILITY CORRIDOR, SUPPLIER shall inform ORDERING PARTY within [*] after receipt of the consumption and inventory data. Further, if SUPPLIER is not able to replenish according to the agreed minimum level as per ANNEX K, SUPPLIER shall inform ORDERING PARTY within [*] after receipt of the consumption and inventory data.

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ORDERING PARTY” shall pay for each SR PRODUCT consumed from the CONSIGNMENT STOCK the price valid on the date of the respective credit note.

6.5.2 Order Processing, Call-Off and Replenishment for DR-1

ORDERING PARTY shall place a FRAME ORDER per each DR-1 PRODUCT. Such FRAME ORDER shall be for order-processing purposes, and shall not represent a volume/price commitment on the part of ORDERING PARTY.

The call-off of a DR-1 PRODUCT shall be initiated by consuming such DR-1 PRODUCT from the LOCAL BUFFER, i.e. by decreasing the stock level. ORDERING PARTY shall daily provide consumption and inventory data per each DR-1 PRODUCT. Such data shall be exchanged electronically between SUPPLIER and ORDERING PARTY.

SUPPLIER shall manage the stock levels of his SUPPLIER STOCK and/or DISTRIBUTION CENTERS and shall trigger regular deliveries in such way that the stock level of each LOCAL BUFFER is maintained in between the minimum and maximum stock level as defined in ANNEX L. Such regular deliveries shall replenish each LOCAL BUFFER up to the maximum stock level by using full transportation units.

If SUPPLIER is not able to replenish each LOCAL BUFFER according to the agreed levels as per ANNEX L, SUPPLIER shall inform all ORDERING PARTY affected within one (1) working day after receipt of the consumption and inventory data

ORDERING PARTY shall pay for each DR-1 PRODUCT received in the LOCAL BUFFER the price valid on the date of the respective credit note.

6.5.3 Order Processing, Call-Off and Replenishment for DR-2

ORDERING PARTY shall issue a PURCHASE ORDER to call off a DR-2 PRODUCT.

SUPPLIER shall deliver the ordered quantities on the DELIVERY DATE and in line with the SDLT as defined in ANNEX M.

All information shall be exchanged electronically between SUPPLIER and ORDERING PARTY.

If ordered quantities are not covered by the respective FORECAST and FLEXIBILITY CORRIDOR, SUPPLIER shall inform ORDERING PARTY in accordance with the order acceptance provisions of the FPA.

ORDERING PARTY shall pay for each DR-2 PRODUCT based on an invoice to be issued by SUPPLIER.

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6.6 Managing Exceptions

6.6.1 Early Warning, Notification

In case SUPPLIER becomes aware that he will not be able to meet a DELIVERY DATE, or a SDLT for what reason so ever, SUPPLIER shall notify each ORDERING PARTY affected in writing without undue delay.

Furthermore, SUPPLIER agrees to notify ORDERING PARTIES immediately of any developments in his material supply chain that could put deliveries to ORDERING PARTIES at risk. PURCHASER/ORDERING PARTY as well shall inform SUPPLIER if any changes occur concerning the volumes of PRODUCTS to be delivered by SUPPLIER, not covered by the FORECAST.

6.6.2 Underperformance

The SUPPLIER’S primary responsibility is to keep its commitments regarding to SUPPLIER DELIVERY LEAD TIMES and DELIVERY DATES and to achieve the performance and logistic service levels defined in this LSA.

Otherwise SUPPLIER shall be liable for all PURCHASER’S and ORDERING PARTY’S damages in accordance with the provisions of the FPA. In the event of SUPPLIER’S delay in delivery of PRODUCTS, SUPPLIER may — based on a written approval by PURCHASER — deliver PRODUCTS fulfilling or exceeding the approved specifications, without any additional costs.

6.7 PHASE-IN and PHASE-OUT

Any information related to PHASE IN and/or PHASE OUT of a PRODUCT and known to PURCHASER will be considered in the FORECAST. During PHASE IN and/or PHASE OUT the FLEXIBILITY CORRIDOR provisions of ANNEX B and the provisions of ANNEX K, L and M for such PRODUCT shall not be applicable.

During PHASE IN or PHASE OUT the communication between PURCHASER and SUPPLIER will be intensified both in frequency and in level of detail. Therefore, SUPPLIER agrees to allow PURCHASER to manage such PHASE IN or PHASE OUT on a weekly basis meaning that especially, but not limited to, demand figures per each ORDERING PARTY, DELIVERY TIME, SDLT, and stock levels may be adjusted once a week. These specific regulations concerning PHASE IN and PHASE OUT shall be stated in a separate document to be mutually agreed and signed by the PARTIES.

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In case of PRODUCT changes PURCHASER and SUPPLIER shall mutually agree on an implementation time schedule, based on the provisions of the FPA hereto.

6.8 Process and Operations Model

As defined in ANNEX C to this LSA.

6.9 Contact Persons and Deputy Regulations

As defined in ANNEX A and ANNEX G to this LSA.

7 COMPONENTS OF THIS LSA

The documents listed below form part of this LSA and in case of discrepancies shall be valid in the following sequence:

(i)	[*]
(ii)	[*]
(iii)	[*]

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EXHIBIT B (LSA)	CONFIDENTIAL	1 of 12
GENERAL ANNEXES

ANNEX A: Contact Persons

SIEMENS	SUPPLIER
Name: Rudolf Mazzoli	Name: Steve McGowan
Phone: +39 (0) 2 2437 2255	Phone: +1 408 522 3121
E-Mail: rudolf.mazzoli@siemens.com	E-mail: steve.mcgowan@endwave.com
Document approved:	Document approved:
1st December 2005 /s/ Rudolf Mazzoli	10/17/05 /s/ Steve Layton
Date, Rudolf Mazzoli	Date, Steve Layton
Senior Director ICM MW OP I SLO	Vice President Sales

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EXHIBIT B (LSA)	CONFIDENTIAL	2 of 12
GENERAL ANNEXES

ANNEX B: FORECAST and FLEXIBILITY CORRIDOR

The FORECAST shall be sent by PURCHASER to SUPPLIER each month on a specific day. With regards to the agreed flexibility, it shall be assumed that the quantity in a month frame is equally distributed over the four weeks.

     1 FLEXIBILITY CORRIDOR rebated to PRODUCT DR2:

Week 1-2:            [*]
Week 3-4:            [*]
Week 5-8:            [*]
Week 9-12:          [*]
Week > 12:          [*]

     2 Rules for defining a FLEXIBILITY CORRIDOR:

R1 The Absolute Maximum Quantity can be maximally equal to the Physical Maximum Capacity.

R2 The Absolute Maximum / Minimum is determined by the Base Quantity and the Maximum / Minimum Flexibility when reaching a new Flexibility Zone.

R3 The new Absolute Maximum / Minimum can not be higher / lower than the Absolute Maximum / Minimum of the zone before.

When defining a FLEXIBILITY CORRIDOR the following terms shall apply:

Flexibility Zone	Area with the same flexibility
Maximum Flexibility	Percentage maximum per Flexibility Zone
Minimum Flexibility	Percentage minimum per Flexibility Zone
Base Quantity	Absolute quantity, when Flexibility Zone is entered the first time
Absolute Maximum	Absolute maximum quantity for each Flexibility Zone
Absolute Minimum	Absolute minimum quantity for each Flexibility Zone
Absolute Weekly Increase	Absolute quantity increase from week to week
Absolute Weekly Decrease	Absolute quantity decrease from week to week
Physical Maximum Capacity	Maximum applicable capacity of SUPPLIER

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	3 of 12
GENERAL ANNEXES

     3 FLEXIBILITY CORRIDOR Example:

     4 PURCHASER’s Liability

The PARTIES agree to meet and find a solution in order to share the costs raising from any unexpected unstable business or in an unexpected sudden phase out.

Such costs shall/may include:

• WIP

• Finished goods

• Materials as per list LSA Annex J

• Custom parts

Supplier must provide evidence of costs and necessary documentation (i.e. PO’s , invoices, etc.)

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	4 of 12
GENERAL ANNEXES

ANNEX C: Process and Operations Model

     1 STANDARD REPLENISHMENT: (Not applicable)

Rough description of the process:

• The stock level of the CONSIGNMENT STOCK shall be replenished by SUPPLIER to maintain the stock level according to ANNEX K.

• Daily consumption and inventory data related to the CONSIGNMENT STOCK shall be provided to SUPPLIER by ORDERING PARTY.

• SUPPLIER shall initiate the delivery process in such way that the stock level will never fall below the agreed minimum level as per ANNEX K.

• All kind of information, including but not limited to consumption and inventory data, shall be exchanged via EDI 98.B (DELFOR, INVRPT).

• Payment process:

™ Payment for consumption from the CONSIGNMENT STOCK shall be calculated and paid monthly. For the future it is foreseen to implement the SAP-credit-note system. Then no invoice shall be issued by SUPPLIER.

™ Accounting shall take place on a specific day of each month for the quantities consumed from the CONSIGNMENT STOCK and at the price valid on the issue date of the respective credit note.

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	5 of 12
GENERAL ANNEXES

™ Payment shall be made in line with the provisions of the FPA.

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	6 of 12
GENERAL ANNEXES

     2 DIRECT REPLENISHMENT 1: (Not applicable)

Rough description of the process:

• SUPPLIER shall maintain a SUPPLIER STOCK and/or DISTRIBUTION CENTER in order to supply into ORDERING PARTY LOCATIONS.

• The SUPPLIER STOCK and/or the DISTRIBUTION CENTERS are controlled according to the agreed stock levels following ANNEX L by SUPPLIER in such a way that deliveries can be made within the specified SDLT to each ORDERING PARTY LOCATION.

• SUPPLIER replenishes the consumed PRODUCT quantities into each LOCAL BUFFER by regular deliveries.

• Daily consumption and inventory data related to each LOCAL BUFFER shall be provided to SUPPLIER by the ORDERING PARTY.

• All kind of information, including but not limited to consumption and inventory data, shall be exchanged via EDI 98-B (DELFOR, INVRPT) and via EDI 96.B (ORDERS, ORDRSP, INVOIC)

• Payment process:

o Payment for LOCAL BUFFER receipts shall be calculated and paid monthly. For the future it is foreseen to implement the SAP-credit-note system. Then no invoice shall be issued by SUPPLIER.

o Accounting shall take place on a specific day of each month for the quantities received in the LOCAL BUFFER and at the price valid on the issue date of the respective credit note.

o Payment shall be made in line with the provisions of the FPA.

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	7 of 12
GENERAL ANNEXES

     3 DIRECT REPLENISHMENT 2:

Rough description of the process:

• After receiving a PURCHASE ORDER from ORDERING PARTY SUPPLIER shall deliver the ordered PRODUCTS to the location specified in the PURCHASE ORDER and within the SDLT specified in ANNEX M

• To ensure timely delivery SUPPLIER may keep a SUPPLIER STOCK, if necessary.

• The PURCHASE ORDER shall be issued by ORDERING PARTY and confirmed by SUPPLIER electronically.

• Payment process:

o   SUPPLIER shall issue an invoice to ORDERING PARTY.

o   ORDERING PARTY shall pay the invoice according to the provisions of the FPA.

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	8 of 12
GENERAL ANNEXES

ANNEX D: Minimum Documentation Requirements

The following information must exist:

Delivery note:	Delivery note number and date
	Order number
	Quantity
	PURCHASER material number
	PURCHASER part number
	PURCHASER description
	SUPPLIER product description
	Order unit if different from “pieces”
[*]
Product packaging:	SUPPLIER part number
	Quantity, if more than one (1)
	SUPPLIER PRODUCT description in plain text
	PURCHASER part number
	Date code
[*] in plain text

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	9 of 12
GENERAL ANNEXES

ANNEX E: Locations of the PARTIES

     1 ORDERING PARTY LOCATIONS, CONSIGNMENT STOCK locations

          a. ORDERING PARTY LOCATION Cassina

Legal Entity	Siemens Mobile Communications S.p.a
Street	V.Ie Piero e Alberto Pirelli, 10
Postal Code, City	20126 Milano
Country	Italy

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	CONFIDENTIAL	10 of 12
GENERAL ANNEXES

     2 SUPPLIER LOCATIONS, DISTRIBUTION CENTER locations

a. SUPPLIER LOCATION #1

Legal Entity: Endwave Corporation
Street: 776 Palomar Avenue
Postal Code: 94085
City: Sunnyvale
State: California
Country: USA

b. SUPPLIER LOCATION #2

Legal Entity:
Street:
Postal Code:
City:
State:
Country:

	Page Initialed by the PARTIES
[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	11 of 12
GENERAL ANNEXES

ANNEX F – CONSIGNMENT STOCK (“CS”) Terms (Not applicable)

A       Delivery of CONSIGNMENT STOCK PRODUCTS

1.	The subject of this ANNEX F is the performance of services relating to the receipt, the storage, the transportation and any commercial administration of CS PRODUCTS. SUPPLIER shall deliver CS PRODUCTS in accordance with ANNEX J to the CONSIGNMENT STOCK locations as specified in ANNEX E. Details of the CONSIGNMENT STOCK regulations at specific locations may be specified in an additional location specific CONSIGNMENT STOCK agreement.
2.	The CS inventory shall remain the property of SUPPLIER until withdrawn by ORDERING PARTY from such CS inventory. Risk of loss or damage to the CS PRODUCT shall pass to ORDERING PARTY at the time SUPPLIER has delivered the PRODUCT into the CONSIGNMENT STOCK in accordance with the terms and conditions of this LSA, except if the damages or losses have been caused by SUPPLIER and/or SUPPLIER’S freight forwarder.
3.	ORDERING PARTY may perform incoming goods inspections based on SUPPLIER’S delivery notes regarding quantity and identity of the delivered units of CS PRODUCTS as well as inspections on apparent defects. Loss or defects which have been detected during such an incoming goods inspection shall be documented by ORDERING PARTY and reported to SUPPLIER. Quantity variances of delivered CS PRODUCTS which have been detected by ORDERING PARTY during an incoming goods inspection shall be notified by ORDERING PARTY to SUPPLIER within [*] days of receipt of the relevant units of CS PRODUCTS. Whenever loss or damage has occurred to a CS PRODUCT prior to receipt by ORDERING PARTY at the CONSIGNMENT STOCK and becomes apparent to ORDERING PARTY within the incoming goods inspection, ORDERING PARTY should mark the delivery receipt with a description of the damage or loss before signing and shall do reasonable efforts to request the carrier to inspect and confirm such loss or damage by signing such marked receipt.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	12 of 12
GENERAL ANNEXES

B       Consigned Inventory Storage and Management

1.	ORDERING PARTY will provide a secure and separated space for CS PRODUCTS at the CONSIGNMENT STOCK, Storage of the goods is to occur in suitable, dry rooms. The CS PRODUCTS are to be protected from unauthorized access through suitable means.
2.	ORDERING PARTY may at it’s own discretion subcontract any of its obligations under this ANNEX F to a third party, whereby subcontracting of Storage of the CS PRODUCTS by ORDERING PARTY at a third party warehouse and/or subcontracting of related services to a third party shall not affect any of the contractual obligations of SUPPLIER and ORDERING PARTY under the framework of the FPA and this LSA.
3.	ORDERING PARTY will perform the receipt of goods, stocking, storage and withdrawal of CS PRODUCTS at no charge to SUPPLIER. ORDERING PARTY shall safeguard that the inventory management method FIFO (“First In, First Out’) will be used by its personnel and/or its subcontractors. ORDERING PARTY will maintain accurate and complete records with regard to the custody and care of the CONSIGNMENT STOCK. Such records shall be maintained in accordance with recognized commercial accounting practices, so that they may be readily audited. The records shall be held until all payments or final adjustments of payments have been made. ORDERING PARTY shall permit SUPPLIER to examine and audit such records, provided that [*] working days prior written notice has been given to SUPPLIER.

C.       Withdrawal and Invoicing

1. ORDERING PARTY will send to SUPPLIER electronically the actual inventory, receipts, and withdrawals, on each day having any inventory activity (i.e., receipts or withdrawals). SUPPLIER will submit invoices to ORDERING PARTY which shall identify the total quantities of CS PRODUCTS withdrawn from the inventory. SUPPLIER may issue EDI 98.8 (INVOIC) transactions. Invoices will be due and payable by ORDERING PARTY in full via electronic funds transfer to the account number specified by SUPPLIER in accordance with the respective regulations of the FPA. For the future it is foreseen to implement the SAP-credit-note system. Then no invoice shall be issued by SUPPLIER.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	13 of 12
GENERAL ANNEXES

2.	PRODUCTS withdrawn from CONSIGNMENT STOCK cannot be returned to CONSIGNMENT STOCK, unless mutually agreed by the PARTIES in writing. Defective CS PRODUCT shall be subject to warranty terms of the FPA.
3.	ORDERING PARTY agrees that CS PRODUCTS shall be withdrawn from the CONSIGNMENT STOCK only on a FIFO process.

D.       Inspection and Audit

SUPPLIER shall have the right to enter the CONSIGNMENT STOCK locations of ORDERING PARTY as listed in ANNEX E, during normal local business hours and upon [*] hours prior written notice, to conduct a physical inspection of the CONSIGNMENT STOCK and/or of the books and records for the respective CONSIGNMENT STOCK location. In the event SUPPLIER becomes aware of any problems with the CONSIGNMENT STOCK inventory, SUPPLIER will notify ORDERING PARTY in writing of any such problem without any delay. ORDERING PARTY is responsible for adjusting any deviations in inventory unless ORDERING PARTY is able to offer proof of having used sound stock maintenance principles. Deviations will be immediately accounted for as inventory corrections.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	1 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX G: Stand-in regulation in place

Contacts Logistics:

ORDERING PARTY	SUPPLIER
Name: [*]	Name: Steve McGowan
Phone: [*]	Phone: 1 408 522 3121
E-Mail: [*]	E-mail: steve.mcgowan@endwave.com

Document approved: Document approved:

1st December 2005 /s/ Rudolf Mazzoli	10/17/05 /s/ Steve Layton
Date, Rudolf Mazzoli	Date, Steve Layton
Senior Director	Vice President Sales
ICM MW OP I SLO

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	2 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX H: List of SR PRODUCTS (Not applicable)

Part no. SAP no. Supplier no. Product Class Description Product

Critical Component List:

Material	Lead time in weeks1)	Value in % of
		assembly price

1) [*]

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	3 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX I: List of DR-1 PRODUCTS (Not applicable)

Part no. SAP no. Supplier no. Product Class Description Product

Critical Component List:

Material	Lead time in weeks1)	Value in % of
		assembly price

1) [*]

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	4 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX J: List of DR-2 PRODUCTS

Part no.	SAP no.	Supplier no.	Product Class	Description	Product
[*]				38 GHz ND [*]
[*]				38 GHz ND [*]
[*]				38 GHz ND [*]
[*]				38 GHz ND [*]
[*]				38 GHz ND [*]
[*]				38 GHz ND [*]

Critical Component List:

			Value in % of
Material	Lead time in weeks1)		assembly price	End Product Usage
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND and 38 HD
[*]		[*]	[*]	38 GHz ND and 38 HD
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND
[*]		[*]	[*]	38 GHz ND

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	5 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

		Value in % of
Material	Lead time in weeks1)	assembly price	End Product Usage
[*]	[*]	[*]	38 GHz ND
[*]	[*]	[*]	38 GHz ND
[*]	[*]	[*]	38 GHz ND

1) [*]

2) ORDERING PARTY shall monthly provide, an informal forecast with [*] months visibility.

The SUPPLIER shall monthly provide, for the defined critical components. inventory and on order status.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	6 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX K: Stock Levels related to SR PRODUCTS (Not applicable)

The quantity of 1 DOS shall be calculated as follows:
First (1^st) month’s quantity of each FORECAST issued divided by the number of working days during this month.

ORDERING PARTY LOCATION:
Minimum stock level in CONSIGNMENT STOCK	[*]
Maximum stock level in CONSIGNMENT STOCK	[*]

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	7 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX L: Stock Levels related to DR-1 PRODUCTS (Not applicable)

The quantity of 1 DOS shall be calculated as follows:

First (1^st) month’s quantity of each FORECAST issued divided by the number of working days during this month.

ORDERING PARTY LOCATION:
Maximum SDLT	within [*]
Minimum stock level in LOCAL BUFFER	[*]
Maximum stock level in LOCAL BUFFER	[*]
Stock level of SUPPLIER STOCK or DC	at least [*] for daily delivery, in order to ensure [*] upside flexibility in short term
Emergency replenishment:	[*] within [*] hours out of SUPPLIER STOCK or DC

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	8 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX M: Stock Levels related to DR-2 PRODUCTS

The quantity of 1 DOS shall be calculated as follows:

First (1^st) month’s quantity of each FORECAST issued divided by the number of working days during this month.

ORDERING PARTY LOCATION:
Minimum stock level of SUPPLIER STOCK	No specific stock levels required, SUPPLIER has to guarantee to replenish the material within the required replenishment time, thus it may be necessary to hold a stock level on SUPPLIER site
Maximum SDLT	[*]

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	9 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

ANNEX N: Goods Receiving

If not otherwise specified below, all deliveries shall take place during the opening hours of the goods-receiving department of the ORDERING PARTY LOCATION. All times defined in this LSA are stated in a 24-hour format and as local time of the respective ORDERING PARTY LOCATION.

     1 STANDARD REPLENISHMENT (Not applicable)

SUPPLIER shall deliver PRODUCTS using the respective standardized containers (in case they have been defined by PURCHASER). A continuous container exchange between SUPPLIER and ORDERING PARTY shall be implemented.

     a. Opening hours at ORDERING PARTY LOCATION:

Day	Goods Receiving
Monday – Friday	06.30 – 20.00
Saturday	Special arrangements
Sunday	Special arrangements

     b. Logistic Data

The logistic data shall include the container quantities and container type for each PRODUCT to be delivered by SUPPLIER.

The latest version of the logistic data will be provided to SUPPLIER by ORDERING PARTY and it may be adjusted at short notice.

SUPPLIER shall notify ORDERING PARTY immediately in case of missing logistic data.

     2 DIRECT REPLENISHMENT 1 (Not applicable)

SUPPLIER shall deliver PRODUCTS using the respective standardized containers (in case they have been defined by PURCHASER). A continuous container exchange between SUPPLIER and ORDERING PARTY shall be implemented.

Deliveries into each LOCAL BUFFER shall meet the respective delivery time slot defined between ORDERING PARTY and SUPPLIER.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA)	C O N F I D E N T I A L	10 of 10
SPECIFIC ANNEXES FOR ORDERING PARTY LOCATIONS

     a. Opening hours at ORDERING PARTY LOCATION:

Day	Goods Receiving
Monday – Friday	06.30 – 20.00
Saturday	Special arrangements
Sunday	Special arrangements

     b. Logistic Data

The logistic data shall include the container quantities and container type for each PRODUCT to be delivered by SUPPLIER.

The latest version of the logistic data will be provided to SUPPLIER by ORDERING PARTY and it may be adjusted at short notice. SUPPLIER shall notify ORDERING PARTY immediately in case of missing logistic data.

     3 DIRECT REPLENISHMENT 2:

SUPPLIER shall deliver all DR-2 PRODUCTS packed as agreed with PURCHASER/ORDERING PARTY.

     a. Opening times at ORDERING PARTY LOCATION:

Day	Goods Receiving
Monday – Friday	06.30 – 20.00
Saturday	Special arrangements
Sunday	Special arrangements

     b. Logistic Data

The logistic data shall include the container quantities and container type for each PRODUCT to be delivered by SUPPLIER.

The latest version of the logistic data will be provided to SUPPLIER by ORDERING PARTY and it may be adjusted at short notice. SUPPLIER shall notify ORDERING PARTY immediately in case of missing logistic data.

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 1 of 10

ANNEX O                                                Location specific Amendment

to

Logistic Service Agreement (LSA)
for
ORDERING PARTY Cassina only

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[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 2 of 10

In Amendment to the existing LSA to the FPA the following shall exclusively apply for the delivery and logistic of PRODUCTS if PRODUCTS are delivered to MW Cassino, Siemens Mobile Communications S.p.a, S.S.11 Padana Superiore Km 158, 20060 Cassino de’ Pecchi, Italy (ORDERING PARTY).

LSA Body

The articles from 1.20 to 1.24 shall be added :

1.20	The term “WFS” shall mean a specific technical architecture (Web File Server) provided by ORDERING PARTY to support electronic data interchange between ORDERING PARTY and SUPPLIER or DESIGNATED SUBSIDIARY as required by this LSA.
1.21	The term “FULL CONSIGNMENT” shall be the synonym for “STANDARD REPLENISHMENT”.
1.22	The term “SPLITTED CONSIGNMENT” shall be the synonym for “DIRECT REPLENISHMENT 1”
1.23	The term “SUPPLIER SAFETY BUFFER “ shall be the synonym for “DIRECT REPLENISHMENT 2”.
1.24	The term “SCHEDULING” shall mean the period of [*] days starting with the 1st day on which a demand is indicated to SUPPLIER.
1.25	The term “SAFETY BUFFER” shall mean a defined SUPPLIER stock at supplier site or in DC

The article 2.3 shall be added :

In the event of a conflict between this LSA and the FPA, the terms of the FPA shall control

In the article 6.1.1 the item “• issue of a FRAME ORDER” is not relevant.

The item “• no call-off for CONSIGNMENT STOCK replenishment” shall be added.

In the article 6.1.2 the following items are not relevant:

• issue of a FRAME ORDER

• ship to stock delivery by SUPPLIER into a LOCAL BUFFER

     The following items shall be added:

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 3 of 10

• delivery by SUPPLIER into a LOCAL BUFFER at ORDERING PARTY LOCATION on a consignment basis.

• call-off for LOCAL BUFFER at ORDERING PARTY LOCATION on a consignment basis.

• SDLT no longer than one (1) week.

In the article 6.1.3

Supply Class DIRECT REPLENISHMENT 2

This supply class shall apply to all PRODUCTS listed in ANNEX J.

Operating principles for a DR-2 PRODUCT shall be:

• FORECAST from PURCHASER as per Article 6.3 below

• delivery by SUPPLIER at the location specified in the respective PURCHASE ORDER

• call-off via PURCHASE ORDERS

• SAFETY BUFFER at SUPPLIER or DC

• defined service level as per Article 6.2.3 below

• performance measurement as per Article 6.2.3 below

• payment as per ANNEX C

In the article 6.2.2 the definitions for “LOCAL BUFFER” and “On-time delivery” shall be superseded by the following wording :

LOCAL BUFFER	SUPPLIER refills the CONSIGNMENT STOCK according to call-off issued by ORDERING PARTY
On-time delivery	meet the DELIVERY DATE as per call-off

In the article 6.2.3

Service Level for DIRECT REPLENISHMENT 2

SUPPLIER shall meet the following criteria and both PARTIES agree to monitor the following performance metrics each month:

Ordering/replenishment planning	under full responsibility of each ORDERING PARTY
SAFETY BUFFER	according the List A
Contract contacts and
stand-in regulation in place	according to ANNEX A and ANNEX J

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 4 of 10

Early-warning system in place according to Article 6.6.1 below

Page Initialed by the PARTIES

[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 6 of 10

Metric	SUPPLIER Commitment
Maximum SDLT	according to ANNEX M
On-time delivery	to meet the DELIVERY DATE as per PURCHASE ORDER
Material availability	according to FORECAST and FLEXIBILITY CORRIDOR
Caused line-break-down	zero (0) times at ORDERING PARTY

Any missed on-time delivery or any caused line-break-down at ORDERING PARTY shall be deemed as a DELIVERY DATE not met by SUPPLIER and thus shall be regarded as a late delivery like provided for in the FPA.

The article 6.3 shall be superseded in its’ entirety and replaced by the following wording :

6.3 FORECAST and SCHEDULING

A FORECAST is a planning tool intended to improve the demand visibility for a period of at least four weeks, depending on the respective PRODUCT family.

The FORECAST together with the respective FLEXIBILITY CORRIDOR as defined in ANNEX B shall reflect the cumulative demand of a PRODUCT in specified timeframe by all ORDERING PARTIES as predicted by PURCHASER, status as of the date of issue.

PURCHASER shall issue such FORECAST fortnightly and shall send it to SUPPLIER via WFS.

The FORECAST last issued by PURCHASER shall supersede all FORECASTS issued before.

SUPPLIER shall give feedback to PURCHASER regarding feasibility of the FORECAST via WFS within [*] days from receipt or such FORECAST, otherwise such FORECAST shall be deemed as accepted.

The FORECAST and SCHEDULING shall not constitute and shall not be interpreted as any obligation of PURCHASER/ORDERING PARTIES to purchase PRODUCTS.

In case the demand of PURCHASER/ORDERING PARTIES is higher than specified by the FLEXIBILITY CORRIDOR both PARTIES shall mutually agree on a solution.

6.3.1. FORECAST and SCHEDULING for SR PRODUCTS (Not applicable)
The quantities shown in the FORECAST as per ANNEX B are planned gross demands. The FORECAST together with the respective FLEXIBILITY CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production and to replenish each CONSIGNMENT STOCK. The FORECAST is binding according to the quantities and the validity of defined flexibility, but is not binding referring to the chronological demand. SUPPLIER must take the flexibility range shown in ANNEX B into consideration when using the FORECAST.

The replenishment of CONSIGNMENT STOCK shall be consumption driven only.

6.3.2. FORECAST and SCHEDULING for DR-1 PRODUCTS (Not applicable)

The replenishment of a LOCAL BUFFER (at ORDERING PARTY LOCATION) on a consignment basis is driven via call-off

The quantities shown in the FORECAST and scheduling as per ANNEX B are planned gross demands. The FORECAST and scheduling together with the respective FLEXIBILITY

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 6 of 10

CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production,

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[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 7 of 10

procurement of components, his SUPPLIER STOCK and/or DISTRIBUTION CENTERS. SUPPLIER must take the flexibility range shown in ANNEX B into consideration when using the FORECAST and scheduling.

Delivery shall be based on individual PURCHASE ORDERS only.

The flexibility range with defined upward and downward flexibility has to start latest on the DELIVERY DATE.

6.3.3. FORECAST and SCHEDULING for DR-2 PRODUCTS

The quantities shown in the FORECAST as per ANNEX B are planned gross demands. The FORECAST together with the respective FLEXIBILITY CORRIDOR shall be used as a guideline and planning tool by SUPPLIER to manage his production and to guarantee the defined minimum SDLT. SUPPLIER must take the flexibility range shown in ANNEX B into consideration when using the FORECAST.

Delivery shall be based on individual PURCHASE ORDERS only.

The flexibility range with defined upward and downward flexibility has to start latest on the DELIVERY DATE.

The article 6.4 shall be superseded in its’ entirety and replaced by the following wording:

6.4 Buffering

6.4.1 Buffering for SR Products (Not applicable)

SUPPLIER agrees to build up and maintain an agreed stock level of SR PRODUCTS on each CONSIGNMENT STOCK. The stock levels agreed for each CONSIGNMENT STOCK are listed in ANNEX K.

Both PARTIES agree to revise and adjust ANNEX K at least quarterly in order to adapt the stock levels to changes in demand requirements.

6.4.2 Buffering for DR-1 PRODUCTS (Not applicable)

SUPPLIER agrees to build and carry a SUPPLIER STOCK and/or at least one DISTRIBUTION CENTER dedicated to DR1 PRODUCTS. The agreed stock levels are listed in ANNEX L.

SUPPLIER agrees to manage its internal production and supply processes to maintain the stock levels in the SUPPLIER STOCK and/or DISTRIBUTION CENTERS, as listed in ANNEX L, at all times. SUPPLIER is responsible for all aspects of managing the SUPPLIER STOCK and/or DISTRIBUTION CENTERS including, but not limited to, planning, carrying costs and replenishment.

SUPPLIER shall report the stock levels held in the SUPPLIER STOCK and DISTRIBUTION CENTERS to PURCHASER and ORDERING PARTY at least once a week. This data is necessary for PURCHASER and ORDERING PARTY to execute material availability calculations.

PURCHASER reserves the right to inspect the SUPPLIER STOCK and the DISTRIBUTION CENTERS at any time with [*] prior written notice to SUPPLIER.

Both PARTIES agree to revise and adjust ANNEX L at least quarterly in response to changes in demand requirements.

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 8 of 10

6.4.3 Buffering for DR-2 PRODUCTS

SUPPLIER has to guarantee to replenish the material within the SDLT.

[*]

SUPPLIER shall inform ORDERING PARTY about SAFETY BUFFER stock levels held in the SUPPLIER site and /or DISTRIBUTION CENTERS at least once a week.

PURCHASE ORDERS shall be issued in accordance with the FPA.

Example of List A:

The article 6.5 shall be superseded in it’s entirety and replaced by the following wording :

6.5. Order Processing, Call-Off and Replenishment

6.5.1. Order Processing, Call-Off and Replenishment for SR (Not applicable)

The replenishment of a SR PRODUCT shall be initiated by consuming such SR PRODUCT from the CONSIGNMENT STOCK, that is by decreasing the stock level. PURCHASER shall daily provide consumption and inventory data per each SR PRODUCT. Such data shall be exchanged electronically between SUPPLIER and PURCHASER. SUPPLIER shall manage the delivery process in such way that the stock level of the CONSIGNMENT STOCK will never fall below the agreed minimum stock level. The CONSIGNMENT STOCK must not be replenished beyond the agreed maximum stock level listed in ANNEX K.

If the quantity of a SR PRODUCT consumed from the CONSIGNMENT STOCK is not covered by the respective FORECAST and FLEXIBILITY CORRIDOR, SUPPLIER shall inform PURCHASER within [*] working day after receipt of the consumption and inventory data. Further, if SUPPLIER is not able to replenish according to the agreed minimum level as per ANNEX K, SUPPLIER shall inform PURCHASER within [*] after receipt of the consumption and inventory data. Not withstanding the above, the order acceptance provisions of the FPA shall apply.

PURCHASER shall pay for each SR PRODUCT consumed from the CONSIGNMENT STOCK at the price valid on the date of consumption.

6.5.2. Order Processing, Call-Off and Replenishment for DR-1 (Not applicable)

ORDERING PARTY shall issue a call off of DR1 PRODUCT into LOCAL BUFFER (at ORDERING PARTY LOCATION) on a consignment basis at ORDERING PARTY LOCATION.

SUPPLIER shall deliver the required quantities on DELIVERY DATE and in line with the maximum SDLT as defined in ANNEX L.

All information shall be exchanged via WFS between SUPPLIER and ORDERING PARTY.

SUPPLIER shall manage the stock levels of his SUPPLIER STOCK and/or DISTRIBUTION CENTERS.

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 9 of 10

If required quantities are not covered by the respective FORECAST and FLEXIBILITY CORRIDOR, SUPPLIER shall inform ORDERING PARTY in accordance with the order acceptance provisions of the FPA.

ORDERING PARTY will pay for each DR1 PRODUCT consumed from the LOCAL BUFFER on a consignment basis at the price valid on the date of consumption.

6.5.3. Order Processing, Call-Off and Replenishment for DR-2

ORDERING PARTY shall issue a PURCHASE ORDER to call off a DR2 PRODUCT into LOCAL BUFFER (at ORDERING PARTY LOCATION).

SUPPLIER shall deliver the required quantities on DELIVERY DATE and in line with the maximum SDLT as defined in ANNEX M.

All information shall be exchanged via WFS between SUPPLIER and ORDERING PARTY. SUPPLIER shall manage the stock levels of his SAFETY BUFFER

If required quantities are not covered by the respective FORECAST and FLEXIBILITY CORRIDOR, SUPPLIER shall inform ORDERING PARTY in accordance with the order acceptance provisions of the FPA.

ORDERING PARTY shall pay for each DR-2 PRODUCT based on an invoice to be issued by SUPPLIER

LSA, ANNEX B

ANNEX B shall be superseded in it’s introduction and replaced by the following wording :

The FORECAST shall be sent by PURCHASER to SUPPLIER weekly. With regards to the agreed flexibility, it shall be assumed that the quantity in a monthly frame is equally distributed over the four weeks.

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 10 of 10

LSA, ANNEX C

ANNEX C shall be superseded in its entirety and replaced by the following wording :

STANDARD REPLENISHMENT (within MW named as FULL CONSIGNMENT) – (Not applicable) Rough description of the process:

All kind of information, including but not limited to consumption and inventory data, shall be exchanged via Web File Server.

Payment process :

Payment for consumption from the CONSIGNMENT STOCK shall be calculated and paid monthly. Invoices issued by SUPPLIER shall be based on consumption data provided by ORDERING PARTY and submitted by SUPPLIER via WFS to ORDERING PARTY. Then, no invoice’s hardcopy shall be sent by SUPPLIER.

Accounting shall take place on a specific day of each month for the quantities consumed from the CONSIGNMENT STOCK and at the price valid on the consumption.

Payment shall be made in line with the provisions of FPA

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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 11 of 10

DIRECT REPLENISHMENT 1 (within MW named as SPLITTED CONSIGNMENT) – (Not applicable)

Rough description of the process:

After receiving the call-off from ORDERING PARTY, SUPPLIER shall deliver the required PRODUCTS to the ORDERING PARTY LOCATION and within the SDLT specified in ANNEX L Daily consumption and inventory data related to each Local Buffer on a Consignment basis shall be provided to SUPPLIER by the ORDERING PARTY.

All kind of information, including but not limited to consumption and inventory data, shall be exchanged via Web File Server.

Payment process:

Payment for consumption from the Local Buffer on a Consignement basis shall be calculated and paid monthly. Invoices issued by SUPPLIER shall be based on consumption data provided by ORDERING PARTY and submitted via WFS to ORDERING PARTY. Then, no invoice’s hardcopy shall be sent by SUPPLIER.

Accounting shall take place on a specific day of each month for the quantities consumed from the

Local Buffer on a Consignement basis and at the price valid on the consumption.

Payment shall be made in line with the provisions of the FPA.

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[*]
[*]

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT B (LSA) C O N F I D E N T I A L 12 of 10

DIRECT REPLENISHMENT 2 (within MW named as SUPPLIER SAFETY BUFFER)

     Rough description of the process:

• After receiving a PURCHASE ORDER from ORDERING PARTY SUPPLIER shall deliver the ordered PRODUCTS to the location specified in the PURCHASE ORDER and within the SDLT specified in ANNEX M

• To ensure timely delivery SUPPLIER must keep a SAFETY BUFFER at Supplier Site

• The PURCHASE ORDER shall be issued by ORDERING PARTY and confirmed by SUPPLIER electronically.

• Payment process:

o SUPPLIER shall issue an invoice to ORDERING PARTY.

o ORDERING PARTY shall pay the invoice according to the provisions of the FPA.

Page Initialed by the PARTIES

[*]
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[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 333-128331, 333-123577 and 333-75798) and Forms S-8 (Nos. 333-115183 and 333-49012) of Endwave Corporation of our reports dated March 14, 2006 relating to the consolidated financial statements and financial statement schedule as of December 31, 2005 and 2004 and for each of the two years in the period ended December 31, 2005, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005, and the effectiveness of internal control over financial reporting as of December 31, 2005, which appear in this Form 10-K.

/s/ Burr, Pilger & Mayer LLP

Palo Alto, California
March 14, 2006

EX-23.2

Exhibit 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We consent to the incorporation by reference in the (i) Registration Statements (Form S-3 No. 333-75798 and No. 333-123577) of Endwave Corporation and related Prospectuses and (ii) Registration Statements (Form S-8 No. 333-49012) pertaining to the 1992 Stock Option Plan, 2000 Equity Incentive Plan, 2000 Non-Employee Directors’ Stock Option Plan and the 2000 Employee Stock Purchase Plan of Endwave Corporation and ( Form S-8 No. 333-115183) pertaining to the 2000 Equity Incentive Plan and 2000 Employee Stock Purchase Plan of Endwave Corporation of our report dated February 3, 2004, with respect to the statements of operations, stockholders’ equity, and cash flows and schedule of Endwave Corporation for the year ended December 31, 2003, included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/ Ernst & Young LLP

Palo Alto, California

March 14, 2006

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Edward A. Keible, Jr., certify that:

1.	I have reviewed this annual report on Form 10-K of Endwave Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2006

/s/ Edward A. Keible, Jr.  Edward A. Keible, Jr.

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Julianne M. Biagini, certify that:

1.	I have reviewed this annual report on Form 10-K of Endwave Corporation;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2006

/s/ Julianne M. Biagini  Julianne M. Biagini

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350, as adopted), Edward A. Keible, Jr., Chief Executive Officer of Endwave Corporation (the “Company”), and Julianne M. Biagini, Chief Financial Officer of the Company, each hereby certify that, to the best of their knowledge:

     1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2005, to which this Certification is attached as Exhibit 32.1 (the “Annual Report”) fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and

     2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     IN WITNESS WHEREOF, the undersigned have set their hands hereto as of March 14, 2006.

/s/ Edward A. Keible, Jr.	/s/ Julianne M. Biagini
Edward A. Keible, Jr.	Julianne M. Biagini
Chief Executive Officer	Chief Financial Officer