<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION NO. 333-05307
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROXIM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 77-0059429
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 960-1630
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID C. KING
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROXIM, INC.
295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 960-1630
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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JEFFREY D. SAPER, ESQ. EDWARD M. LEONARD, ESQ.
RICHARD C. DEGOLIA, ESQ. SCOTT D. LESTER, ESQ.
ROBERT G. DAY, ESQ. BROBECK, PHLEGER & HARRISON LLP
WILSON SONSINI GOODRICH & ROSATI TWO EMBARCADERO PLACE
PROFESSIONAL CORPORATION 2200 GENG ROAD
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94303
PALO ALTO, CALIFORNIA 94304-1050 (415) 424-0160
(415) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and Canada the ("U.S.
Prospectus") and the other to be used in connection with a concurrent
international offering (the "International Prospectus"). The two prospectuses
are identical except for the outside front cover page. The form of U.S.
Prospectus outside front cover page is included behind this explanatory note and
is followed by the differing outside front cover page to be used in the
International Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS Subject to Completion, Dated June 26, 1996
2,500,000 SHARES
LOGO
COMMON STOCK
------------------------
Of the 2,500,000 shares of Common Stock offered hereby, 1,875,000 shares
are being offered initially in the United States and Canada by the U.S.
Underwriters and 625,000 shares are being offered initially outside of the
United States and Canada by the International Underwriters. See "Underwriting."
All of the 2,500,000 shares of Common Stock offered hereby are being sold by
Proxim, Inc. ("Proxim" or the "Company"). The Company's Common Stock is traded
on the Nasdaq National Market under the symbol "PROX." On June 3, 1996, the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
was $40.25 per share. See "Price Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
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Per Share................... $ $ $ $
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Total(3).................... $ $ $ $
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</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $675,000.
(3) The Company has granted the U.S. Underwriters an option, exercisable within
30 days from the date hereof, to purchase up to 375,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public will be $ , the Underwriting Discounts and
Commissions will be $ and the Proceeds to the Company will be
$ . See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of the shares will be made through the
offices of UBS Securities LLC, 299 Park Avenue, New York, New York on or about
, 1996.
------------------------
UBS SECURITIES
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
, 1996
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS Subject to Completion, Dated June 26, 1996
2,500,000 SHARES
LOGO
COMMON STOCK
------------------------
Of the 2,500,000 shares of Common Stock offered hereby, 625,000 shares
are being offered initially outside of the United States and Canada by the
International Underwriters and 1,875,000 shares are being offered initially in
the United States and Canada by the U.S. Underwriters. See "Underwriting." All
of the 2,500,000 shares of Common Stock offered hereby are being sold by Proxim,
Inc. ("Proxim" or the "Company"). The Company's Common Stock is traded on the
Nasdaq National Market under the symbol "PROX." On June 3, 1996, the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
was $40.25 per share. See "Price Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<S> <C> <C> <C> <C>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
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Per Share................... $ $ $ $
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Total(3).................... $ $ $ $
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</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $675,000.
(3) The Company has granted the U.S. Underwriters an option, exercisable within
30 days from the date hereof, to purchase up to 375,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public will be $ , the Underwriting Discounts and
Commissions will be $ and the Proceeds to the Company will be
$ . See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of the shares will be made through the
offices of UBS Securities LLC, 299 Park Avenue, New York, New York on or about
, 1996.
------------------------
UBS LIMITED
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
, 1996
<PAGE> 5
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
This Prospectus includes trademarks of the Company and other companies.
2
<PAGE> 6
PROSPECTUS SUMMARY
This Prospectus contains certain statements of a forward-looking nature
relating to future events or future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, a prospective investor should specifically consider the various
factors identified in or incorporated by reference into this Prospectus,
including the matters set forth under the caption "Risk Factors," which could
cause actual results to differ materially from those indicated in such
forward-looking statements. The following summary is qualified in its entirety
by the more detailed information, including "Risk Factors" and Financial
Statements and Notes thereto, appearing elsewhere in, or incorporated by
reference into, this Prospectus. Unless otherwise indicated, the information
contained in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
Proxim designs, manufactures and markets high performance wireless local
area data networking products based on spread spectrum radio frequency
technology. Proxim's highly integrated wireless client adapters and network
infrastructure systems seamlessly extend existing enterprise LANs to enable
mobility-driven applications in a wide variety of in-building and campus area
environments. Proxim's RangeLAN2TM 2.4 GHz wireless LAN technology has been
adopted by a number of major mobile computer system and handheld data terminal
manufacturers, as well as many leading wireless solution providers, for
real-time data collection applications in manufacturing, warehousing,
transportation and retailing and for point-of-service network applications in
healthcare, hospitality and financial services.
Significant technological advances and changes in the regulatory
environment have facilitated the development and proliferation of wireless
networking solutions which extend the reach of existing wired networks. Recent
advances in wireless data communications technology have enabled the development
of a new generation of 2.4 GHz wireless LAN products that operate at
significantly higher data rates and utilize standard network interfaces and
protocols to seamlessly extend existing enterprise data networks in a wide
variety of vertical markets and applications. As a result of recent regulatory
changes, the 2.4 GHz frequency band has been allocated for unlicensed wireless
networks in virtually every developed country around the world. The universal
availability of this unlicensed spectrum has encouraged wireless LAN suppliers
to design standard products and solutions which can be used globally. The
Company believes that the convergence of worldwide spectrum availability,
emerging standards and new high performance products will lead to more
widespread deployment of wireless LAN products to achieve improved productivity
and enhanced customer service in both established industrial data collection
applications as well as emerging point-of-service network applications.
In 1994, Proxim pioneered 2.4 GHz frequency hopping wireless LAN technology
by being first to market with its RangeLAN2 product family. Proxim designs high
performance open systems wireless communications products that transparently
extend the reach of existing enterprise LANs using standard network interfaces
and protocols. RangeLAN2's unique frequency hopping systems architecture and
wireless LAN protocols create a robust RF network environment that
cost-effectively expands to accommodate an increasing number of mobile users and
applications. The RangeLAN2 family incorporates a number of industry-leading
technology innovations to achieve superior product performance and
functionality. The widespread availability of RangeLAN2-based mobile computer
and peripheral systems allows end users to select from numerous interoperable
products in meeting their application requirements.
Proxim's objective is to maintain its leadership position in the wireless
LAN market by enhancing the performance and functionality of its existing
products, developing new wireless communications technologies and products,
working closely with its OEM customers and wireless solution partners to expand
into new markets and applications, and strengthening its international marketing
and distribution capabilities.
The Company sells its products directly to OEM customers, and indirectly to
value added resellers, system integrators and end users through regional,
national and international distributors. Since 1994, Proxim
3
<PAGE> 7
has captured a substantial number of key design wins with major 2.4 GHz OEM
customers. Currently, the Company has relationships with over 50 OEM customers
and application solution providers for its RangeLAN2 products. Representative
OEM customers include AMP Incorporated, Data General Corporation, Digital
Equipment Corporation, Fujitsu Personal Systems, Inc., Intermec Corporation,
LXE, Inc., Norand Corporation, NTT Intelligent Technology Co., Ltd., SpaceLabs
Medical, Inc. and Zenith Data Systems Corporation.
The Company was incorporated in California in December 1984 and was
reincorporated in Delaware in December 1993. Its principal executive offices are
located at 295 North Bernardo Avenue, Mountain View, California 94043 and the
Company's telephone number is (415) 960-1630.
THE OFFERING
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<S> <C>
Common Stock offered............................. 2,500,000 shares
Common Stock to be outstanding after the
offering....................................... 9,956,000 shares(1)
Use of Proceeds.................................. For working capital, capital expenditures
and other general corporate purposes
Nasdaq National Market Symbol.................... PROX
Risk Factors..................................... The Common Stock offered hereby involves a
high degree of risk. See "Risk Factors."
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 2,672 $ 4,114 $ 8,078 $11,297 $22,083 $3,363 $8,901
Gross profit.................. 558 1,696 4,171 6,076 11,240 1,744 4,362
Research and development...... 1,673 1,199 1,474 1,783 3,288 652 1,070
Selling, general and
administrative............. 1,368 2,383 2,821 3,982 6,694 1,235 2,127
Income (loss) from
operations................. (2,483) (1,886) (124) 311 1,258 (143) 1,165
Net income (loss)............. (2,494) (1,902) (99) 745 2,846 18 912
Net income (loss) per
share(2)................... -- (.36) (.02) .10 .35 .00 .11
Weighted average common shares
and equivalents(2)......... -- 5,326 5,665 7,738 8,172 7,733 8,268
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 5,590 $100,609
Working capital...................................................... 17,256 112,275
Total assets......................................................... 23,875 118,894
Stockholders' equity................................................. 19,525 114,544
</TABLE>
- ---------------
(1) Based upon shares outstanding as of March 31, 1996. Excludes as of March 31,
1996 (i) 1,377,250 shares reserved for issuance upon exercise of outstanding
stock options, (ii) 1,140,000 additional shares reserved for future issuance
pursuant to the Company's 1995 Long-Term Incentive Plan, (iii) 231,913
additional shares reserved for future issuance under the Company's 1993
Employee Stock Purchase Plan and (iv) 53,542 additional shares reserved for
future issuance under the Company's 1994 Director Option Plan.
(2) Net loss per share for 1992 is a pro forma calculation based on the weighted
average number of outstanding shares of Common Stock plus common stock
equivalents. Common stock equivalents include stock options and warrants
granted between October 1, 1992 and December 22, 1993 (using the treasury
stock method and the initial public offering price) and Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock
on their respective original dates of issuance, even though anti-dilutive
for all periods through the effectiveness of the Company's initial public
offering. Net loss per share for 1991 has not been presented as such
information is not meaningful. See Note 2 of Notes to Financial Statements.
(3) Adjusted to give effect to the issuance and sale by the Company of 2,500,000
shares of Common Stock offered hereby at an assumed public offering price of
$40.25 per share after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company and the application of
the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
4
<PAGE> 8
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in, or
incorporated by reference into, this Prospectus. In addition to the other
information in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company's business before purchasing shares of the
Company's Common Stock offered hereby.
POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS
The Company has experienced, and may in the future continue to experience,
significant annual and quarterly fluctuations in revenue, gross margins and
operating results due to numerous factors, some of which are outside the
Company's control. These factors include fluctuating market demand for, and
declines in the average selling prices of, the Company's products, the timing of
and delays or cancellations of significant orders from OEM customers, the cost,
availability and quality of components from the Company's suppliers, the cost,
availability, and quality of assemblies from subcontractors, the lengthy sales
and design-in cycles for OEM products, delays in the introduction of the
Company's new products, competitive product introductions, market adoption of
new technologies and standards, the mix of products sold, the effectiveness of
the Company's distribution channels, the failure to anticipate changing customer
product requirements, seasonality, manufacturing capacity and efficiency,
changes in the regulatory environment and general economic conditions.
Historically, the Company has not operated with a significant order backlog and
a substantial portion of the Company's revenue in any quarter has been derived
from orders booked and shipped in that quarter. Accordingly, the Company's
revenue expectations are based almost entirely on its internal estimates of
future demand and not on firm customer orders. Planned expense levels are
relatively fixed in the short term and are based in large part on these
estimates, and if orders and revenue do not meet expectations, the Company's
operating results could be materially adversely affected. In this regard, in the
third quarter of 1994, the Company experienced a decrease in revenue and an
operating loss as a result of lower than expected orders in connection with the
transition of several OEM customers from 900 MHz products to 2.4 GHz RangeLAN2
products. There can be no assurance that the Company will not experience future
quarter to quarter decreases in revenue and gross margins or quarterly operating
losses. In addition, due to the timing of orders from OEM customers, the Company
has often recognized a substantial portion of its revenue in the last month of a
quarter. As a result, minor fluctuations in the timing of orders and the
shipment of products have caused, and may in the future cause, operating results
to vary significantly from quarter to quarter. It is possible that due to such
fluctuations or other factors, the Company's future operating results could be
below the expectations of securities analysts and investors. In such an event,
or in the event that adverse market conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
DEPENDENCE ON A LIMITED NUMBER OF OEM CUSTOMERS
Historically, a substantial portion of the Company's revenue has been
derived from a limited number of customers, most of which are OEM customers.
Approximately 76%, 79%, 56%, and 83% of the Company's total revenue during the
first quarter of 1996 and during 1995, 1994 and 1993, respectively, were to OEM
customers. Sales to two OEM customers represented approximately 27% and 14%, of
the Company's total revenue during 1995. Sales to three OEM customers
represented approximately 27%, 17% and 11% of the Company's total revenue during
the first quarter of 1996. The Company expects that sales to a limited number of
OEM customers will continue to account for a substantial portion of its revenue
during any period for the foreseeable future. The Company also has experienced
quarter to quarter variability in sales to each of
5
<PAGE> 9
its major OEM customers and expects this pattern to continue in the future. The
loss of one or more of the Company's major OEM customers could have a material
adverse effect on the Company's results of operations.
Sales of many of the Company's wireless networking products depend in
significant part upon the decision of a prospective OEM customer to develop and
market wireless solutions which incorporate the Company's wireless technology.
OEM customers' orders are affected by a variety of factors such as new product
introductions, regulatory approvals, end user demand for OEM customers'
products, product life cycles, inventory levels, manufacturing strategy,
contract awards, competitive conditions and general economic conditions. Sales
of the Company's products generally involve a significant commitment of capital
and other resources by its customers, with the attendant delays associated with
such customers' internal procedures to approve such commitment. For these and
other reasons, the design-in cycle associated with the purchase of the Company's
wireless products by OEM customers is quite lengthy, generally ranging from six
months to two years, and is subject to a number of significant risks, including
customers' budgeting constraints and internal acceptance reviews, that are
beyond the Company's control. Because of the lengthy sales cycle, the Company
typically plans its production and inventory levels based on internal forecasts
of OEM customer demand, which is highly unpredictable and can fluctuate
substantially. In addition, the Company's agreements with OEM customers
typically do not require minimum purchase quantities and a significant
reduction, delay or cancellation of orders from any of these customers could
have a material adverse effect on the Company's results of operations. If
revenue forecasted from a specific customer for a particular quarter is not
realized in that quarter, the Company's operating results for that quarter could
be materially adversely affected. In addition, there can be no assurance that
the Company will become a qualified supplier for new OEM customers or that the
Company will remain a qualified supplier for existing OEM customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Customers" and "-- Sales and Marketing."
SOLE OR LIMITED SOURCES OF SUPPLY
Certain parts and components used in the Company's products, including the
Company's proprietary application specific integrated circuits ("ASICs"),
monolithic microwave integrated circuits ("MMICs") and assembled circuit boards,
are only available from single sources, and certain other parts and components
are only available from a limited number of sources. The Company's reliance on
these sole source or limited source suppliers involves certain risks and
uncertainties, including the possibility of a shortage or discontinuation of
certain key components and reduced control over delivery schedules,
manufacturing capability, quality and costs. Any reduced availability of such
parts or components when required could materially impair the Company's ability
to manufacture and deliver its products on a timely basis and result in the
cancellation of orders, which could have a material adverse effect on the
Company's operating results. In addition, the purchase of certain key components
involves long lead times and, in the event of unanticipated increases in demand
for the Company's products, the Company has in the past been, and may in the
future be, unable to manufacture certain products in a quantity sufficient to
meet its customers' demand in any particular period. The Company has no
guaranteed supply arrangements with its sole or limited source suppliers, does
not maintain an extensive inventory of parts or components, and customarily
purchases sole or limited source parts and components pursuant to purchase
orders placed from time to time in the ordinary course of business. Business
disruptions, production shortfalls or financial difficulties of a sole or
limited source supplier could materially and adversely impact the Company by
increasing product costs, or reducing or eliminating the availability of such
parts or components. In such event, the inability of the Company to develop
alternative sources of supply quickly and on a cost-effective basis could
materially impair the Company's ability to manufacture and deliver its products
on a timely basis and could have a material adverse effect on its operating
results. See "Business -- Manufacturing."
6
<PAGE> 10
MANUFACTURING RISKS
The Company currently has limited manufacturing capability and has no
experience in large scale manufacturing. If the Company's customers were to
place orders for unexpectedly large quantities of the Company's products, the
Company's present manufacturing capacity could be inadequate to meet such
demand. There can be no assurance that the Company will be able to develop or
contract for additional manufacturing capacity on acceptable terms on a timely
basis. In addition, in order to continue to compete successfully, the Company
will need to achieve significant product cost reductions. Although the Company
intends to achieve cost reductions through engineering improvements and
production economies, there can be no assurance that the Company will be able to
do so. In order to remain competitive, the Company must continue to introduce
new products and processes into its manufacturing environment. The Company
currently conducts its manufacturing operations for all of its products in a
single facility in Mountain View, California. In addition, the Company relies on
certain outside contract manufacturers for circuit board assemblies which
subjects the Company to a number of risks, including a potential inability to
obtain an adequate supply of assembled circuit boards as well as reduced control
over the price, timely delivery and quality of such assembled circuit boards. If
the Company's Mountain View facility or the facilities of the outside contract
manufacturers were incapable of operating, even temporarily, or were unable to
operate at or near current or full capacity for any extended period, the
Company's business and operating results could be materially adversely affected.
Changes in the manufacturing operations to incorporate new products and
processes could cause disruptions, which, in turn, could adversely affect
customer relationships, cause a loss of market opportunities and have a material
adverse effect on the Company's business and operating results.
During the second and third quarters of 1995, the Company experienced
higher than expected demand for its products. This resulted in delays in the
delivery of certain products due to temporary shortages of certain components,
particularly components with long lead times, and insufficient manufacturing
capacity. Although the Company has taken certain steps to minimize such delays
in the future by increasing its manufacturing capacity and stocking certain
critical and long lead time components, due to the complex nature of the
Company's products and manufacturing processes, the worldwide demand for certain
wireless technology components and other factors, there can be no assurance that
delays in the delivery of products will not occur in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations," and "Business -- Manufacturing."
RAPID TECHNOLOGICAL CHANGE; ONGOING NEW PRODUCT DEVELOPMENT REQUIREMENTS;
EVOLVING INDUSTRY STANDARDS
The wireless communications industry is characterized by very rapid
technological change, short product life cycles and evolving industry standards.
To remain competitive, the Company must develop or gain access to new
technologies in order to increase product performance and functionality, reduce
product size and maintain cost-effectiveness. The Company has committed and
expects that it will continue to devote substantial research and development
resources to enhance its RangeLAN2 architecture and develop new RangeLAN2-based
products. The Company also expects to substantially increase its research and
development expenses to develop new technologies and products in the future.
Given the emerging nature of the wireless LAN market, there can be no assurance
that the RangeLAN2 products and technology, or the Company's other products or
technology, will not be rendered obsolete by alternative technologies.
The Company's success is also dependent on its ability to develop new
products for existing and emerging wireless communications markets, to introduce
such products in a timely manner and to have them designed into new products
developed by OEM customers. The development of new wireless networking products
is highly complex, and wireless LAN companies, including Proxim, from time to
time have experienced delays in developing and introducing new products. Due to
the intensely competitive nature of the Company's business, any delay in the
commercial availability of new products could have a material adverse
7
<PAGE> 11
effect on the Company's operating results. If the Company is unable to develop
or obtain access to advanced wireless networking technologies as they become
available, or is unable to design, develop and introduce competitive new
products on a timely basis, or is unable to hire qualified engineers to develop
such technologies and products, its future operating results would be materially
and adversely affected. In particular, the Company intends to expend substantial
resources in developing products that are designed to conform to the potential
IEEE 802.11 specifications. There can be no assurance that these specifications
will be ultimately adopted or that such standards will have a meaningful
commercial impact. To the extent these standards or other standards are adopted,
the Company could be at a disadvantage if its competitors are able to develop
and introduce competitive products which conform to such standards more rapidly
than the Company. See "Business -- Research and Development" and
"-- Competition."
COMPETITION
The wireless local area networking market is intensely competitive. The
principal competitive factors in this market include effective RF coverage area,
data throughput, wireless networking protocol sophistication, network
scalability, roaming capability, power consumption, product miniaturization,
product reliability, product time to market, product certifications, price,
effective distribution channels, ability to support new industry standards and
company reputation. Although the Company believes that it currently competes
favorably on the basis of these factors, the Company could be at a disadvantage
to companies that have broader distribution channels and offer more diversified
product lines.
Proxim has several current competitors which offer 2.4 GHz products,
including IBM, Lucent Technologies, Symbol Technologies and Telxon. In addition,
certain other companies, such as 3Com Corporation, have announced their
intention to offer competitive 2.4 GHz products. Some of these competitors have
announced their intention to develop IEEE 802.11 standards-based products or
other higher performance systems in the future. In addition to competition from
companies that offer or have announced their intention to develop wireless LAN
products, the Company could face future competition from companies that offer
products which replace network adapters or offer alternative wireless
communications solutions, or from large computer and network equipment
companies. There can be no assurance that the Company will be able to compete
successfully against these competitors or that competitive pressures faced by
the Company will not adversely affect its business or operating results.
Many of the Company's present and potential competitors have substantially
greater financial, marketing, technical and other resources than the Company
with which to pursue engineering, manufacturing, marketing, and distribution of
their products and may succeed in establishing technology standards or strategic
alliances in the wireless LAN market, obtain more rapid market acceptance for
their products, or otherwise gain a competitive advantage. There can be no
assurance that the Company will succeed in developing products or technologies
that are more effective than those developed by its competitors. Furthermore,
the Company competes with companies with high volume manufacturing and extensive
marketing and distribution capabilities, areas in which the Company has limited
experience. Increased competition, direct and indirect, could adversely affect
the Company's revenue and profitability through pricing pressure and loss of
market share. There can be no assurance that the Company will be able to compete
successfully against existing and new competitors as the market evolves and the
level of competition increases.
INTERNATIONAL SALES
Revenue from shipments by the Company to customers outside the United
States, principally to a limited number of international distributors and OEM
customers, represented 36%, 24%, 6% and 4% of total revenue during the first
quarter of 1996 and during 1995, 1994 and 1993, respectively. The Company
expects that revenue from shipments to international customers will continue to
represent a substantial portion of total revenue for the foreseeable future.
Sales to international customers or to U.S. OEM customers who ship to
international locations are subject to a number of risks and uncertainties
including, but not limited to,
8
<PAGE> 12
changes in foreign government regulations and telecommunications standards,
export license requirements, tariffs and taxes, other trade barriers,
fluctuations in currency exchange rates, difficulty in collecting accounts
receivable, difficulty in staffing and managing foreign operations, and
potential political and economic instability. While international sales are
typically denominated in U.S. dollars and the Company generally extends limited
credit terms, fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country.
Additionally, payment cycles for international distributors are usually longer
than for distributors in the United States. There can be no assurance that
foreign markets will continue to develop or that the Company will receive
additional orders to supply its products to foreign customers. The Company's
business and operating results could be materially and adversely affected if
foreign markets do not continue to develop or the Company does not receive
additional orders to supply its products for use by foreign customers. See
"Business -- Sales and Marketing."
PROTECTION OF PROPRIETARY RIGHTS
The Company relies on a combination of patents, trademarks and
non-disclosure agreements in order to establish and protect its proprietary
rights. Proxim has been issued three U.S. patents which are important to the
current business of the Company, and has four patent applications pending in the
U.S. which relate to the Company's core technology. There can be no assurance
that patents will issue from any of these pending applications or, if patents do
issue, that the claims allowed will be sufficiently broad to protect the
Company's technology. In addition, there can be no assurance that any patents
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection to the
Company. Since U.S. patent applications are maintained in secrecy until patents
issue, and since publication of inventions in the technical or patent literature
tend to lag behind such inventions by several months, the Company cannot be
certain that it was the first creator of the inventions covered by its issued
patents or pending patent applications or that it was the first to file patent
applications for such inventions or that the Company is not infringing on the
patents of others. In addition, the Company has filed, or reserved its rights to
file, a number of patent applications internationally. There can be no assurance
that any such international patent applications will issue or that the laws of
foreign jurisdictions will protect the Company's proprietary rights to the same
extent as the laws of the United States.
In view of the rapid technological change in this industry, Proxim believes
that the technical expertise and creative skills of its engineers and other
personnel are crucial in determining the Company's future success. The Company's
ability to compete in the marketplace may be enhanced by its ability to protect
its proprietary information through the ownership of patents, registrations, and
trademarks. The Company attempts to protect its trade secrets and other
proprietary information through agreements with customers and suppliers,
proprietary information agreements with employees and other security measures.
Although the Company intends to protect its rights vigorously, there can be no
assurance that these measures will be successful. Litigation may be necessary to
enforce the Company's patents, trademarks or other intellectual property rights,
to protect the Company's trade secrets, to determine the validity and scope of
the proprietary rights of others or to defend against claims of infringement.
Such litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business and operating
results. No intellectual property of the Company has been invalidated or
declared unenforceable. However, there can be no assurance that in the future
such rights will be upheld. Furthermore, there can be no assurance that any
issued patents will provide the Company with a competitive advantage or will not
be challenged by third parties or that the patents of others will not have an
adverse effect on the Company's ability to do business. There can be no
assurance that the measures taken by the Company will prevent misappropriation
of its technology. In addition, there can be no assurance that others will not
independently develop similar products, design around the Company's proprietary
technology or duplicate the Company's products. See "Business -- Protection of
Proprietary Rights."
9
<PAGE> 13
MANAGEMENT OF GROWTH
The Company's growth to date has caused, and will continue to cause, a
significant strain on its management, operational, financial and other
resources. The Company's ability to manage its growth effectively will require
it to improve its operational and financial systems. These demands will require
the addition of new management personnel and the development of additional
expertise by existing management. The failure of the Company's management team
to effectively manage growth, should it occur, could have a material adverse
impact on the Company's results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
UNCERTAIN GOVERNMENT REGULATION
In the United States, the Company is subject to various FCC rules and
regulations. Current FCC regulations permit license-free operation in certain
FCC-certified bands in the radio spectrum. Proxim's spread spectrum wireless
products are certified for unlicensed operation in the 902-928 MHz and
2.4-2.4835 GHz frequency bands. Operation in these frequency bands is governed
by rules set forth in Part 15 of the FCC regulations. The Part 15 rules are
designed to minimize the probability of interference to other users of the
spectrum and, thus, accord Part 15 systems secondary status. In the event that
there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of the Company's products experience
excessive interference from primary users, market acceptance of the Company's
products could be adversely affected, thereby materially and adversely affecting
the Company's business and results of operations. The FCC, however, has
established certain standards which create an irrebuttable presumption of
noninterference for Part 15 users and the Company believes that its products
comply with such requirements. There can be no assurance that the occurrence of
regulatory changes, including changes in the allocation of available frequency
spectrum or modification to the standards establishing an irrebuttable
presumption for unlicensed Part 15 users, would not significantly impact the
Company's operations by rendering current products obsolete, restricting the
applications and markets served by the Company's products or increasing the
opportunity for additional competition.
The Company's products are also subject to regulatory requirements in
international markets and, therefore, the Company has been monitoring the
development of spread spectrum regulations in certain countries that represent
potential markets for its products. The Company has limited experience in
gaining regulatory approval outside of the United States. Several foreign
countries, such as Canada, have regulations that closely follow those of the
FCC. To date, Proxim or its distribution partners have obtained certifications
for the Company's products in 22 countries as well as approval for use in over
20 additional countries which rely on or reference certification requirements of
regulatory bodies such as the FCC and the European Telecommunications Standards
Institute ("ETSI"). Each new Proxim product or OEM customer product must be
certified or otherwise qualified for use in each country. The Company has an
ongoing program to obtain certifications for its products and to assist certain
OEM customers in obtaining certification for their products in all available
markets. While there can be no assurance that the Company will be able to comply
with regulations in any particular country, the Company has designed its
RangeLAN2 products to minimize the design modifications required to meet various
2.4 GHz international spread spectrum regulations. Changes in, or the failure by
the Company to comply with, applicable domestic and international regulations
could have a material adverse effect on the Company's business and operating
results. In addition, with respect to those countries that do not follow FCC
regulations, Proxim may need to modify its products to meet local rules and
regulations.
EXPANDED DISTRIBUTION REQUIRED FOR BRANDED PRODUCTS
To date, a substantial percentage of Proxim's revenue has been derived from
OEM customers through the Company's direct sales force. The Company sells its
branded RangeLAN2 products through domestic and
10
<PAGE> 14
international distributors. In general, distributors offer products of several
different companies, including products that may compete with the Company's
products. Accordingly, these distributors may give higher priority to products
of other suppliers, thus reducing their efforts to sell the Company's products.
Agreements with distributors are generally terminable at the distributor's
option. A reduction in sales efforts or termination of a distributor's
relationship with the Company may have a material adverse effect on the
Company's future operating results. Use of distributors also entails the risk
that distributors will build up inventories in anticipation of substantial
growth in sales. If such growth does not occur as anticipated, these
distributors may substantially decrease the amount of product ordered in
subsequent quarters. Such fluctuations could contribute to significant
variations in the Company's future operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Sales and Marketing."
FORWARD-LOOKING INFORMATION
In connection with a May 1996 interview with a representative from a
computer industry publication, the Company's Chairman of the Board, President
and Chief Executive Officer, in response to questions regarding the growth of
the Company's channel and OEM business, discussed historical revenue in relation
to Wall Street analysts' revenue forecasts for the Company. In particular, he
expressed comfort with the published revenue expectations of analysts who have
forecasted approximately $40 million in Company revenue for the current fiscal
year. While the Company remains comfortable with regard to such published
estimates, revenue forecasts are forward-looking information and as such are
inherently subject to risk and uncertainty. The Company's actual operating
results have fluctuated significantly in the past and may do so in the future.
Important factors which could cause the Company's actual results to differ
materially and adversely from the projected revenue levels include each of those
discussed elsewhere within this "Risk Factors" section, as well as a failure by
the Company to implement successfully any aspect of its strategy during the
current year and in future periods. See "Business -- Strategy." Accordingly,
there can be no assurance that the Company will achieve such levels of revenue,
or, if achieved, what effect such revenue will have on the Company's net income
or income per share.
HEALTH AND SAFETY RISKS
Recently, there has been publicity regarding the potentially adverse health
and safety effects of electromagnetic emissions from cellular telephones,
particularly in hospitals and other medical environments. While Proxim's
wireless networking products also emit electromagnetic radiation, the Company
believes its products pose no material health and safety concerns because of the
low power output of the Company's products and the distance typically maintained
between the Company's products and the end user in normal operation. There can
be no assurance that health and safety issues related to the Company's products
will not arise in the future. Any such issues could have a material adverse
effect on the Company's business. Even if such concerns prove to be baseless,
the resultant publicity could have a material adverse effect on the Company's
stock price and its ability to market its products.
DEPENDENCE ON KEY EMPLOYEES
The Company is highly dependent on the technical and management skills of
its key employees, in particular David C. King, Chairman, President and Chief
Executive Officer, and Juan Grau, Vice President of Engineering. The Company
does not have employment agreements with, or life insurance on the life of,
either person. The loss of the services of any key employee could adversely
affect the Company's business and operating results. The Company's success also
depends in large part on a limited number of key technical, marketing and sales
employees and on the Company's ability to continue to attract, assimilate and
retain additional highly talented personnel. Competition for qualified personnel
in the wireless data communications and networking industries is intense. There
can be no assurance that the Company will be successful in retaining its key
employees or that it can attract, assimilate or retain the additional skilled
personnel as required. See "Business -- Employees" and "Management."
11
<PAGE> 15
VOLATILITY OF STOCK PRICE
Recently, the price of the Company's Common Stock has been volatile. The
Company believes that the price of its Common Stock may continue to fluctuate,
perhaps substantially, as a result of factors such as announcements of
developments relating to the Company's business, fluctuations in the Company's
operating results, general conditions in the wireless communications industry or
the worldwide economy, a shortfall in revenue or earnings from securities
analysts' expectations or other changes in financial estimates by securities
analysts, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in patent,
copyrights or other intellectual property rights and developments in the
Company's relationships with its customers, distributors and suppliers. In
addition, in recent years the stock market in general, and the market for shares
of high technology stocks in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. There can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuation in the
future, including fluctuations that are unrelated to the Company's performance.
See "Price Range of Common Stock."
12
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$95,019,000 ($109,374,000 if the Underwriters' over-allotment option is
exercised in full), based on an assumed public offering price of $40.25 per
share and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company intends to use the net
proceeds primarily for working capital, capital expenditures and other general
corporate purposes. In addition, a portion of the net proceeds may be used to
finance strategic acquisitions or corporate alliances. The Company considers
such acquisitions on an ongoing basis, but has no current commitments for any
acquisition which would have a material impact on the Company's results of
operations or financial condition. Pending such uses, the Company will invest
the net proceeds in investment grade short or medium term income producing
instruments.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock since its
incorporation and anticipates that for the foreseeable future it will continue
to retain any earnings for use in its business.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been traded on the Nasdaq National Market
since the Company's initial public offering on December 15, 1993 under the
symbol "PROX". Prior to that time, there was no public market for the Company's
Common Stock. The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1993
Fourth Quarter (from December 15, 1993)................... $10 $ 7 1/2
1994
First Quarter............................................. $11 $ 8
Second Quarter............................................ $ 9 1/2 $ 6 1/2
Third Quarter............................................. $ 7 1/4 $ 4 1/4
Fourth Quarter............................................ $ 6 7/8 $ 3 5/8
1995
First Quarter............................................. $ 6 3/8 $ 3 7/8
Second Quarter............................................ $ 9 5/8 $ 5
Third Quarter............................................. $14 3/4 $ 7 3/4
Fourth Quarter............................................ $17 7/8 $11
1996
First Quarter............................................. $26 1/8 $15 1/8
Second Quarter (through June 3, 1996)..................... $51 1/4 $24 3/4
</TABLE>
On June 3, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market was $40.25 per share. As of March 29, 1996, the Company
had approximately 185 holders of record of its Common Stock (including nominees
and brokers holding street accounts).
13
<PAGE> 17
CAPITALIZATION
The following table sets forth, at March 31, 1996, the capitalization of
the Company and the capitalization as adjusted to give effect to the issuance
and sale by the Company of 2,500,000 shares of Common Stock offered hereby (at
an assumed public offering price of $40.25 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company) and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with the Financial Statements of the
Company and the Notes thereto included elsewhere and incorporated into this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Preferred Stock, $0.001 par value, 5,000,000 shares authorized;
no shares issued and outstanding............................... $ -- $ --
Common Stock, $0.001 par value, 25,000,000 shares authorized;
7,456,000 shares issued and outstanding; 9,956,000 shares
issued and outstanding as
adjusted(1).................................................... 7 10
Additional paid-in capital....................................... 27,757 122,773
Accumulated deficit.............................................. (8,239) (8,239)
-------- --------
Total stockholders' equity............................... $19,525 $ 114,544
======== ========
</TABLE>
- ---------------
(1) Excludes as of March 31, 1996 (i) 1,377,250 shares reserved for issuance
upon exercise of outstanding stock options, (ii) 1,140,000 additional shares
reserved for future issuance pursuant to the Company's 1995 Long-Term
Incentive Plan, (iii) 231,413 additional shares reserved for future issuance
under the Company's 1993 Employee Stock Purchase Plan, and (iv) 53,542
additional shares reserved for future issuance under the Company's 1994
Director Option Plan.
14
<PAGE> 18
SELECTED FINANCIAL DATA
The selected financial data of the Company set forth below are qualified in
their entirety by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Financial Statements and Notes thereto included elsewhere
in and incorporated into this Prospectus. The statement of operations data for
the years ended December 31, 1993, 1994 and 1995, and the balance sheet data at
December 31, 1994 and 1995, are derived from, and are qualified by reference to,
the Company's financial statements audited by Price Waterhouse LLP, independent
accountants, included elsewhere in this Prospectus. The statement of operations
data for the years ended December 31, 1991 and 1992, and the balance sheet data
as of December 31, 1991, 1992 and 1993 are derived from audited financial
statements of the Company not included herein. The statement of operations data
for the three months ended March 31, 1995 and 1996, and the balance sheet data
at March 31, 1996 are derived from unaudited financial statements of the
Company, included elsewhere in this Prospectus. The unaudited financial
information of the Company, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial data for such periods. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of results that may be expected for any subsequent period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................... $ 2,672 $ 4,114 $ 8,078 $11,297 $22,083 $ 3,363 $ 8,901
Gross profit................ 558 1,696 4,171 6,076 11,240 1,744 4,362
Research and development.... 1,673 1,199 1,474 1,783 3,288 652 1,070
Selling, general and
administrative........... 1,368 2,383 2,821 3,982 6,694 1,235 2,127
Income (loss) from
operations............... (2,483) (1,886) (124) 311 1,258 (143) 1,165
Net income (loss)........... (2,494) (1,902) (99) 745 2,846 18 912
Net income (loss) per
share(1)................. -- (.36) (.02) .10 .35 .00 .11
Weighted average common
shares and
equivalents(1)........... -- 5,326 5,665 7,738 8,172 7,733 8,268
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH
----------------------------------------------- 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 920 $ 1,216 $13,303 $11,300 $ 6,247 $ 5,590
Working capital...................... 1,051 1,397 13,980 14,488 16,650 17,256
Total assets......................... 2,222 2,816 15,753 17,435 24,107 23,875
Mandatorily Redeemable Convertible
Preferred Stock................... 2,927 5,376 -- -- -- --
Stockholders' equity (deficit)....... (1,414) (3,612) 14,299 15,226 18,450 19,525
</TABLE>
- ---------------
(1) Net loss per share for 1992 is a pro forma calculation based on the weighted
average number of outstanding shares of Common Stock plus common stock
equivalents. Common stock equivalents include stock options and warrants
granted between October 1, 1992 and December 22, 1993 (using the treasury
stock method and the initial public offering price) and Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock
on their respective original dates of issuance, even though anti-dilutive
for all periods through the effectiveness of the Company's initial public
offering. Net loss per share for 1991 has not been presented as such
information is not meaningful. See Note 2 of Notes to Financial Statements.
15
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains trend analysis and other forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in the forward-looking statements
as a result of the certain factors, including those set forth under "Risk
Factors" and elsewhere in, or incorporated by reference into, this Prospectus.
The following discussion should be read in conjunction with the Selected
Financial Data and the Company's Financial Statements and Notes thereto.
OVERVIEW
Since 1989, Proxim has focused on supplying spread spectrum RF transceiver
modules and wireless LAN adapters to OEM customers for integration into mobile
computing platforms, pen-based portables and handheld data collection terminals.
In 1990, the Company introduced its first commercial product for OEM customers,
a 900 MHz direct sequence spread spectrum RF transceiver. The Company introduced
ProxLink, its first branded wireless data communications product for the
commercial end user market in 1991, and RangeLAN(R), a family of 900 MHz direct
sequence wireless LAN adapters in 1992. In 1994, the Company began commercial
shipment of RangeLAN2, the industry's first family of 2.4 GHz frequency hopping
spread spectrum wireless LAN products. In 1995, the Company introduced
RangeLINKTM, a line of 2.4 GHz inter-building wireless remote bridges.
Since the introduction of the RangeLAN2 product family in 1994, Proxim's
2.4 GHz product sales have increased to over 70% of total revenue in the first
quarter of 1996. The Company further anticipates that its 2.4 GHz product family
will continue to increase as a percentage of total revenue as a result of the
worldwide availability of unlicensed 2.4 GHz spectrum as well as the higher
throughput and capacity achievable with 2.4 GHz wireless networks. To date, the
Company has realized lower gross margins from sales of its 2.4 GHz products
compared to its 900 MHz products due primarily to the higher component costs and
higher manufacturing costs associated with early production of various 2.4 GHz
products. While the Company expects manufacturing costs to decline over time as
a result of greater efficiencies associated with higher volume production, there
can be no assurance that the Company will be able to achieve higher gross
margins with respect to 2.4 GHz product sales. Gross margins will be affected by
a variety of factors, including manufacturing efficiencies, competitive pricing
pressures, the degree of customization of individual products required by OEM
customers and component and assembly costs. In addition, gross profit as a
percentage of total revenue may fluctuate in the future depending primarily on
the mix of revenue between 900 MHz products and 2.4 GHz products.
Historically, the Company has marketed its products predominantly in the
United States and, until 1995, revenue from international sales was not
significant. During 1994 and 1995, the Company obtained regulatory
certifications for its 2.4 GHz RangeLAN2 products in 22 countries and approval
to ship to 20 additional countries. These certifications and approvals have
significantly increased the available markets for these products. Revenue from
sales directly to international customers were 36%, 24%, 6% and 4% during the
first quarter of 1996 and during 1995, 1994 and 1993, respectively. See
"Business -- Sales and Marketing."
A substantial portion of the Company's revenue to date has been derived
from a limited number of customers, most of which are OEM customers. Sales to
OEM customers represented approximately 76%, 79%, 56% and 83% of total revenue
during the first quarter of 1996 and during 1995, 1994 and 1993, respectively.
The Company expects that sales to a limited number of OEM customers will
continue to account for a substantial portion its revenue during any period for
the foreseeable future. The Company also has experienced quarter to quarter
variability in sales to each of its major OEM customers and expects this pattern
to continue in the future. The loss of one or more of the Company's major OEM
customers could have a
16
<PAGE> 20
material adverse effect on the Company's results of operations. The development
of products for OEM customer applications is characterized by a lengthy sales
process and design-in cycle which typically lasts from six months to two years
and requires the Company to integrate its technologies into, and in certain
cases adapt its products to fit, OEM customers' products. In addition, the
Company's OEM customers' products are generally required to be certified by the
FCC or the equivalent regulatory agency in each country where such products are
sold. The Company has committed substantial engineering, marketing and sales
resources to develop key OEM relationships and has broadened its OEM customer
base. Due to the Company's current dependency on its OEM customers for a
significant percentage of its total revenue and the nature of its OEM business,
the Company's annual and quarterly operating results are subject to fluctuations
as a result of the level and timing of OEM customer orders. The Company works
closely with its OEM customers to manage the order cycle process in an attempt
to reduce the fluctuations inherent in its OEM business. See "Business --
Customers."
The Company's RangeLAN2, RangeLINK, RangeLAN and ProxLink branded products
are marketed to value added resellers, systems integrators and end users
primarily through regional and national distributors. The Company grants certain
distributors limited rights of return and price protection on unsold products.
Product revenue on shipments to distributors which have rights of return and
price protection is recognized upon shipment by the distributor. Many of the
Company's packaged products are also sold to certain OEM customers. Packaged
products sold through distribution channels under Proxim's brand name and to OEM
customers under private label agreements, represented 55%, 49%, 52% and 27% of
total revenue during the first quarter of 1996 and during 1995, 1994 and 1993,
respectively.
In connection with a May 1996 interview with a representative from a
computer industry publication, the Company's Chairman of the Board, President
and Chief Executive Officer, in response to questions regarding the growth of
the Company's channel and OEM business, discussed historical revenue in relation
to Wall Street analysts' revenue forecasts for the Company. In particular, he
expressed comfort with the published revenue expectations of analysts who have
forecasted approximately $40 million in Company revenue for the current fiscal
year. While the Company remains comfortable with regard to such published
estimates, revenue forecasts are forward-looking information and as such are
inherently subject to risk and uncertainty. The Company's actual operating
results have fluctuated significantly in the past and may do so in the future.
Important factors which could cause the Company's actual results to differ
materially and adversely from the projected revenue levels include each of those
discussed within the "Risk Factors" section of this prospectus, as well as a
failure by the Company to implement successfully any aspect of its strategy
during the current year and in future periods. See "Business -- Strategy."
Accordingly, there can be no assurance that the Company will achieve such levels
of revenue, or, if achieved, what effect such revenue will have on the Company's
net income or income per share.
17
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenue represented
by certain line items in the Statement of Operations for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 48.4 46.2 49.1 48.1 51.0
---- ---- ---- ---- ----
Gross profit................... 51.6 53.8 50.9 51.9 49.0
---- ---- ---- ---- ----
Operating expenses:
Research and development.... 18.2 15.8 14.9 19.4 12.0
Selling, general and
administrative........... 34.9 35.3 30.3 36.7 23.9
---- ---- ---- ---- ----
Total operating
expenses............ 53.1 51.1 45.2 56.1 35.9
---- ---- ---- ---- ----
Income (loss) from
operations.................. (1.5) 2.7 5.7 (4.2) 13.1
Interest and other income,
net......................... 0.3 4.6 2.4 4.8 0.9
---- ---- ---- ---- ----
Income (loss) before income
taxes....................... (1.2) 7.3 8.1 0.6 14.0
Provision (benefit) for income
taxes....................... -- 0.7 (4.8) 0.1 3.8
---- ---- ---- ---- ----
Net income (loss).............. (1.2)% 6.6% 12.9% 0.5% 10.2%
==== ==== ==== ==== ====
</TABLE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Revenue increased 165% in the first quarter of 1996 compared to the first
quarter of 1995. The increase in revenue was primarily attributable to increased
unit sales of 2.4 GHz OEM products and RangeLAN2 branded products, including
increased revenue from shipments to international distributors and to OEM
customers that have recently introduced RangeLAN2-based 2.4 GHz product lines in
North America, Europe and Asia.
Gross profit as a percentage of revenue was 49% and 52% in the first
quarters of 1996 and 1995, respectively. Gross profit as a percentage of revenue
decreased in the first quarter of 1996 compared to the first quarter of 1995 due
to a change in the mix of revenue from higher gross margin 900 MHz products to
lower gross margin 2.4 GHz products, and costs related to initial manufacturing
of 2.4 GHz product versions designed to meet certification requirements in
Europe and Japan. Gross profit as a percentage of total revenue may fluctuate in
future periods depending primarily on the mix of revenue between 900 MHz
products and 2.4 GHz products.
Research and development expenses consist primarily of personnel expenses
and, to a lesser extent, consulting fees, prototype material and other costs of
ASIC/MMIC development. Research and development expenses are related primarily
to the development and enhancement of radio transceivers, ASICs/MMICs, wireless
protocols and network software drivers. Research and development expenses
increased in the first quarter of 1996 compared to the first quarter of 1995
primarily due to the increased number of engineering employees, costs related to
product certifications and other development program expenses. Research and
development expenses declined as a percentage of revenue in the first quarter of
1996 compared to the first quarter of 1995 primarily due to the substantial
increase in revenue. To date, all of the Company's research and development
costs have been expensed as incurred. The Company currently does not anticipate
further significant declines in research and development expenses as a
percentage of revenue. The Company expects that research and development
expenses will continue to increase substantially in absolute dollars but may
vary over time as a percentage of revenue.
Selling, general and administrative expenses consist primarily of personnel
expenses, sales commissions, costs related to both domestic and international
product certifications, customer support, trade show and advertising expenses,
and to a lesser extent, professional fees and facilities costs. Selling, general
and
18
<PAGE> 22
administrative expenses increased in the first quarter of 1996 compared to the
first quarter of 1995 primarily due to the hiring of additional marketing and
sales personnel to support the Company's growth, particularly its expansion into
international markets, as well as increased trade show and promotional expenses.
Selling, general and administrative expenses declined as a percentage of revenue
in the first quarter of 1996 compared to the first quarter of 1995 primarily due
to the substantial increase in revenue. The Company currently does not
anticipate further significant declines in selling, general and administrative
expenses as a percentage of revenue. The Company expects that selling, general
and administrative expenses will continue to increase in absolute dollars but
may vary over time as a percentage of revenue.
Interest and other income consists primarily of interest income and a minor
amount of interest expense. Interest income is derived from interest earned on
cash and cash equivalent investments. Interest and other income decreased in the
first quarter of 1996 compared to the first quarter of 1995 primarily due to the
decrease in cash balances.
The Company's estimated effective income tax rate was 27% and 10% for the
first quarters of 1996 and 1995, respectively. The 1996 estimated effective
income tax rate is less than the combined federal and state statutory rates
based on the expected utilization of available net operating loss carryforwards
and tax credits. The provision for income taxes in the first quarter of 1995
primarily represented alternative minimum taxes.
Three Years Ended December 31, 1995, 1994 and 1993
Revenue increased 95% from 1994 to 1995 and 40% from 1993 to 1994. Revenue
increased from 1994 to 1995 primarily due to increased unit sales of 2.4 GHz OEM
products and RangeLAN2 branded products, including increased revenue from
shipments to international distributors and to OEM customers. Revenue increased
from 1993 to 1994 primarily due to increased total unit sales, including sales
of the RangeLAN2 product family in the U.S., and increased ProxLink sales.
Gross profit as a percentage of revenue was 51%, 54% and 52% in 1995, 1994
and 1993, respectively. Gross profit as a percentage of revenue decreased in
1995 compared to 1994 due to a change in the mix of revenue from higher gross
margin 900 MHz products to lower gross margin 2.4 GHz products and costs related
to initial manufacturing of new 2.4 GHz product versions designed to meet
certification requirements in Europe and Japan. Gross profit as a percentage of
revenue increased in 1994 compared to 1993 principally due to increased unit
sales which resulted in improved manufacturing efficiencies and reduced material
costs due to purchasing economies.
Research and development expenses since 1993 have increased each year
primarily due to the increased number of engineering employees, continued
investment in integrating the Company's technology into ASICs, development of
wireless protocols and network software drivers, costs related to performance
enhancements in the RangeLAN2 architecture, and costs related to both domestic
and international product certifications. Research and development expenses as a
percentage of revenue were 15%, 16% and 18% in 1995, 1994 and 1993,
respectively. Research and development expenses since 1993 have declined as a
percentage of revenue primarily due to increases in revenue.
Selling, general and administrative expenses since 1993 have increased each
year primarily due to the hiring of additional marketing and sales personnel to
support the Company's growth, particularly its expansion into international
markets, as well as increased trade show and promotional expenses. Selling,
general and administrative expenses as a percentage of revenue were 30%, 35% and
35% in 1995, 1994 and 1993, respectively. Selling, general and administrative
expenses since 1994 have declined as a percentage of revenue primarily due to
increases in revenue.
Interest and other income increased significantly from 1993 to 1994
primarily due to investment in cash equivalents of the proceeds from the
Company's December 1993 initial public offering, and increased moderately from
1994 to 1995 due to higher average interest rates partially offset by lower
invested cash balances.
19
<PAGE> 23
The Company recognized a benefit for income taxes in 1995 of $1,051,000
compared to a provision of $83,000 in 1994. No provision for income taxes was
recorded in 1993 as the Company incurred a loss. The provision of $83,000 in
1994 primarily represented alternative minimum taxes. The benefit recognized in
1995 was due to a current provision of $180,000, primarily representing
alternative minimum taxes, offset by the recognition of $1,231,000 of deferred
tax assets based on the Company's assessment that this portion of the deferred
tax assets will be realized. At December 31, 1995, the Company had approximately
$5,000,000 of federal net operating loss carryforwards ("NOLs") which expire
from 2003 to 2008. As a result of a prior financing which resulted in a
cumulative change in ownership in 1991 of greater than 50%, approximately
$3,000,000 of the Company's NOLs may be limited to usage of approximately
$300,000 per year through 2005. See Note 7 of Notes to Financial Statements.
To date, inflation has not had a significant impact on the Company's
operating results.
Quarterly Results of Operations
The following table presents selected unaudited quarterly financial
information for the Company and the same information as a percentage of revenue
for each of the five quarters ended March 31, 1996. This information has been
derived from unaudited financial statements that, in the Company's opinion,
reflect all normal recurring adjustments that are necessary to present fairly
the results of operations in the quarterly periods. The data set forth below
should be read in conjunction with the Financial Statements and Notes thereto.
The operating results for any quarter are not necessarily indicative of results
for future quarters.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
1995 1996
----------------------------------------- ---------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... $3,363 $ 4,202 $ 5,930 $ 8,588 $ 8,901
Cost of revenue........................... 1,619 2,002 2,948 4,274 4,539
------ ------ ------ ------- ------
Gross profit.............................. 1,744 2,200 2,982 4,314 4,362
------ ------ ------ ------- ------
Operating expenses:
Research and development............... 652 754 865 1,017 1,070
Selling, general and administrative.... 1,235 1,360 1,711 2,388 2,127
------ ------ ------ ------- ------
Total operating expenses......... 1,887 2,114 2,576 3,405 3,197
------ ------ ------ ------- ------
Income (loss) from operations............. (143) 86 406 909 1,165
Interest and other income, net............ 163 142 130 102 84
------ ------ ------ ------- ------
Income before income taxes................ 20 228 536 1,011 1,249
Provision (benefit) for income taxes...... 2 23 54 (1,130) 337
------ ------ ------ ------- ------
Net income................................ $ 18 $ 205 $ 482 $ 2,141 $ 912
====== ====== ====== ======= ======
Net income per share...................... $ .00 $ .03 $ .06 $ .26 $ .11
====== ====== ====== ======= ======
Weighted average common shares and
equivalents............................ 7,733 7,842 8,084 8,179 8,268
</TABLE>
20
<PAGE> 24
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
1995 1996
-------------------------------------------- ---------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- --------- -------- ---------
(AS A PERCENTAGE OF REVENUE)
<S> <C> <C> <C> <C> <C>
Revenue................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......................... 48.1 47.6 49.7 49.8 51.0
-------- ------- --------- -------- ---------
Gross profit............................ 51.9 52.4 50.3 50.2 49.0
-------- ------- --------- -------- ---------
Operating expenses:
Research and development............. 19.4 17.9 14.6 11.8 12.0
Selling, general and
administrative.................... 36.7 32.4 28.9 27.8 23.9
-------- ------- --------- -------- ---------
Total operating expenses....... 56.1 50.3 43.5 39.6 35.9
-------- ------- --------- -------- ---------
Income (loss) from operations........... (4.3) 2.1 6.8 10.6 13.1
Interest and other income, net.......... 4.9 3.4 2.2 1.2 0.9
-------- ------- --------- -------- ---------
Income before income taxes.............. 0.6 5.5 9.0 11.8 14.0
Provision (benefit) for income taxes.... 0.1 0.6 0.9 (13.1) 3.8
-------- ------- --------- -------- ---------
Net income.............................. 0.5% 4.9% 8.1% 24.9% 10.2%
======= ====== ====== ====== =======
</TABLE>
The Company has experienced and may in the future continue to experience
significant annual and quarterly fluctuations in revenue, gross margins and
operating results due to numerous factors, some of which are outside the
Company's control. These factors include fluctuating market demand for, and
declines in the average selling prices of, the Company's products, the timing of
and potential delays or cancellations of significant orders from OEM customers,
the cost, availability and quality of components from the Company's suppliers,
the cost, availability and quality of assemblies from subcontractors, the
lengthy sales and design-in cycles for OEM products, delays in the introduction
of the Company's new products, competitive product introductions, market
adoption of new technologies and standards, the mix of products sold, the
effectiveness of the Company's distribution channels, the failure to anticipate
changing customer product requirements, seasonality, manufacturing capacity and
efficiency, changes in the regulatory environment and general economic
conditions. Historically, the Company has not operated with a significant order
backlog and a substantial portion of the Company's revenue in any quarter has
been derived from orders booked and shipped in that quarter. Accordingly, the
Company's revenue expectations are based almost entirely on its internal
estimates of future demand and not on firm customer orders. Planned expense
levels are relatively fixed in the short term and are based in large part on
these estimates, and if orders and revenue do not meet expectations, the
Company's operating results could be materially adversely affected. In this
regard, in the third quarter of 1994, the Company experienced a decrease in
revenue and an operating loss as a result of lower than expected orders in
connection with the transition from 900 MHz products to 2.4 GHz RangeLAN2
products. There can be no assurance that the Company will not experience future
quarter-to-quarter decreases in revenue and gross margins or quarterly operating
losses. In addition, due to the timing of orders from OEM customers, the Company
has often recognized a substantial portion of its revenue in the last month of a
quarter. As a result, minor fluctuations in the timing of orders and the
shipment of products have caused, and may in the future cause, operating results
to vary significantly from quarter to quarter. It is possible that due to such
fluctuations or other factors, the Company's future operating results could be
below the expectations of securities analysts and investors. In such an event,
or in the event that adverse market conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock would likely be materially adversely affected. Although
the Company has been profitable on a quarterly basis for the past six quarters
and has experienced revenue growth in the last six quarters, the Company
experienced a decrease in revenue and an operating loss for the quarter ended
September 30, 1994, and there can be no assurance that revenue growth or
profitability will continue on a quarterly or annual basis in the future.
21
<PAGE> 25
As shown in the table above, revenue has increased in each of the past four
quarters primarily due to increased unit sales of 2.4 GHz OEM products and
RangeLAN2 branded products, including increased revenue from shipments to
international distributors and to OEM customers that have recently introduced
RangeLAN2-based 2.4 GHz product lines in North America, Europe and Asia.
Although revenue has increased during each of the past four quarters in absolute
dollars, the percentage increase in each quarter over the prior quarter has
fluctuated significantly. During the second and third quarters of 1995, the
Company experienced higher than expected demand for its products. This increased
demand, together with temporary shortages of certain components, increased lead
times for certain components and the time required to increase manufacturing
capacity, resulted in delays in the shipment of certain products and the
deferral of revenue into subsequent periods. Because of the Company's
significant dependence on OEM customers, future quarterly revenue may continue
to fluctuate significantly in accordance with the timing of OEM customers'
orders. In addition, the quarter-to-quarter changes in the rate of the Company's
revenue growth, if any, may fluctuate due to unit sales volume and product mix
changes.
Gross profit as a percentage of revenue has declined in each of the past
three quarters primarily due to a change in the mix of revenue from higher
margin 900 MHz products to lower margin 2.4 GHz products and the ramp up costs
related to manufacturing 2.4 GHz product versions designed to meet certification
requirements in Europe and Japan. Gross profit as a percentage of total revenue
may fluctuate in future periods depending on numerous factors including the mix
of revenue between 900 MHz products and 2.4 GHz products.
Research and development expenses increased in each of the past four
quarters in absolute dollars, but decreased as a percentage of revenue in each
quarter other than the first quarter of 1996, primarily due to increases in
revenue. Research and development expenses have increased in absolute dollars in
each of the past four quarters primarily due to the increased number of
engineering employees, continued investment in integrating the Company's
technology and designs into ASICs, development of wireless protocols and network
software drivers, costs related to performance enhancements in the RangeLAN2
architecture, and costs related to product certifications.
Selling, general and administrative expenses have increased in absolute
dollars in three of the past four quarters primarily due to the hiring of
additional marketing and sales personnel to support the Company's growth
particularly its expansion into international markets, as well as increased
trade show and promotional expenses. Selling, general and administrative
expenses decreased as a percentage of revenue in each quarter, however,
primarily due to increases in revenue. The decrease in selling, general and
administrative expenses in the first quarter of 1996 compared to the fourth
quarter of 1995 was principally due to certain sales commission incentives and
employee bonuses which were earned at the end of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through private
placements of its equity securities, and its initial public offering in December
1993. As of March 31, 1996, the Company had an accumulated deficit of
$8,239,000.
In 1995, 1994 and 1993, the Company used $3,853,000, $1,070,000 and
$485,000, respectively, of cash in operations. In 1995 and 1994, cash was used
primarily to fund increases in inventories and accounts receivable, partially
offset by cash provided by net income and by increases in accounts payable and
accrued liabilities. In 1993, cash was used primarily to fund operating losses
and increases in inventories and accounts receivable, partially offset by cash
provided by increases in accounts payable and accrued liabilities. The increases
in inventories and accounts receivable in 1995, 1994 and 1993 were primarily
attributable to the addition of new products and the growth in revenue. In the
first quarter of 1996, $191,000 of cash was used in operating activities
primarily to
22
<PAGE> 26
fund increases in inventories and decreases in accounts payable, partially
offset by net income for the period, and cash provided by decreases in accounts
receivable and increases in accrued liabilities.
In 1995, 1994 and 1993, the Company purchased $1,578,000, $681,000 and
$129,000, respectively, of property and equipment using cash raised in equity
financings. Capital expenditures in 1995 and 1994 related primarily to the
acquisition of manufacturing and engineering test equipment, and leasehold
improvements. Capital expenditures in 1993 primarily related to the acquisition
of manufacturing and engineering test equipment. The Company expects to incur
approximately $1,500,000 of capital expenditures during the remainder of 1996,
consisting primarily of leasehold improvements, telecommunications equipment,
manufacturing and engineering test equipment, engineering systems software and
equipment, and general office equipment. In the first quarter of 1996, the
Company purchased $629,000 of property and equipment. Capital expenditures in
the first quarter of 1996 were primarily for manufacturing and engineering test
equipment, office furniture and leasehold improvements related to the Company's
facilities expansion.
At March 31, 1996, the Company had cash and cash equivalents of
approximately $5,590,000. The Company believes that the net proceeds from this
offering, together with its existing working capital and cash generated from
operations, if any, will be sufficient to finance any cash acquisitions which
the Company may consider and provide adequate working capital for the
foreseeable future. However, to the extent that additional funds may be required
in the future to address working capital needs and to provide funding for
capital expenditures, expansion of the business or additional acquisitions, the
Company will consider additional financing. There can be no assurance that such
financing will be available on terms acceptable to the Company, if at all.
23
<PAGE> 27
BUSINESS
Proxim designs, manufactures and markets high performance wireless local
area networking ("LAN") products based on spread spectrum radio frequency ("RF")
technology. Proxim's highly integrated wireless client adapters and network
infrastructure systems seamlessly extend existing enterprise LANs to enable
mobility-driven applications in a wide variety of in-building or campus area
environments. Proxim's RangeLAN2 2.4 GHz wireless LAN technology has been
adopted by a number of major mobile computer system and handheld data terminal
manufacturers, as well as many leading wireless solution providers, for
real-time data collection applications in manufacturing, warehousing,
transportation and retailing and for point-of-service network applications in
healthcare, hospitality and financial services. Proxim is a leading supplier of
both branded and OEM spread spectrum wireless LAN products and has shipped over
175,000 of these products to date.
BACKGROUND
In recent years, organizations have shifted from centralized computing
environments to distributed client/server networks in order to move information
processing power closer to end users. Traditionally, these networks have been
accessed from desktop computers situated in fixed locations throughout the
enterprise and, accordingly, have not addressed the needs of organizations which
require their employees to be mobile within the workplace. In response,
organizations have begun to utilize wireless technologies to extend their
client/server networks to mobile end users.
Significant technological advances and changes in the regulatory
environment have facilitated the development and proliferation of wireless
networking solutions which extend the reach of existing wired networks. In voice
communications, wireless technology has made possible the extension of wired
networks to serve mobile users through devices such as cordless and cellular
telephones. Similarly, advances in wireless data communications, including
wireless LAN adapters and radio modems, have enabled the extension of enterprise
networks to notebook computers, pen-based notepads and handheld data collection
terminals in the local area environment. By providing network connectivity for
mobile users, these products increase the accuracy, timeliness and convenience
of data collection and information access, thereby improving productivity and
enhancing customer service.
Commercial applications of wireless local area networking technology
initially addressed a limited number of vertical markets such as retailing,
warehousing and distribution. In these industries, businesses quickly recognized
the advantages of mobile handheld data collection devices and the productivity
benefits associated with applications such as on-line inventory management and
real-time asset tracking. Early wireless networking products failed to achieve
widespread adoption, however, because these systems typically involved
proprietary wireless network architectures operating at low data rates with
limited connectivity to existing enterprise LANs. Furthermore, because these
systems operated in licensed narrowband frequencies or in the 900 MHz frequency
band, they were generally authorized for use only in the U.S. and in a limited
number of international markets.
During the past several years, advances in wireless data communications
technology have enabled the development of a new generation of wireless LAN
systems designed to operate in the 2.4 GHz frequency band. This new generation
of 2.4 GHz products operates at significantly higher data rates and utilizes
standard network interfaces and protocols to seamlessly extend existing
enterprise data networks. The recent development of these high performance, open
systems products has enabled the emergence of a number of new high bandwidth
applications in established industrial data collection markets and has fostered
the creation of many promising applications in new vertical markets such as
healthcare, hospitality and financial services. In healthcare, for example,
wireless LANs now allow medical professionals to access clinical data and input
patient charting information at the point-of-care anywhere in a hospital
environment. These same wireless
24
<PAGE> 28
networks can also be used to facilitate admissions, billing, materials
management and other administrative applications. Data-intensive applications in
markets such as healthcare require robust and scalable wireless networks capable
of supporting an increasing number of applications and users over time.
The figure below illustrates a wireless communications system integrated
into a hospital's existing network infrastructure.
LOGO
Concurrent with the emergence of new applications and new vertical markers,
two primary factors have led to a significant expansion in the worldwide market
potential for wireless LANs. First, from a regulatory perspective, the 2.4 GHz
frequency band has recently been allocated for unlicensed wireless networks in
virtually every developed country around the world. Second, the universal
availability of this unlicensed spectrum has encouraged wireless LAN suppliers
to design standard products and solutions which can be marketed and sold
globally.
The Company believes that the convergence of worldwide spectrum
availability, emerging standards and new high performance products will lead to
more widespread deployment of wireless LAN products in both traditional
industrial data collection applications as well as emerging point-of-service
network applications. BIS Strategic Decisions estimates that sales of wireless
local area networking products in the U.S. will increase from $90 million in
1994 to approximately $550 million by the year 2000. This growth is expected to
be even stronger in certain industries such as healthcare, where BIS Strategic
Decisions estimates the number of wireless LAN products deployed to increase
from approximately 3,000 in 1994 to over 600,000 by the end of the decade.
THE PROXIM SOLUTION
In 1994, Proxim pioneered 2.4 GHz frequency hopping wireless LAN technology
by being first to market with its RangeLAN2 product family. Since then, the
Company has captured a substantial number of key design wins with major 2.4 GHz
OEM customers. The Company attributes this success to the architectural
advantages of its RangeLAN2 product line as well as key aspects of the Company's
overall technology approach, including the following:
- Seamless Extension of Existing Enterprise Data Networks. Proxim designs
high performance open systems wireless communications products that
transparently extend the reach of existing enterprise LANs using standard
network interfaces and protocols.
25
<PAGE> 29
- Robust, Scalable Wireless Network Architecture. RangeLAN2's unique
frequency hopping systems architecture and wireless LAN protocols create
a robust RF network environment that cost-effectively expands to
accommodate an increasing number of mobile users and applications.
- Superior Product Performance and Functionality. The RangeLAN2 family
incorporates a number of industry-leading technology innovations to
achieve superior product performance and functionality, including a
fully-integrated, single chip gallium arsenide ("GaAs") RF transceiver
for enhanced radio sensitivity and power amplification, a high throughput
frequency hopping modulation approach with a fallback mode for extended
range and coverage, and sophisticated wireless networking protocols for
state-of-the-art roaming and power management capabilities.
- Broad Array of Interoperable Products and Applications. Based on the
highly integrated design of Proxim's RangeLAN2 credit card-sized OEM
adapter products, numerous mobile systems and handheld device
manufacturers have designed RangeLAN2 technology into their products. The
widespread availability of RangeLAN2-based mobile computer and peripheral
systems allows end users to select from numerous interoperable products
in meeting their application requirements.
STRATEGY
Proxim designs its products to address the needs of organizations seeking
to extend their enterprise networks to mobile end users. Proxim's objective is
to maintain its leadership position in the high performance wireless LAN market
by pursuing the following strategies:
- Leveraging Core Competencies to Maintain Technology Leadership. Proxim's
technology strengths have positioned the Company as a leader in the
emerging worldwide 2.4 GHz wireless LAN market. The Company intends to
leverage its core competencies in wireless systems architecture, radio
transceiver design, ASIC development, wireless communications protocols
and network software drivers both to enhance the functionality of its
existing products and to develop new technologies for future wireless LAN
products. In addition, Proxim will begin to invest significant research
and development resources in order to introduce new technologies and
products for other wireless communications markets.
- Focusing on Key Vertical Market Opportunities. The Company currently
markets its wireless networking products as an enabling technology for a
variety of applications in specific industries, including healthcare,
hospitality, retailing, warehousing, manufacturing and transportation.
Proxim believes that wireless applications in several of these
industries, such as healthcare, are only now beginning to emerge and that
demand for these applications will grow over the next several years. The
Company plans to work closely with its OEM customers and wireless
solutions partners to increase the base of applications developed on
RangeLAN2 networks for both existing and new vertical markets.
- Strengthening International Marketing and Distribution
Capabilities. Given the increasing adoption of local area networks
globally and recent regulatory changes opening the 2.4 GHz frequency band
to permit unlicensed wireless LAN products outside the U.S., Proxim
intends to aggressively expand its international marketing and sales
efforts. Specifically, the Company plans to invest significant resources
in strengthening its branded marketing and distribution capabilities
throughout Europe and Asia, and to enhance the marketing, sales and
technical support provided to OEM partners with worldwide distribution
channels.
- Expanding OEM Customer Relationships. Proxim seeks to have its products
designed into OEM products for a broad range of industry-specific and
general purpose applications. Currently, the Company has relationships
with over 50 OEM customers and application solutions providers for its
RangeLAN2 products. In addition to expanding product sales to existing
OEM customers such as AMP, Data General, DEC, Fujitsu, Intermec, LXE,
Norand, SpaceLabs Medical and Zenith Data
26
<PAGE> 30
Systems, Proxim is committed to forging relationships with new OEM
customers and application solutions providers that serve a wide variety
of end user markets.
PRODUCTS
Since 1989, Proxim has focused on supplying spread spectrum RF transceiver
modules and wireless LAN adapters to OEM customers for integration into mobile
computing platforms, handheld data terminals and portable peripheral devices.
Proxim designs its products to be small, lightweight, cost-effective and power
efficient in order to meet the needs of its OEM customers and the vertical
markets they serve. Proxim currently offers three wireless networking product
lines: RangeLAN2, RangeLINK and 900 MHz products. The RangeLAN2 and RangeLINK
product families are based on the Company's latest 2.4 GHz frequency hopping
technology, while Proxim's 900 MHz products utilize the Company's first
generation direct sequence technology.
Since the introduction of the RangeLAN2 product family in 1994, Proxim's
2.4 GHz product sales have increased to over 70% of total revenue in the first
quarter of 1996. Although 900 MHz product sales are still increasing in absolute
terms, the Company anticipates that its 2.4 GHz product family will continue to
increase as a percentage of total revenue based on the worldwide availability of
unlicensed 2.4 GHz spectrum as well as the higher throughput and capacity
achievable with 2.4 GHz wireless networks.
RangeLAN2. Introduced in 1994, RangeLAN2 was the industry's first
FCC-certified 2.4 GHz frequency hopping wireless LAN product family. The
RangeLAN2 family consists of two product lines: OEM design-in modules and
packaged "off the shelf " products. The design-in modules are integrated by OEM
customers into handheld computing and data collection devices. Packaged products
are used with standard notebook and desktop computers to extend existing
enterprise networks and to create ad hoc wireless networks. All RangeLAN2
products are designed to share the same software and are functionally
interoperable. RangeLAN2 products operate in the 2.4 GHz frequency band, which
has become widely available in North and South America, Europe and Asia for
unlicensed wireless LAN products.
RangeLAN2 packaged products include PCMCIA and ISA wireless LAN adapters
for client computer systems as well as a network Access Point for transparent
bridging to existing 802.3 Ethernet LANs. In addition, RangeLAN2 packaged
products are available as private label models, enabling OEM customers to offer
a complete line of 2.4 GHz wireless LAN products under their brand name. Private
label versions of these products are currently marketed by AMP, DEC, Intermec,
LXE, and Zenith Data Systems, among others.
RangeLAN2 OEM modules are credit card-sized, design-in wireless LAN
adapters. These modules are highly integrated, miniaturized products which
reduce the design-in cycle time and expedite the time to market for OEMs by
offering industry standard interfaces and, if required, the ability to port to
non-standard interfaces and computing platforms with software tools and licensed
source code. RangeLAN2 OEM modules have been designed into more than 30 OEM
handheld computing and data collection devices by companies such as Alps
Electric (formerly Kalidor), Bass, Citadel, Fujitsu, Intermec, LXE, Norand and
Zenith Data Systems.
The RangeLAN2 family has received numerous industry awards since its
introduction. PC Magazine (February 1996) recently selected RangeLAN2 as
"Editors' Choice" in a comprehensive review of wireless LAN products over eight
competitive offerings and LAN magazine (April 1996) awarded RangeLAN2 its "1996
Wireless Networking Product of the Year."
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The Company believes that the commercial success RangeLAN2 has achieved to
date derives in part from several key design advantages inherent in the
RangeLAN2 architecture as set forth below.
<TABLE>
<CAPTION>
RANGELAN2 FEATURE RANGELAN2 SPECIFICATION ADVANTAGES
<S> <C> <C>
- --------------------------------------------------------------------------------------
Frequency Band 2.4 GHz Worldwide spectrum
availability; increased
wireless bandwidth
Spread Spectrum Frequency hopping Most prevalent 2.4 GHz
Technology technology due to increased
scalability and enhanced
interference-immunity
Data Rate per Channel 1.6 Mbps/800 Kbps Highest data rate among
available frequency hopping
products
Number of Channels 15 Multiple co-located wireless
Available networks in a single location
Modulation Technique 4GFSK/2GFSK High throughput modulation
approach with range-extending
fallback mode (IEEE proposed
standard)
Media Access Control CSMA/CA Highly reliable "wireless
(MAC) Ethernet" MAC protocol (IEEE
proposed standard)
Maximum Range 300-500 feet (standard Extended RF range for
antenna); cost-effective coverage
1000+ feet (high gain
antenna)
Power Consumption 350 mA transmit; Lowest average power
175 mA receive consumption among available
high speed 2.4 GHz spread
spectrum products
Power Saving Mode 5 mA doze; Advanced power management
2 mA sleep system for extended battery
life
Roaming Automatic handoff with Seamless microcellular
configurable speeds roaming feature for mobile
applications
Network Management SNMP compliant Standards-based management
Diagnostic Tools Site survey utility First software-based solution
available
</TABLE>
RangeLINK. RangeLINK is a family of building-to-building wireless remote
bridges designed to connect local area networks at distances of up to three
miles. RangeLINK utilizes Proxim's 2.4 GHz frequency hopping technology,
specialized software and directional antennas. These products provide a
cost-effective alternative to leased 56 Kbps and T1 data communications lines
and other more expensive wireless products. Proxim offers two different
RangeLINK models: one operates point-to-point with maximum throughput exceeding
1 Mbps, and the other serves as a multipoint "hub and spoke" campus area
interconnection bridging system with throughput in the 500-600 Kbps range.
900 MHz Products. The Company offers four types of products based on the
Company's 900 MHz direct sequence spread spectrum technology: RF transceivers;
dual board radio-modems that combine a RF transceiver, controller and RS 232
interface in a single unit; ProxLink, a packaged version of the dual board
radio-modem units; and RangeLAN, a family of wireless LAN adapters. The RF
transceiver products
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and dual board radio-modems are OEM design-in products. ProxLink products,
originally introduced in 1991, are self-contained ruggedized networking devices
which enable both point-to-point and multipoint wireless data communications.
The RangeLAN product family, originally introduced in 1992, includes Proxim's
first generation of open systems wireless LAN adapters.
TECHNOLOGY
Proxim's core technology strengths include high performance spread spectrum
radios, sophisticated wireless networking protocols, highly integrated ASIC/MMIC
designs and advanced network software drivers. The Company's expertise in these
key technology areas has allowed it to design small, lightweight and power-
efficient products that easily integrate into mobile computing and handheld data
collection devices. These technologies enable Proxim's customers to create
products and applications that seamlessly extend existing enterprise data
networks, particularly to mobile end users.
Spread Spectrum Radios. Since 1989, Proxim has focused on developing high
performance spread spectrum radio products for the 900 MHz and 2.4 GHz frequency
bands. The Company was among the first to certify and market 900 MHz direct
sequence RF transceivers, modems and adapters, and has become a leading OEM
supplier of such products to a wide variety of handheld terminal and mobile
computer systems manufacturers. In 1994, Proxim introduced its 2.4 GHz RangeLAN2
wireless LAN product family based on frequency hopping spread spectrum
technology. Frequency hopping provides enhanced interference immunity and
increased wireless network scalability compared to direct sequence products
operating in the 2.4 GHz band. In addition, the Company's RangeLAN2 product
family incorporates an advanced dual data rate, high throughput modulation
technique with a fallback mode for extending RF coverage, an innovation the IEEE
802.11 Committee has adopted as part of its frequency hopping draft standard.
ASIC/MMIC Designs. Many of RangeLAN2's key performance advantages are a
direct result of the high degree of functionality integrated into its custom
ASICs and MMICs. RangeLAN2 mobile client adapter products incorporate a highly
integrated single chip GaAs RF transceiver which provides enhanced radio
sensitivity and power amplification as well as reduced size, weight and power
consumption. To date, Proxim is the only wireless LAN supplier utilizing a fully
integrated GaAs RF transceiver in its 2.4 GHz wireless LAN products. In
addition, Proxim has developed both a custom mixed-signal DSP ASIC and a network
controller ASIC based on CMOS technology for its RangeLAN2 product line. The
Company intends to integrate these two ASICs into a single chip solution in the
future. The Company believes that its RangeLAN2 products reflect the highest
degree of ASIC/MMIC integration of any 2.4 GHz wireless LAN solution available.
See "Risk Factors -- Sole or Limited Sources of Supply."
Wireless Networking Protocols. Implemented in a combination of firmware
and software, Proxim's sophisticated RangeLAN2 MAC protocol is a result of the
Company's extensive experience delivering wireless LAN solutions in a broad
range of applications environments over the past several years. The Company's
CSMA/CA ("Carrier Sense Multiple Access with Collision Avoidance") MAC protocol
provides the equivalent of a robust "wireless Ethernet" RF communications
system, and incorporates a performance-enhancing acknowledgement system that
ensures fairness of access and reliable communications, even in large multi-user
application environments. This CSMA/CA approach closely resembles the MAC
protocol included in the current IEEE 802.11 draft standard. The RangeLAN2 MAC
protocol also provides for advanced wireless networking features such as
seamless roaming and multi-level power management to support mobile users. These
advanced features, while permitted, are not specifically defined or required in
the current IEEE 802.11 draft standard.
Network Software Drivers. As part of its standard RangeLAN2 product
offering, Proxim provides software drivers such as ODI and NDIS to support most
major network operating systems, including TCP/IP, Novell IPX and Microsoft
Windows (including Windows 95 and Windows NT), among others. These
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<PAGE> 33
network software drivers enable RangeLAN2 users to seamlessly access existing
enterprise LANs. In addition, the Company offers a "C" version RangeLAN2
software driver to facilitate the customization of Proxim source code in order
to meet specialized OEM hardware and software requirements.
CUSTOMERS
The majority of Proxim's revenue has been derived from sales to OEM
customers that offer wireless LANs products as part of a complete solution that
typically includes specialized mobile computers developed by the OEM, network
infrastructure systems, peripheral devices, software and services. The Company's
OEM partners traditionally target industrial applications in one or more
specific markets such as manufacturing, warehousing, transportation and
retailing. Additionally, Proxim markets its branded products to value added
resellers and systems integrators in emerging wireless markets that include
healthcare, hospitality and financial services, where access to real-time
information is critical. Proxim's 2.4 GHz OEM customers include, among others,
AMP, Bass, Digital, Fujitsu, Intermec, LXE, Norand, NTT-IT, SpaceLabs Medical,
and Zenith Data Systems.
In 1995, Intermec and NTT-IT represented 27% and 14%, respectively, of the
Company's total revenue; in 1994 Intermec and Zenith Data Systems represented
17% and 15%, respectively, of the Company's total revenue; and in 1993, Intermec
and Comtec Information Systems, Inc. represented 18% and 13%, respectively, of
the Company's total revenue. Sales to OEM customers were $17,465,000,
$6,286,000, and $6,691,000 in 1995, 1994 and 1993, respectively, representing
79%, 56% and 83% of total revenue during such periods.
Sales to three OEM customers represented approximately 27%, 17% and 11% of
the Company's total revenue during the first quarter of 1996. The Company
expects that sales to a limited number of OEM customers will continue to account
for a substantial portion of its revenue during any period for the foreseeable
future. The Company also has experienced quarter to quarter variability in sales
to each of its major OEM customers and expects this pattern to continue in the
future. The loss of one or more of the Company's major OEM customers could have
a material adverse effect on the Company's results of operations. See "Risk
Factors -- Dependence on a Limited Number of OEM Customers."
The Company's products are used by a diverse set of customers in a wide
variety of applications. The following are representative examples of
industry-specific applications of Proxim's wireless networking products:
Saint Joseph Hospital. Saint Joseph Hospital, the largest private
inpatient facility in Denver, Colorado, has implemented an innovative
point-of-care solution utilizing Proxim's RangeLAN2 wireless LAN technology with
notebook computers and customized medical carts. Nurses and therapists utilize
approximately 100 of these carts to roam from room to room, accessing clinical
data from, and entering patient information to, the hospital's central database
via the RangeLAN2 wireless network. This automated charting system allows Saint
Joseph Hospital medical professionals to spend more time interacting with
patients while providing numerous quality and productivity benefits: real-time
access to patient information, elimination of redundant data entry and reduction
of transcription errors.
Chicago Board Options Exchange. The Chicago Board Options Exchange
("CBOE") has adopted RangeLAN2 as its standard technology for wireless trading
and information systems applications on the trading floor. RangeLAN2 products,
including over 30 access points and over 200 wireless LAN adapters, are deployed
with handheld PCs to create secure private wireless networks for each CBOE
member firm to connect traders with the central database. Members of the CBOE
have used Proxim's spread spectrum RF products in trading floor environments for
over two years. On the CBOE, wireless computers provide real-time access to
bids, offers, trades and other proprietary information, enabling the CBOE to
make the highest quality markets for brokers and investors.
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<PAGE> 34
T.G.I. Friday's. T.G.I. Friday's has implemented a table management system
in over 20 restaurants that utilizes a Fujitsu Stylistic 500 RF with a
fully-integrated RangeLAN2 wireless LAN adapter. With this system, T.G.I.
Friday's employees maintain real-time information about the seating preferences
of each group of customers and the status of each table, coordinating
information from a variety of locations within the restaurant. The result is
better customer service, more efficient guest seating and increased sales.
SALES AND MARKETING
The Company sells its products directly to OEM customers, and indirectly to
value added resellers, system integrators, SIs and end users through regional,
national and international distributors. Proxim offers both its design-in
products directly to OEM customers who incorporate these products into their
wireless computing platforms and its branded products as private label models.
Sales of many of the Company's wireless networking products depend in
significant part upon the decision of a prospective OEM customer to develop and
market wireless solutions which incorporate the Company's wireless technology.
OEM customers' orders are affected by a variety of factors such as new product
introductions, regulatory approvals, end user demand for OEM customers'
products, product life cycles, inventory levels, manufacturing strategy,
contract awards, competitive conditions and general economic conditions. Sales
of the Company's products generally involve a significant commitment of capital
and other resources by its customers, with the attendant delays associated with
such customers' internal procedures to approve such commitment. For these and
other reasons, the design-in cycle associated with the purchase of the Company's
wireless products by OEM customers is quite lengthy, generally ranging from six
months to two years, and is subject to a number of significant risks, including
customers' budgeting constraints and internal acceptance reviews, that are
beyond the Company's control. Because of the lengthy sales cycle, the Company
typically plans its production and inventory levels based on internal forecasts
of OEM customer demand, which is highly unpredictable and can fluctuate
substantially. In addition, the Company's agreements with OEM customers
typically do not require minimum purchase quantities and a significant
reduction, delay or cancellation of orders from any of these customers could
have a material adverse effect on the Company's results of operations. If
revenue forecasted from a specific customer for a particular quarter is not
realized in that quarter, the Company's operating results for that quarter could
be materially adversely affected. In addition, there can be no assurance that
the Company will become a qualified supplier for new OEM customers or that the
Company will remain a qualified supplier for existing OEM customers.
The Company generally does not operate with a significant order backlog.
The Company's agreements with OEM customers typically do not require minimum
purchase quantities and a significant reduction in orders from any of these
customers could have a material adverse effect on the Company's results of
operations. The Company's sales to any single OEM customer are also subject to
significant variability from quarter to quarter. Such fluctuations could have a
material adverse effect on the Company's operating results. In addition, there
can be no assurance that the Company will become a qualified supplier for new
OEM customers or that the Company will remain a qualified supplier for existing
OEM customers.
Proxim's branded products are sold to value added resellers, systems
integrators and end users in the U.S. through regional distributors, and through
TechData Corporation and Anixter Corporation, two nationwide distribution and
sales organizations.
In general, distributors generally offer products of several different
companies, including products that may compete with the Company's products.
Accordingly, these distributors may give higher priority to products of other
suppliers, thus reducing their efforts to sell the Company's products.
Agreements with distributors are generally terminable at the distributor's
option. A reduction in sales efforts or termination of a distributor's
relationship with the Company may have a material adverse effect on future
operating results. Use of distributors also entails the risk that distributors
will build up inventories in anticipation of substantial
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<PAGE> 35
growth in sales. If such growth does not occur as anticipated, these
distributors may substantially decrease the amount of product ordered in
subsequent quarters. Such fluctuations could contribute to significant
variations in the Company's future operating results. In addition, distributors
generally have stock rotation rights and price protection on unsold merchandise,
which may adversely impact the Company's profit margins.
Proxim is expanding the international distribution channels for its
products. The Company is authorized to ship its RangeLAN2 products into more
than 40 countries. In addition to the Company's relationships with numerous OEM
customers who market the RangeLAN2 technology internationally, the Company has
over 30 international authorized distributors in over 40 sales territories.
Revenue from shipments by the Company to customers outside the United States,
principally to a limited number of distributors and OEM customers, represented
36%, 24%, 6% and 4% of total revenue during the first quarter of 1996 and during
1995, 1994 and 1993, respectively. The Company expects that revenue from
shipments to international customers will continue to represent a substantial
portion of total revenue for the foreseeable future. Sales to international
customers or to U.S. OEM customers who ship to international locations are
subject to a number of risks and uncertainties including, but not limited to,
changes in foreign government regulations and telecommunications standards,
export license requirements, tariffs and taxes, other trade barriers,
fluctuations in currency exchange rates, difficulty in collecting accounts
receivable, difficulty in staffing and managing foreign operations, and
potential political and economic instability. While international sales are
typically denominated in U.S. dollars and the Company typically extends limited
credit terms, fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country.
Additionally, payment cycles for international distributors are typically longer
than for distributors in the United States. There can be no assurance that
foreign markets will continue to develop or that the Company will receive
additional orders to supply its products to foreign customers. The Company's
business and operating results could be materially and adversely affected if
foreign markets do not continue to develop or the Company does not receive
additional orders to supply its products for use by foreign customers.
MANUFACTURING
The Company's manufacturing operations consist primarily of final assembly
and testing, quality assurance, packaging and shipping at the Company's
manufacturing facility in Mountain View, California. The Company purchases all
of the circuit boards, integrated circuits and other components used in its
products from third party suppliers. The Company inspects these components for
quality, groups the components into kits by production order, and ships the kits
to its subcontractors for interim assembly and test.
The Company designs its products to provide a high degree of reliability.
The Company's products have achieved a field failure rate of its installed base
of less than 1% per annum to date. The Company believes that this reliability is
the result of its careful quality assurance procedures. Proxim has developed a
supplier selection procedure and approved vendor list to maintain quality. In
addition, the Company monitors its suppliers' performance to ensure consistent
quality, reliability and yields. While the Company's quality assurance program
is not currently certified under ISO 9000, it is modeled after the ISO 9000
quality standards, including process documentation, test procedures, quality
assurance procedures, process control, equipment maintenance, quality record
keeping and training of personnel. In addition, the Company generally uses ISO
9000 certified manufacturing assembly subcontractors and intends to pursue ISO
9000 certification for its internal manufacturing processes in the future.
The Company currently has limited manufacturing capability and has no
experience in large scale manufacturing. If the Company's customers were to
place or concurrently place orders for unexpectedly large quantities of the
Company's products, the Company's present manufacturing capacity might be
inadequate to meet such demand. There can be no assurance that the Company will
be able to develop or contract for additional manufacturing capacity on
acceptable terms on a timely basis. In addition, in order to compete
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successfully, the Company will need to achieve significant product cost
reductions. Although the Company intends to achieve cost reductions through
engineering improvements and production economies, there can be no assurance
that the Company will be able to do so. In order to remain competitive, the
Company must continue to introduce new products and processes into its
manufacturing environment. The Company currently conducts its manufacturing
operations for all of its products in a single facility in Mountain View,
California. In addition, the Company relies on certain outside contract
manufacturers for circuit board assemblies which subjects the Company to a
number of risks, including a potential inability to obtain an adequate supply of
assembled circuit boards as well as reduced control over the price, timely
delivery and quality of such assembled circuit boards. If the Company's Mountain
View facility were to become incapable of operating, even temporarily, or were
unable to operate at or near its current or full capacity for an extended
period, the Company's business and operating results could be materially
adversely affected. Further, in order to remain competitive the Company expects
to continue to introduce new processes into its manufacturing environment.
Changes in the manufacturing operations to incorporate new products and
processes could cause disruptions, which, in turn, could adversely affect
customer relationships, cause a loss of market opportunities and have a material
adverse effect on the Company's business and operating results.
Certain parts and components used in the Company's products, including the
Company's proprietary ASICs, MMICs and assembled circuit boards, are only
available from single sources, and certain other parts and components are only
available from a limited number of sources. The Company's reliance on these sole
source or limited source suppliers involves certain risks and uncertainties,
including the possibility of a shortage or discontinuation of certain key
components and reduced control over delivery schedules, manufacturing
capability, quality and costs. Any reduced availability of such parts or
components when required could materially impair the Company's ability to
manufacture and deliver its products on a timely basis and result in the
cancellation of orders, which could have a material adverse effect on the
Company's operating results. In addition, the purchase of certain key components
involves long lead times and, in the event of unanticipated increases in demand
for the Company's products, the Company has in the past been, and may in the
future be, unable to manufacture certain products in a quantity sufficient to
meet its customers' demand in any particular period. The Company has no
guaranteed supply arrangements with its sole or limited source suppliers, does
not maintain an extensive inventory of parts or components, and customarily
purchases sole or limited source parts and components pursuant to purchase
orders placed from time to time in the ordinary course of business. Business
disruptions, production shortfalls or financial difficulties of a sole or
limited source supplier could materially and adversely impact the Company by
increasing product costs, or reducing or eliminating the availability of such
parts or components. In such event, the inability of the Company to develop
alternative sources of supply quickly and on a cost-effective basis could
materially impair the Company's ability to manufacture and deliver its products
on a timely basis and could have a material adverse effect on its operating
results.
RESEARCH AND DEVELOPMENT
The wireless communications industry is characterized by very rapid
technological change, short product life cycles and evolving industry standards.
To remain competitive, the Company must develop or gain access to new
technologies in order to increase product performance and functionality, reduce
product size and maintain cost-effectiveness. The Company's research and
development efforts are focused on investigating new technologies, developing
new products and implementing enhancements to existing products. The Company's
research and development efforts since 1994 have been primarily concentrated on
enhancing features and performance of the Company's RangeLAN2-based products.
These efforts include the development of new ASICs/MMICs, software drivers,
enhanced wireless adapter and access point products; and additional networking
software features. The Company expects that it will continue to devote
substantial research and development resources to enhance its RangeLAN2
architecture in the foreseeable future. Given the emerging
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nature of the wireless LAN market, there can be no assurance that the RangeLAN2
products and technology, or the Company's other products or technology, will not
be rendered obsolete by alternative technologies.
The Company's success is also dependent on its ability to develop new
products for existing and emerging wireless communications markets, to introduce
such products in a timely manner and to have them designed into new products
developed by OEM customers. The development of new wireless networking products
is highly complex, and wireless LAN companies, including Proxim, from time to
time have experienced delays in developing and introducing new products. Due to
the intensely competitive nature of the Company's business, any delay in the
commercial availability of new products could have a material adverse effect on
the Company's operating results. If the Company is unable to develop or obtain
access to advanced wireless networking technologies as they become available, or
is unable to design, develop and introduce competitive new products on a timely
basis, or is unable to hire qualified engineers to develop such technologies and
products, its future operating results would be materially and adversely
affected. In particular, the Company intends to expend substantial resources in
developing products that are designed to conform to the potential IEEE 802.11
specifications. There can be no assurance that these specifications will be
ultimately adopted or that such standards will have a meaningful commercial
impact. To the extent these standards or other standards are adopted, the
Company could be at a disadvantage if its competitors are able to develop and
introduce competitive products which conform to such standards more rapidly than
the Company.
As of March 31, 1996, the Company's research and development department
consisted of 31 full-time employees and one consultant. Research and development
expenses were $1,070,000, $3,288,000, $1,783,000 and $1,474,000 during the first
quarter of 1996 and during 1995, 1994 and 1993, respectively.
COMPETITION
The wireless local area networking market is intensely competitive. The
principal competitive factors in this market include effective RF coverage area,
data throughput, wireless networking protocol sophistication, network
scalability, roaming capability, power consumption, product miniaturization,
product reliability, product time to market, product certifications, price,
effective distribution channels, ability to support new industry standards and
company reputation. Although the Company believes that it currently competes
favorably on the basis of these factors, the Company could be at a disadvantage
to companies that have broader distribution channels and offer more diversified
product lines.
Proxim has several current competitors which offer 2.4 GHz products,
including IBM, Lucent Technologies, Symbol Technologies and Telxon. In addition,
certain other companies, such as 3Com Corporation, have announced their
intention to offer competitive 2.4 GHz products. Some of these competitors have
announced their intention to develop IEEE 802.11 standards-based products or
other higher performance systems in the future. In addition to competition from
companies that offer or have announced their intention to develop wireless LAN
products, the Company could face future competition from companies that offer
products which replace network adapters or which offer alternative wireless
communications solutions, or from large computer and network equipment
companies. There can be no assurance that the Company will be able to compete
successfully against these competitors or that competitive pressures faced by
the Company will not adversely affect its business or operating results.
Many of the Company's present and potential competitors have substantially
greater financial, marketing, technical and other resources than the Company
with which to pursue engineering, manufacturing, marketing, and distribution of
their products and may succeed in establishing technology standards or strategic
alliances in the wireless LAN market, obtain more rapid market acceptance for
their products, or otherwise gain a competitive advantage. There can be no
assurance that the Company will succeed in developing products or technologies
that are more effective than those developed by its competitors. Furthermore,
the Company competes with companies with high volume manufacturing and extensive
marketing and distribution
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capabilities, areas in which the Company has limited experience. Increased
competition, direct and indirect, could adversely affect the Company's revenue
and profitability through pricing pressure and loss of market share. There can
be no assurance that the Company will be able to compete successfully against
existing and new competitors as the market evolves and the level of competition
increases.
GOVERNMENT REGULATION
In the United States, the Company is subject to various FCC rules and
regulations. Current FCC regulations permit license-free operation in certain
FCC-certified bands in the radio spectrum. Proxim's spread spectrum wireless
products are certified for unlicensed operation in the 902-928 MHz and
2.4-2.4835 GHz frequency bands. Operation in these frequency bands is governed
by rules set forth in Part 15 of the FCC regulations. The Part 15 rules are
designed to minimize the probability of interference to other users of the
spectrum and, thus, accord Part 15 systems secondary status. In the event that
there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of the Company's products experience
excessive interference from primary users, market acceptance of the Company's
products could be adversely affected, thereby materially and adversely affecting
the Company's business and results of operations. The FCC, however, has
established certain standards which create an irrebuttable presumption of
noninterference for Part 15 users and the Company believes that its products
comply with such requirements. There can be no assurance that the occurrence of
regulatory changes, including changes in the allocation of available frequency
spectrum or modification to the standards establishing an irrebuttable
presumption for unlicensed Part 15 users, would not significantly impact the
Company's operations by rendering current products obsolete, restricting the
applications and markets served by the Company's products or increasing the
opportunity for additional competition.
The Company's products are also subject to regulatory requirements in
international markets and, therefore, the Company has been monitoring the
development of spread spectrum regulations in certain countries that represent
potential markets for its products. The Company has limited experience in
gaining regulatory approval outside of the United States. Several foreign
countries, such as Canada, have regulations that closely follow those of the
FCC. To date, Proxim or its distribution partners have obtained certifications
for the Company's products in 22 countries as well as approval for use in over
20 additional countries which rely on or reference certification requirements of
regulatory bodies such as the FCC and the European Telecommunications Standards
Institute ("ETSI"). Each new Proxim product or OEM customer product must be
certified or otherwise qualified for use in each country. The Company has an
ongoing program to obtain certifications for its products and to assist certain
OEM customers in obtaining certification for their products in all available
markets. While there can be no assurance that the Company will be able to comply
with regulations in any particular country, the Company has designed its
RangeLAN2 products to minimize the design modifications required to meet various
2.4 GHz international spread spectrum regulations. Changes in, or the failure by
the Company to comply with, applicable domestic and international regulations
could have a material adverse effect on the Company's business and operating
results. In addition, with respect to those countries that do not follow FCC
regulations, Proxim may need to modify its products to meet local rules and
regulations.
PROTECTION OF PROPRIETARY RIGHTS
The Company relies on a combination of patents, trademarks and
non-disclosure agreements in order to establish and protect its proprietary
rights. Proxim has been issued three U.S. patents which were issued in 1991,
1993 and 1995 and are important to the current business of the Company, and has
four patent applications pending in the U.S. which relate to the Company's core
technology. There can be no assurance that patents will issue from any of these
pending applications or, if patents do issue, that the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any
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patents issued to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection to the Company. Since U.S. patent applications are maintained in
secrecy until patents issue, and since publication of inventions in the
technical or patent literature tend to lag behind such inventions by several
months, the Company cannot be certain that it was the first creator of the
inventions covered by its issued patents or pending patent applications or that
it was the first to file patent applications for such inventions or that the
Company is not infringing on the patents of others. In addition, the Company has
filed, or reserved its rights to file, a number of patent applications
internationally. There can be no assurance that any such international patent
applications will issue or that the laws of foreign jurisdictions will protect
the Company's proprietary rights to the same extent as the laws of the United
States.
In view of the rapid technological change in this industry, Proxim believes
that the technical expertise and creative skills of its engineers and other
personnel are crucial in determining the Company's future success. The Company's
ability to compete in the marketplace may be enhanced by its ability to protect
its proprietary information through the ownership of patents, registrations and
trademarks. The Company attempts to protect its trade secrets and other
proprietary information through agreements with customers and suppliers,
proprietary information agreements with employees and other security measures.
However, although the Company intends to protect its rights vigorously, there
can be no assurance that these measures will be successful. Litigation may be
necessary to enforce the Company's patents, trademarks or other intellectual
property rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business and operating results. No intellectual property of the Company has been
invalidated or declared unenforceable. However, there can be no assurance that
in the future such rights will be upheld. Furthermore, there can be no assurance
that any issued patents will provide the Company with a competitive advantage or
will not be challenged by third parties or that the patents of others will not
have an adverse effect on the Company's ability to do business. There can be no
assurance that the measures taken by the Company will prevent misappropriation
of its technology. In addition, there can be no assurance that others will not
independently develop similar products, design around the Company's proprietary
technology or duplicate the Company's products.
EMPLOYEES
As of March 31, 1996, the Company employed 112 full-time employees and 35
temporary employees. Of these individuals, 31 are in engineering and product
development, 37 are in marketing, sales and customer support, 70 are in
manufacturing and quality assurance and 9 are in finance and administration. The
Company believes that its future success will depend in large measure on its
ability to retain certain key technical and management personnel and to attract
and retain additional highly skilled employees. Competition for qualified
personnel in the wireless data communications and networking industries is
intense, and there can be no assurance that the Company will be successful in
retaining its key employees or that it will be able to attract, assimilate or
retain the additional skilled personnel that will be required to support the
Company's anticipated growth. None of the Company's employees are represented by
a labor union. The Company believes that its relations with employees are good.
FACILITIES
The Company maintains its corporate headquarters in a 40,000 square foot
building located in Mountain View, California pursuant to a lease that expires
in June 2000. The Company also leases sales offices in Atlanta, Georgia and
Nashua, New Hampshire. The Company believes that its facilities are adequate to
meet its current needs and that additional or alternative space will be
available as necessary in the future on commercially reasonable terms.
36
<PAGE> 40
MANAGEMENT
The following table sets forth certain information concerning the Company's
directors and executive officers as of March 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
David C. King................. 36 Chairman of the Board of Directors, President and
Chief Executive Officer
Brian T. Button............... 37 Vice President of Marketing
Keith E. Glover............... 39 Vice President of Finance and Administration and
Chief Financial Officer
Juan Grau..................... 38 Vice President of Engineering
Warren A. Hackbarth........... 49 Vice President of Sales
Yosh Sato..................... 51 Vice President of Manufacturing
Raymond Chin.................. 42 Director
Leslie G. Denend.............. 55 Director
Michael D. Kaufman............ 54 Director
G. Russell Mortenson.......... 46 Director
</TABLE>
DAVID C. KING joined Proxim in December 1992 as Vice President of Marketing
and acting Chief Financial Officer, in July 1993 was appointed President, Chief
Executive Officer and Director, and in January 1996 was named Chairman of the
Board of Directors. From December 1990 to November 1992, Mr. King served in
various executive capacities at Vitalink Communications Corporation
("Vitalink"), a LAN internetworking subsidiary of Network Systems Corporation,
most recently as Vice President of Marketing and Customer Services. From 1985 to
1990, Mr. King was Senior Manager in the San Francisco office of McKinsey &
Company, Inc., an international management consulting firm, where he was a
member of the firm's high technology and health care practices.
BRIAN T. BUTTON joined Proxim as Vice President of Marketing in June 1994.
From March 1989 to June 1994, Mr. Button worked for Stratacom Corporation, where
he held several management positions, most recently as Director, Product
Marketing. From May 1982 to February 1989, Mr. Button worked for Hewlett-Packard
Company, where he held several marketing management positions.
KEITH E. GLOVER has served as the Vice President of Finance and
Administration and Chief Financial Officer since he joined Proxim in September
1993. From March 1986 to June 1993, Mr. Glover worked for Vitalink, where he
held several financial management positions, most recently as Vice President of
Finance.
JUAN GRAU joined Proxim in August 1988 as RF Communications Manager. Mr.
Grau was appointed Director of Product Engineering in November 1989 and, in June
1991, was promoted to Vice President of Engineering. From 1980 to 1988, Mr. Grau
worked at Hewlett-Packard Company, where he served in several engineering and
project management positions.
WARREN A. HACKBARTH joined Proxim in May 1994 as Director of Market
Development. In July 1994, Mr. Hackbarth was promoted to Vice President of
Sales. From March 1991 to May 1994, Mr. Hackbarth worked for Fujitsu Personal
Systems, Inc. (formerly Poqet Computer Corp.), where he held several sales
management positions, most recently as Director, Value Integration Services.
From September 1989 to February 1991, Mr. Hackbarth served as an Account Manager
at Informix Corporation. From October 1984 to September 1989, Mr. Hackbarth
worked for Wang Laboratories, Inc., where he held several sales and marketing
management positions.
YOSH SATO joined Proxim in January 1993 as Director of Manufacturing and
has served as Vice President of Manufacturing since June 1993. From August 1989
to September 1992, Mr. Sato served as
37
<PAGE> 41
Director of Operations at Maxoptix Corporation, an optical disk drive company.
From 1988 to 1989, he served as a program manager at MIPS Computer Systems,
Inc., a semiconductor and computer systems manufacturer.
RAYMOND CHIN became a Director of the Company in May 1991 and was Chairman
of the Board of Directors from July 1991 until October 1995. Since January 1995,
Dr. Chin has served as a general partner of Alpine Technology Ventures, a
venture capital firm. From May 1990 to December 1994, Dr. Chin served as a
general partner of MK Global Ventures, a venture capital firm. From June 1984 to
May 1990, Dr. Chin served as a Director at Ameritech Development Corporation, a
subsidiary of Ameritech Corporation, a regional Bell operating company.
LESLIE G. DENEND became a Director of the Company in March 1996. Since
February 1993, Mr. Denend has served as President and Chief Executive Officer,
and, since June 1993, also as Director, of Network General Corporation. From
October 1990 until December 1992, Mr. Denend was President and Chief Executive
Officer of Vitalink Communications. From January 1989 until October 1990, Mr.
Denend served as Executive Vice President of Product Operations at 3Com
Corporation.
MICHAEL D. KAUFMAN became a Director of the Company in September 1991.
Since October 1987, Mr. Kaufman has served as the managing general partner of MK
Global Ventures. From August 1981 until October 1987, Mr. Kaufman was a general
partner of Oak Investment Partners, a venture capital firm. Mr. Kaufman is also
a director of Asante Technologies, Inc., Davox Corporation, Document
Technologies, Inc., Document Imaging Systems Corporation, and HyperMedia
Communications, Inc.
G. RUSSELL MORTENSON became a Director of the Company in August 1994. Mr.
Mortenson served as the President, Chief Operating Officer and Director of
Amtech Corporation from August 1987 until his appointment as Chief Executive
Officer in January 1992.
38
<PAGE> 42
UNDERWRITING
Under the terms and subject to the conditions contained in Underwriting
Agreements, each of the U.S. Underwriters named below, for whom UBS Securities
LLC, Montgomery Securities, Unterberg Harris and Volpe, Welty & Company are
serving as U.S. Representatives, have severally agreed to purchase and the
Company has agreed to sell to them, and the International Underwriters named
below, for whom UBS Limited, Montgomery Securities, Unterberg Harris and Volpe,
Welty & Company are acting as International Representatives (the "International
Underwriters"), have severally agreed to purchase, and the Company has agreed to
sell to them, the respective number of shares of Common Stock set forth opposite
their respective names below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
------------------------------------------------------------ ----------------
<S> <C>
U.S. Underwriters:
UBS Securities LLC........................................
Montgomery Securities.....................................
Unterberg Harris..........................................
Volpe, Welty & Company....................................
---------
Subtotal............................................... 1,875,000
---------
International Underwriters:
UBS Limited...............................................
Montgomery Securities.....................................
Unterberg Harris..........................................
Volpe, Welty & Company....................................
---------
Subtotal............................................... 625,000
---------
Total............................................ 2,500,000
=========
</TABLE>
The U.S. Underwriters and International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all of the shares of Common Stock offered hereby
(other than those covered by the over-allotment option described below) if any
are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any shares of Common Stock being sold by
it (the "U.S. Shares") for the account of anyone other than a United States or
Canadian Person (as defined below) and (b) it has not offered or sold, and will
not offer or sell, directly or indirectly, any U.S. Shares or distribute this
Prospectus outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement Between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions set forth below, (a) it is not purchasing
any shares of Common Stock being sold by it (the "International Shares") for the
account of any United States or Canadian Person and (b) it has not offered or
sold, and will not offer or sell, directly or indirectly, any International
Shares or distribute this Prospectus within the United States or Canada or to
any United States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between the U.S. and International Underwriters. With respect to UBS
Securities LLC, Montgomery Securities, Unterberg Harris and Volpe, Welty &
Company, the foregoing representations or agreements (i) made by each of them in
their capacity as a U.S. Underwriter shall apply only to shares of Common Stock
purchased by each of them in their capacity as a U.S.
39
<PAGE> 43
Underwriter, (ii) made by each of them in their capacity as an International
Underwriter shall apply only to shares of Common Stock purchased by each of them
in their capacity as an International Underwriter and (iii) shall not restrict
either of their abilities to distribute the Prospectus to any person. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside of the
United States or Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person and "United States" means the United States of
America, its territories, its possessions and all areas subject to its
jurisdiction.
Pursuant to the Agreement Between the U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares so sold shall be the offering price set forth on the cover page hereof,
in United States Dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of shares of Common Stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made, and that such
dealer will deliver to any other dealer to whom it sells any of such shares of
Common Stock a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and will not offer or sell any shares of Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account or any resident thereof, any shares of Common Stock acquired in
connection with this offering, except for offers or sales to Japanese
International Underwriters or dealers and except pursuant to any exemption from
the regulation requirement of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such
40
<PAGE> 44
shares of Common Stock a notice stating in substance that such dealer may not
offer or sell any of such shares, directly or indirectly, in Japan or to or for
the account of any resident thereof, except pursuant to any exemption for the
registration requirement of the Securities and Exchange Law of Japan, and that
such dealer will send to any other dealer to whom it sells any shares a notice
to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer and sell, directly or indirectly or offer or sell to
any person for re-offering or resale, directly or indirectly any shares of
Common Stock to any resident of the Republic of Korea (as the term is defined
under the Foreign Exchange Management Law of the Republic of Korea), or in the
Republic of Korea, except pursuant to applicable laws and regulations of the
Republic of Korea.
The Underwriters have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may
allow, and such dealers may reallow, a concession not more than $ per
share to certain other dealers. After the offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or part.
The Company has granted an option to the Underwriters exercisable during
the 30-day period after the date of this Prospectus to purchase up to 375,000
additional shares of Common Stock to cover over-allotments, if any, at the same
price per share as the initial 2,500,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.
The Underwriting Agreements provide that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
The Company's executive officers and directors, who collectively hold an
aggregate of 900,696 shares of Common Stock and options to purchase Common
Stock, have agreed that without the consent of the Underwriters, acting jointly,
they will not, directly or indirectly offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable therefor for a period of 90 days from the date of this Prospectus,
subject to certain limited exceptions. The Company has agreed that, for a period
of 90 days from the date of this Prospectus, it will not, without the written
consent of the Underwriters acting jointly, directly or indirectly, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities, convertible or exchangeable therefor, subject to limited exceptions.
In connection with this offering, the Underwriters and selling group
members (if any) or their respective affiliates intend to engage in passive
market-making transactions in the Common Stock of the Company on the Nasdaq
National Market in accordance with Rule 10b-6A under the Securities Exchange Act
of 1934, as amended, during the two business day period before commencement of
offers or sales of the shares of Common Stock offered hereby. The passive market
making transactions must be identified as such and comply with applicable volume
and price limits. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; however, if
all independent bids are lowered below the passive market makers bid, such bid
must then be lowered when certain purchase limits are exceeded.
From time to time, certain of the Underwriters or their affiliates have
provided, and may continue to provide, investment banking services to the
Company.
41
<PAGE> 45
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments, schedules and exhibits, referred to as
the "Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement and certain parts are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement. Statements contained
in this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied, at the Commission's Public Reference
Section, Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. The Common Stock of
the Company is quoted on the Nasdaq National Market. Reports and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 9513 Key West Avenue, Rockville, Maryland 20850.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996; and
(3) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on October 22,
1993.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for
42
<PAGE> 46
such documents should be submitted in writing to the Chief Financial Officer of
the Company, at the Company's principal executive offices at 295 North Bernardo
Avenue, Mountain View, California 94043 or by telephone at (415) 960-1630.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Brobeck, Phleger & Harrison
LLP, Palo Alto, California are acting as counsel for the Underwriters in
connection with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The financial statements as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus and incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
43
<PAGE> 47
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheet at December 31, 1994 and 1995, and March 31, 1996 (unaudited)........... F-3
Statement of Operations for the Years Ended December 31, 1993, 1994 and 1995, and for
the Three Months Ended March 31, 1995 and 1996 (unaudited).......................... F-4
Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 1993,
1994 and 1995, and for the Three Months Ended March 31, 1996 (unaudited)............ F-5
Statement of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995, and for
the Three Months Ended March 31, 1995 and 1996 (unaudited).......................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Proxim, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, stockholders' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of Proxim, Inc. at December 31,
1994 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
January 24, 1996
F-2
<PAGE> 49
PROXIM, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- -----------
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $11,300 $ 6,247 $ 5,590
Accounts receivable, net.................................. 2,129 6,810 6,350
Inventories............................................... 3,026 7,891 8,112
Deferred tax assets....................................... -- 1,231 1,275
Other assets.............................................. 242 128 279
-------- ------- -------
Total current assets.............................. 16,697 22,307 21,606
Property and equipment, net................................. 738 1,800 2,269
-------- ------- -------
$17,435 $24,107 $23,875
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,687 $ 3,747 $ 2,331
Accrued liabilities....................................... 522 1,910 2,019
-------- ------- -------
Total current liabilities......................... 2,209 5,657 4,350
-------- ------- -------
Commitments (Note 9)
Stockholders' equity:
Common Stock, $.001 par value, 25,000 shares authorized;
7,011, 7,257 and 7,456 shares issued and outstanding... 7 7 7
Additional paid-in capital................................ 27,216 27,594 27,757
Accumulated deficit....................................... (11,997) (9,151) (8,239)
-------- ------- -------
Total stockholders' equity........................ 15,226 18,450 19,525
-------- ------- -------
$17,435 $24,107 $23,875
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 50
PROXIM, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
------ ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................................... $8,078 $11,297 $22,083 $3,363 $8,901
Cost of revenue............................. 3,907 5,221 10,843 1,619 4,539
------ ------- ------- ------ ------
Gross profit................................ 4,171 6,076 11,240 1,744 4,362
------ ------- ------- ------ ------
Operating expenses:
Research and development.................. 1,474 1,783 3,288 652 1,070
Selling, general and administrative....... 2,821 3,982 6,694 1,235 2,127
------ ------- ------- ------ ------
Total operating expenses.......... 4,295 5,765 9,982 1,887 3,197
------ ------- ------- ------ ------
Income (loss) from operations............... (124) 311 1,258 (143) 1,165
Interest and other income, net.............. 25 517 537 163 84
------ ------- ------- ------ ------
Income before income taxes.................. (99) 828 1,795 20 1,249
Provision (benefit) for income taxes........ -- 83 (1,051) 2 337
------ ------- ------- ------ ------
Net income (loss)........................... $ (99) $ 745 $ 2,846 $ 18 $ 912
====== ======= ======= ====== ======
Net income (loss) per share................. $ (.02) $ .10 $ .35 $ .00 $ .11
====== ======= ======= ====== ======
Weighted average common shares and
equivalents............................... 5,665 7,738 8,172 7,733 8,268
====== ======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 51
PROXIM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCRETION
OF PREFERRED
COMMON STOCK ADDITIONAL STOCK
--------------- PAID-IN REDEMPTION ACCUMULATED
SHARES AMOUNT CAPITAL VALUE DEFICIT TOTAL
------ ------ ---------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992............... 1,519 $1 $ 9,498 $ (468) $ (12,643) $(3,612)
Exercise of stock options................ 258 -- 40 -- -- 40
Accretion of Mandatorily Redeemable
Convertible Preferred Stock redemption
value................................. -- -- -- (466) -- (466)
Conversion of Mandatorily Redeemable
Convertible Preferred Stock into
Common Stock.......................... 3,578 4 5,755 934 -- 6,693
Issuance of Common Stock, net of issuance
costs of $812......................... 1,500 2 11,741 -- -- 11,743
Net loss................................. -- -- -- -- (99) (99)
----- ------- ----- -------- -------
--
Balance at December 31, 1993............... 6,855 27,034 -- (12,742) 14,299
7
Exercise of stock options................ 131 52 -- -- 52
--
Issuance of Common Stock under Stock
Purchase Plan......................... 25 130 -- -- 130
--
Net income............................... -- -- -- 745 745
--
----- ------- ----- -------- -------
--
Balance at December 31, 1994............... 7,011 27,216 -- (11,997) 15,226
7
Exercise of stock options................ 172 102 -- -- 102
--
Issuance of Common Stock under Stock
Purchase Plan......................... 74 276 -- -- 276
--
Net income............................... -- -- -- 2,846 2,846
--
----- ------- ----- -------- -------
--
Balance at December 31, 1995............... 7,257 27,594 -- (9,151) 18,450
7
Exercise of stock options (unaudited).... 130 33 -- -- 33
--
Issuance of Common Stock under Stock
Purchase Plan (unaudited)............. 69 130 -- -- 130
--
Net income (unaudited)................... -- -- -- 912 912
--
----- ------- ----- -------- -------
--
Balance at March 31, 1996 (unaudited)...... 7,456 $ 27,757 $ -- $ (8,239) $19,525
$7
===== ======= ===== ======== =======
==
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 52
PROXIM, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ (99) $ 745 $ 2,846 $ 18 $ 912
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Depreciation and amortization.............. 197 262 516 94 160
Deferred tax assets........................ -- -- (1,231) -- (44)
Changes in assets and liabilities:
Accounts receivable..................... (508) (1,036) (4,681) 342 460
Inventories............................. (325) (2,115) (4,865) (465) (221)
Other assets............................ (85) (115) 114 64 (151)
Accounts payable........................ 142 1,047 2,060 (649) (1,416)
Accrued liabilities..................... 193 142 1,388 199 109
------- ------- ------- ------- -------
Net cash used in operating
activities......................... (485) (1,070) (3,853) (397) (191)
------- ------- ------- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES FOR
PURCHASES OF PROPERTY AND EQUIPMENT........ (129) (681) (1,578) (539) (629)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capitalized lease
obligations............................. (50) (17) -- -- --
Proceeds from issuance of Mandatorily
Redeemable Convertible Preferred
Stock................................... 551 -- -- -- --
Proceeds from issuance of Common Stock..... 12,595 182 378 127 163
Payment of initial public offering issuance
costs................................... (395) (417) -- -- --
------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities............... 12,701 (252) 378 127 163
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents................................ 12,087 (2,003) (5,053) (809) (657)
Cash and cash equivalents, beginning of
period..................................... 1,216 13,303 11,300 11,300 6,247
------- ------- ------- ------- -------
Cash and cash equivalents, end of period..... $13,303 $11,300 $ 6,247 $10,491 $ 5,590
======= ======= ======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of Series A and B Mandatorily
Redeemable Convertible Preferred Stock
into Common Stock upon completion of
initial public offering................. $ 6,693 $ -- $ -- $ -- $ --
Accretion of Mandatorily Redeemable
Convertible Preferred Stock redemption
value................................... 466 -- -- -- --
Conversion of convertible subordinated
promissory notes into Series B
Mandatorily Redeemable Convertible
Preferred Stock......................... 300 -- -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 53
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY:
Proxim, Inc. (the "Company") designs, manufactures and markets high
performance wireless local area data networking products. Based on spread
spectrum radio frequency technology, Proxim's highly integrated wireless client
adapters and network infrastructure systems seamlessly extend existing
enterprise LANs to enable mobility-driven applications in a wide variety of
in-building and campus area environments.. The Company operates in one industry
segment and has no assets located outside the United States.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Management estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenue, cost of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.
Revenue
Product revenue is generally recognized upon shipment to the customer. The
Company grants certain distributors limited rights of return and price
protection on unsold products. Product revenue on shipments to distributors
which have rights of return and price protection is recognized upon shipment by
the distributor. The provision for estimated future warranty is recorded at the
time revenue is recognized.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first in, first out method.
Property and equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets, ranging from two to five years. Amortization of leasehold
improvements is computed using the straight-line method over the shorter of the
remaining lease term or the estimated useful lives of the improvements.
Software development costs
Software development costs are included in research and development and are
expensed as incurred. Statement of Financial Accounting Standards No. 86
requires the capitalization of certain software development costs once
technological feasibility is established, which the Company defines as
completion of a working model. The capitalized cost is then amortized on a
straight-line basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater. To date, the
period between achieving technological feasibility and the general availability
of such software has been short and
F-7
<PAGE> 54
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs.
Income taxes
A deferred tax liability or asset, net of valuation allowance, is
established for the expected future consequences resulting from the differences
between the financial reporting and income tax bases of assets and liabilities
and from net operating loss carryforwards.
Net income (loss) per share
Net income (loss) per share is based upon the weighted average number of
outstanding shares of Common Stock plus dilutive common stock equivalents.
Through the initial public offering of the Company's Common Stock on December
22, 1993, common stock equivalents also included shares of Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock on
their respective original dates of issuance and stock options and warrants
granted subsequent to September 30, 1992 (using the treasury stock method and
initial public offering price).
Interim results (unaudited)
The accompanying balance sheet as of March 31, 1996, the statements of
operations and of cash flows for the three months ended March 31, 1995 and 1996,
and the statement of stockholders' equity for the three months ended March 31,
1996 are unaudited. In the opinion of management, the statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of the results of these interim periods. The data disclosed in
these notes to financial statements for these periods are also unaudited.
F-8
<PAGE> 55
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable:
Gross accounts receivable......................... $ 2,129 $ 6,930 $ 6,450
Less: allowance for doubtful accounts............. -- (120) (100)
------- ------- -------
$ 2,129 $ 6,810 $ 6,350
======= ======= =======
Inventories:
Raw materials..................................... $ 1,303 $ 1,609 $ 1,665
Work-in-process................................... 731 2,987 3,070
Finished goods.................................... 992 3,295 3,377
------- ------- -------
$ 3,026 $ 7,891 $ 8,112
======= ======= =======
Property and equipment:
Computer and test equipment....................... $ 2,038 $ 3,163 $ 3,722
Furniture and fixtures............................ 164 385 392
Leasehold improvements............................ 220 519 582
------- ------- -------
2,422 4,067 4,696
Less: accumulated depreciation and amortization... (1,684) (2,267) (2,427)
------- ------- -------
$ 738 $ 1,800 $ 2,269
======= ======= =======
Accrued liabilities:
Accrued compensation.............................. $ 311 $ 1,119 $ 970
Income taxes payable.............................. 64 220 553
Deferred revenue.................................. 83 340 358
Other............................................. 64 231 138
------- ------- -------
$ 522 $ 1,910 $ 2,019
======= ======= =======
</TABLE>
NOTE 4 -- STOCKHOLDERS' EQUITY:
Initial Public Offering
In December 1993, the Company completed an initial public offering of
1,500,000 shares of Common Stock at $9.00 per share and realized proceeds of
$11,743,000, net of issuance costs of $812,000.
Preferred Stock
In December 1993, the stockholders approved a class of Preferred Stock
consisting of 5,000,000 shares, at a par value of $.001 per share, issuable in
series and having such rights, preferences, privileges and restrictions as may
be determined by the Board of Directors. As of December 31, 1995, no Preferred
Stock had been issued.
1986 Stock Option Plan
The Company's 1986 Stock Option Plan (the "1986 Plan") provides for the
grant of stock options to employees and consultants at prices not less than 85%
of the fair value of the Company's Common Stock on the date of grant. The
options terminate ten years after the date of grant. All options granted have
been at the
F-9
<PAGE> 56
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- STOCKHOLDERS' EQUITY, CONTINUED:
fair market value of the stock at the dates of grant. An aggregate of 2,272,088
shares of Common Stock have been reserved for issuance pursuant to the 1986
Plan.
Unless otherwise provided for by the Board, the options are exercisable
only upon vesting. Options generally vest ratably over a 48 month period. At
December 31, 1995, there were 527,778 shares vested and exercisable under the
1986 Plan. The 1986 Plan (but not outstanding options issued thereunder)
terminated by its terms on March 20, 1996.
A summary of transactions relating to the 1986 Plan follows (in thousands):
<TABLE>
<CAPTION>
SHARES OPTIONS
AVAILABLE OUTSTANDING OPTION PRICE
--------- ----------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1992..................... 200 806 $ .15 - .25
Shares authorized.............................. 500 --
Options granted................................ (741) 741 .15 - 8.00
Options exercised.............................. -- (258) .15 - .25
Options canceled............................... 305 (305) .15 - .25
---- -----
Balance at December 31, 1993..................... 264 984 .15 - 8.00
Shares authorized.............................. 500 --
Options granted................................ (345) 345 4.00 - 6.81
Options exercised.............................. -- (131) .15 - 1.50
Options canceled............................... 47 (47) .25 - 1.50
---- -----
Balance at December 31, 1994..................... 466 1,151 .15 - 8.00
Options granted................................ (257) 257 4.13 - 16.75
Options exercised.............................. -- (172) .15 - 7.13
Options canceled............................... 36 (36) .15 - 7.13
---- -----
Balance at December 31, 1995..................... 245 1,200 .15 - 16.75
Options granted................................ (151) 151 17.75 - 21.88
Options exercised.............................. -- (125) .15 - 9.63
Termination of 1986 Plan....................... (94) --
---- -----
Balance at March 31, 1996........................ -- 1,226 $ .15 - 21.88
==== =====
</TABLE>
1995 Long-Term Incentive Plan
In April 1995, the Company established the 1995 Long-Term Incentive Plan
(the "1995 Plan") which provides for the grant of awards in the form of stock
options, restricted stock, performance shares, restricted stock units, and stock
unit awards to employees, consultants and officers at prices not less than 100%
of the fair value of the Company's Common Stock on the date of grant. The
options terminate ten years after the date of grant. All options granted have
been at the fair market value of the stock at the dates of grant. The 1995 Plan
is intended to supplement and eventually replace the Company's 1986 Plan. At
March 31, 1996, 110,000 options had been granted at an exercise price of $6.50
per share, and no shares were vested and exercisable under the 1995 Plan. In
March 1996, the Company's Board of Directors increased the number of shares of
Common Stock authorized for issuance under the 1995 Plan by 1,000,000 shares to
an aggregate of 1,250,000 shares.
F-10
<PAGE> 57
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- STOCKHOLDERS' EQUITY, CONTINUED:
1993 Employee Stock Purchase Plan
In September 1993, the Company established the 1993 Employee Stock Purchase
Plan (the "Purchase Plan"). The Company initially reserved 200,000 shares of
Common Stock for issuance to employees under the Purchase Plan. Under the
Purchase Plan, an eligible employee may purchase shares of Common Stock from the
Company through payroll deductions of up to 10% of his or her total
compensation, at a price per share equal to 85% of the lesser of the fair market
value of the Company's Common Stock at the first day or last day of each
six-month offering period. Offering periods commence on August 15 and February
15. During 1994 and 1995 and the three months ended March 31, 1996, 24,592,
74,354 and 69,141 shares of the Company's Common Stock were issued under the
Purchase Plan respectively. In March 1996, the Company's Board of Directors
increased the number of shares of Common Stock reserved for issuance under the
Purchase Plan by 200,000 shares to an aggregate of 400,000 shares.
1994 Director Option Plan
In May 1994, the Company adopted the 1994 Director Option Plan (the
"Directors' Plan") which provides for the grant of stock options to directors at
the fair value of the Company's Common Stock on the date of grant. The options
terminate ten years after the date of grant. All options granted have been at
the fair market value of the stock at the dates of grant. An aggregate of
100,000 shares of Common Stock have been reserved for issuance under the
Directors' Plan. At March 31, 1996, 55,000 options had been granted at exercise
prices ranging from $4.25 to $18.63 per share, 5,208 options had been exercised,
8,542 options had been canceled and 53,542 shares were available for grant under
the Directors' Plan.
NOTE 5 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
The Company's Articles of Incorporation were amended and restated in
October 1992 to authorize the issuance of four series of Mandatorily Redeemable
Convertible Preferred Stock aggregating 9,861,448 shares, of which two series of
Mandatorily Redeemable Convertible Preferred Stock (Series A and Series B)
aggregating 3,578,000 shares were issued prior to the initial public offering.
In connection with the public offering of the Company's Common Stock in December
1993, the Mandatorily Redeemable Convertible Preferred Stock was converted into
Common Stock.
A summary of Series A Mandatorily Redeemable Convertible Preferred Stock
("Series A") and Series B Mandatorily Redeemable Convertible Preferred Stock
("Series B") transactions is as follows (in thousands):
<TABLE>
<CAPTION>
SERIES A SERIES B
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Balance at December 31, 1992.................. 2,430 $ 3,451 793 $ 1,925
Conversion of Bridging Notes.................. -- -- 125 300
Accretion of redemption value................. -- 269 -- 197
Exercise of Series B Warrants................. -- -- 230 551
Conversion of Mandatorily Redeemable
Convertible Preferred Stock into Common
Stock upon the closing of the initial public
offering in December 1993................... (2,430) (3,720) (1,148) (2,973)
------ ------- ------ -------
Balance at December 31, 1993.................. -- $ -- -- $ --
====== ======= ====== =======
</TABLE>
In conjunction with the issuance of Series B and the Bridging Notes in
1992, the Company issued warrants to purchase 104,540 and 125,000 shares,
respectively, of the Company's Series B at $2.40 per share,
F-11
<PAGE> 58
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK, CONTINUED:
which represented the fair market value of the Company's preferred stock at the
date of issuance. All such warrants were exercised prior to the initial public
offering.
NOTE 6 -- RETIREMENT SAVINGS PLAN:
Effective January 1, 1993, the Company implemented a retirement savings
plan which qualifies as a thrift plan under section 401(k) of the Internal
Revenue Code. All employees who have completed two months of service and are
twenty-one years of age or older on or before the quarterly entry periods are
eligible to participate in the Plan. The Plan allows participants to contribute
up to 25% of the total compensation that would otherwise be paid to the
participant, not to exceed the amount allowed by applicable Internal Revenue
Service guidelines. The Company may make a discretionary matching contribution
equal to the percentage of the participant's contributions subject to a maximum
of 4%. The Company made no contributions to the plan through December 31, 1995.
NOTE 7 -- INCOME TAXES:
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
---- ---- -------
<S> <C> <C> <C>
Current:
Federal.................................................... $-- $60 $ 149
State...................................................... -- 23 31
--- --- -------
-- 83 180
--- --- -------
Deferred:
Federal.................................................... -- -- (1,093)
State...................................................... -- -- (138)
--- --- -------
-- -- (1,231)
--- --- -------
$-- $83 $(1,051)
=== === =======
</TABLE>
Deferred tax assets comprise the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Net operating loss carryforwards................................. $ 2,441 $ 1,788
Capitalized research and development costs....................... 214 181
Accrued expenses and reserves.................................... 403 586
------- -------
Total deferred tax assets........................................ 3,058 2,555
Valuation allowance.............................................. (3,058) (1,324)
------- -------
$ -- $ 1,231
======= =======
</TABLE>
F-12
<PAGE> 59
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INCOME TAXES, CONTINUED:
The tax provision (benefit) reconciles to the amount computed by
multiplying income (loss) before tax by the U.S. federal statutory rate of 35%
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
---- ----- -------
<S> <C> <C> <C>
Tax at federal statutory rate............................. $(35) $ 290 $ 628
State taxes, net of federal tax benefit................... -- 50 109
Net operating loss carryforwards, net of minimum tax
effect.................................................. 35 (257) (503)
Change in valuation allowance............................. -- -- (1,231)
Other..................................................... -- -- (54)
---- ----- -------
$ -- $ 83 $(1,051)
==== ===== =======
</TABLE>
Management has established a valuation allowance covering a portion of
gross deferred tax assets based on management's expectations of future taxable
income and the actual taxable income of the Company during the three years ended
December 31, 1995.
At December 31, 1995, the Company had approximately $5,000,000 of net
operating loss carryforwards for federal tax reporting purposes available to
offset future taxable income; such carryforwards expire through 2008.
The amounts of and the benefit from net operating losses that can be
carried forward may be impaired or limited in certain circumstances. Events
which may cause changes in the Company's taxes include, but are not limited to,
a cumulative stock ownership change of greater than 50%, as defined, over a
three year period. As a result of a prior financing which resulted in a
cumulative ownership change in 1991 of greater than 50%, approximately
$3,000,000 of the Company's net operating loss carryforwards may be limited to
usage of approximately $300,000 per year through 2005.
NOTE 8 -- CONCENTRATION OF SALES AND CREDIT RISK:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. The Company places its cash and cash equivalents
primarily in market rate accounts and highly rated commercial paper. The
Company, by policy, limits the amount of credit exposure to any financial
institution or commercial issuer.
The Company generally extends 30-day credit terms to its customers, which
is consistent with industry business practices. The Company performs ongoing
credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. To date the Company has not
experienced any material credit losses. All transactions are denominated in U.S.
dollars.
In 1993, revenue from two customers represented 18% and 13% of total
revenue. During 1994, revenue from two customers represented 17% and 15% of
total revenue. During 1995, revenue from two customers represented 27% and 14%
of total revenue. During the three months ended March 31, 1996, revenue from
three customers represented 27%, 17% and 11% of total revenue.
Revenue from shipments to customers outside the United States, primarily in
Asia Pacific, Europe and South America, represented 4%, 6%, 24% and 36% of total
revenue in 1993, 1994, 1995 and the three months ended March 31, 1996,
respectively. Revenue from sales to Asia Pacific represented 17% and 23% of
F-13
<PAGE> 60
PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- CONCENTRATION OF SALES AND CREDIT RISK, CONTINUED:
total revenue in 1995 and the three months ended March 31, 1996, respectively.
Revenue from sales to South America represented 11% of total revenue in the
three months ended March 31, 1996.
At December 31, 1994, outstanding receivables from one customer represented
36% of gross receivables. At December 31, 1995, outstanding receivables from
three customers represented 26%, 25% and 11% of gross receivables. At March 31,
1996, outstanding receivables from two customers represented 27% and 21% of
gross receivables.
NOTE 9 -- COMMITMENTS:
The Company occupies its facility under a non-cancelable operating lease
agreement which expires in June 2000 and which requires payment for property
taxes, insurance, maintenance and utilities. Total rental expense related to
this operating lease was $168,000, $194,000, $364,000 and $114,000 for 1993,
1994, 1995 and the three months ended March 31, 1996, respectively.
Future minimum lease payments under non-cancelable leases at December 31,
1995 were as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
Year ending:
1996............................................................. $ 456
1997............................................................. 488
1998............................................................. 504
1999............................................................. 504
2000............................................................. 252
------
Total minimum lease payments............................. $ 2,204
======
</TABLE>
F-14
<PAGE> 61
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or make any representations not contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company, any Selling Stockholder or the
Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date of this Prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 13
Dividend Policy....................... 13
Price Range of Common Stock........... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 24
Management............................ 37
Underwriting.......................... 39
Additional Information................ 42
Available Information................. 42
Information Incorporated by
Reference........................... 42
Legal Matters......................... 43
Experts............................... 43
Financial Statements.................. F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,500,000 SHARES
LOGO
Common Stock
------------------------
PROSPECTUS
, 1996
------------------------
UBS SECURITIES
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 62
APPENDIX - DESCRIPTION OF GRAPHIC IMAGES
INSIDE FRONT COVER
RANGELAN2 Interoperability. Illustration of the Company's RangeLAN2
technology showing a central processing unit communicating with various
computing devices manufactured by Badger, Epson, Intermec, Dell, Citadel, WISE,
ALPS Electric (formerly Kalidor), BASS, Fujitsu, LXE and Zenith Data Systems.
PAGE 23
Illustration of a wireless communications system integrated into a
hospital's existing network infrastructure. Showing a central server and
wireless network access points communicating with devices in a medical supply
room, a maternity ward, patient admissions and an emergency room.
INSIDE BACK COVER
PHOTO UPPER RIGHT:
RANGELAN2 OEM Products
PHOTO LEFT CENTER:
RANGELINK Family
PHOTO LOWER RIGHT:
RANGELAN2 Branded Products with awards showing PC Magazine Editors' Choice
from February 20, 1996 and LAN Magazine 1996 Products of the Year, April 1996.
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses payable by
the Company, other than underwriting discounts and commissions, of the sale and
distribution of the securities being registered. All of the amounts shown are
estimates except the Securities and Exchange Commission registration fee, the
Nasdaq Stock Market listing fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 40,771
NASD Filing Fee................................................... 12,324
Nasdaq Stock Market Listing Fee................................... 17,500
Blue Sky Fees and Expenses........................................ 10,000
Legal Fees and Expenses........................................... 200,000
Accounting Fees and Expenses...................................... 75,000
Printing.......................................................... 200,000
Transfer Agent and Registrar Fees................................. 10,000
Miscellaneous..................................................... 109,405
--------
Total.................................................. $675,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The Company's Bylaws
provide that the Company shall indemnify its officers and directors and may
indemnify its employees and other agents to the fullest extent permitted by law.
The Company has entered into indemnification agreements with its officers and
directors containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance, if available on reasonable terms. The Company believes that
these agreements are necessary to attract and retain qualified persons as
directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
The Company currently maintains director and officer liability insurance.
Reference is also made to Section 11 of the Underwriting Agreements
contained in Exhibits 1.1 and 1.2 hereto, indemnifying officers and directors of
the Registrant against certain liabilities.
II-1
<PAGE> 64
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
4.1 Restated Certificate of Incorporation of Registrant (incorporated by
reference to the Registrant's Statement No. 33-70712 filed with the
Securities and Exchange Commission).
4.2 Form of Common Stock Certificate (incorporated by reference to the
Registrant's Registration Statement No. 33-70712 filed with the Securities
and Exchange Commission).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
11.1 Computation of net income (loss) per share.
23.1 Consent of Price Waterhouse LLP (see page II-4).
23.2 Consent of counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions of the Company's Certificate of Incorporation
and Bylaws, the Delaware General Corporation Law, the Underwriting Agreement or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the question has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Proxim, Inc., a corporation organized and existing under the law of
the State of Delaware, certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on the 26th day of June, 1996.
Proxim, Incorporated
By: /s/ DAVID C. KING
------------------------------------
David C. King
Chairman of the Board of Directors,
President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ --------------------------------- --------------
<C> <S> <C>
/s/ DAVID C. Chairman of the Board of June 26, 1996
KING Directors, President and Chief
- ------------------------------------ Executive Officer (Principal
David C. King Executive Officer)
/s/ KEITH E. Chief Financial Officer June 26, 1996
GLOVER* (Principal
- ------------------------------------ Financial Officer and Principal
Keith E. Glover Accounting Officer)
/s/ RAYMOND Director June 26, 1996
CHIN*
- ------------------------------------
Raymond Chin
/s/ LESLIE G. Director June 26, 1996
DENEND*
- ------------------------------------
Leslie G. Denend
/s/ MICHAEL D. Director June 26, 1996
KAUFMAN*
- ------------------------------------
Michael D. Kaufman
/s/ G. RUSSELL Director June 26, 1996
MORTENSON*
- ------------------------------------
G. Russell Mortenson
*By: /s/ DAVID C.
KING
- ------------------------------------
David C. King
</TABLE>
II-3
<PAGE> 66
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated January 24, 1996 relating
to the financial statements of Proxim, Inc., which appears in such Prospectus
and is incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. We also consent to the references to us under
the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
San Jose, California
June 26, 1996
II-4
<PAGE> 67
PROXIM, INC.
REGISTRATION STATEMENT ON FORM S-3
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of U.S. Underwriting Agreement..............................
1.2 Form of International Underwriting Agreement.....................
4.1 Certificate of Incorporation of Registrant (incorporated by
reference to the Registrant's Statement No. 33-70712 filed with
the Securities and Exchange Commission)..........................
4.2 Form of Common Stock Certificate (incorporated by reference to
the Registrant's Registration Statement No. 33-70712 filed with
the Securities and Exchange Commission)..........................
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation......................................................
11.1 Computation of net income (loss) per share.......................
23.1 Consent of Price Waterhouse LLP (see page II-4)..................
23.2 Consent of Counsel (included in Exhibit 5.1).....................
24.1 Power of Attorney (see page II-3)................................
</TABLE>
<PAGE> 1
1,825,000 Shares(1)
PROXIM, INC.
Common Stock
U.S. UNDERWRITING AGREEMENT
__________ , 1996
UBS SECURITIES LLC
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
As representatives of the
several U.S. underwriters
named in Schedule I hereto
c/o UBS Securities LLC
299 Park Avenue
New York, New York 10171
Ladies and Gentlemen:
Proxim, Inc., a Delaware corporation (the "Company") proposes
to issue and sell to the several U.S. Underwriters and International Managers
(as defined below) an aggregate of 2,500,000 shares of its common stock, $0.001
par value per share, ("Common Stock"). The 2,500,000 shares of Common Stock to
be issued and sold by the Company are hereinafter called the "Firm Shares."
It is understood that, subject to the conditions hereinafter
stated, 1,875,000 Firm Shares (the "U.S. Firm Shares") will be sold to the
several U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters")
in connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States Persons and Canadian Persons (as such terms
are defined in the Agreement Between U.S. Underwriters and International
Managers of even date herewith (the "U.S. Underwriters and International
Managers Agreement")). It is further understood that the Company is concurrently
entering into an agreement of even date herewith (the
- --------
(1) Plus an additional 375,000 shares of Common Stock to be sold by the
Company to the several U.S. Underwriters (as defined herein) solely to
cover over-allotments, if any.
<PAGE> 2
"International Underwriting Agreement") providing for the sale by the Company of
625,000 Firm Shares (the "International Shares") to be sold to the several
International Managers named in Schedule I thereto (the "International
Managers") in connection with the offering and sale of such International Shares
outside the United States and Canada to persons other than United States Persons
and Canadian Persons. UBS Securities LLC, Montgomery Securities, Unterberg
Harris and Volpe, Welty & Company shall act as representatives (the "U.S.
Representatives") of the several U.S. Underwriters, and UBS Limited, Montgomery
Securities, Unterberg Harris and Volpe, Welty & Company shall act as
representatives (the "International Representatives") of the several
International Managers.
The Company also proposes to issue and sell to the several
U.S. Underwriters not more than an additional 375,000 shares of its Common Stock
(the "Additional Shares"), if requested by the U.S. Underwriters as provided in
Section 2 hereof. The U.S. Firm Shares and the Additional Shares are herein
collectively called the "U.S. Shares," and the U.S. Shares and the International
Shares are herein collectively called the "Shares."
1. Registration Statement and Prospectus. A registration
statement on Form S-3 (File No. 333-[ ]), including a prospectus relating to the
Shares and each amendment thereto, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission. The Company meets the requirements for filing such
registration statement on Form S-3. There have been delivered to you three
signed copies of such registration statement and amendments, together with three
copies of each exhibit filed therewith. Copies of such registration statement
and amendments (but without exhibits) and of the related preliminary prospectus
have been delivered to you in such reasonable quantities as you have requested
for each of the U.S. Underwriters. If such registration statement has not become
effective, a further amendment to such registration statement, including a form
of final prospectus, necessary to permit such registration statement to become
effective will be filed promptly by the Company with the Commission. If such
registration statement has become effective, a final prospectus containing all
Rule 430A Information (as hereinafter defined) will be filed by the Company with
the Commission in accordance with Rule 424(b) of the Rules and Regulations on or
before the second business day after the date hereof (or such earlier time as
may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement
shall mean such registration statement (including all exhibits and financial
statements and all documents incorporated by reference therein) at the time such
registration statement becomes or became effective and, in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall
2.
<PAGE> 3
include all Rule 430A Information deemed to be included in such registration
statement at the time such registration statement becomes effective as provided
by Rule 430A of the Rules and Regulations and shall also mean any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations with
respect to the Shares. The Registration Statement contains two prospectuses to
be used in connection with the offering and sale of the Shares: the prospectus
to be used in connection with the offering and sale of Shares in the United
States and Canada to United States Persons and Canadian Persons (the "U.S.
Prospectus"), and the prospectus to be used in connection with the offering and
sale of Shares outside the United States and Canada to persons other than United
States Persons and Canadian Persons (the "International Prospectus"). The U.S.
Prospectus and the International Prospectus are identical except for the outside
front and back cover pages. The term "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall collectively mean the U.S. Prospectus and the
International Prospectus relating to the Shares in the form in which they are
first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, shall mean the form of final U.S. Prospectus and
International Prospectus included in the Registration Statement at the time the
Registration Statement becomes effective. The term "Rule 430A Information" means
information with respect to the Shares and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A of the Rules and Regulations.
2. Agreements to Sell and Purchase. The Company hereby agrees
to issue and sell the U.S. Firm Shares to the several U.S. Underwriters, and
each of the U.S. Underwriters, upon the basis of the representations and
warranties contained in this Agreement, and subject to its terms and conditions,
agrees, severally and not jointly, to purchase from the Company at a price per
share of $__________ (the "Purchase Price"), the respective number of U.S. Firm
Shares (subject to such adjustments to eliminate fractional shares as the U.S.
Representatives may determine) set forth in Schedule I hereto opposite the name
of such U.S. Underwriter.
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to issue and sell to the U.S. Underwriters the Additional Shares, and the U.S.
Underwriters shall have the right to purchase, severally and not jointly, up to
375,000 Additional Shares from the Company at the Purchase Price. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the U.S. Firm Shares. The U.S. Underwriters
may exercise their right to purchase 375,000 Additional Shares in whole or in
part from time to time by giving written notice thereof to the Company within 30
days after the date of this Agreement. The U.S. Representatives shall give any
such notice on behalf of the U.S. Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant
3.
<PAGE> 4
to such exercise and the date for payment and delivery thereof. The date
specified in any such notice shall be a business day (i) no earlier than the
Closing Date (as hereinafter defined), (ii) no later than ten business days
after such notice has been given and (iii) no earlier than two business days
after such notice has been given. If any Additional Shares are to be purchased,
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as the U.S. Representatives may determine) which
bears the same proportion to the total number of Additional Shares to be
purchased from the Company as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I bears to the total number of U.S. Firm
Shares to be purchased from the Company.
The Company hereby agrees, and the Company shall, concurrently
with the execution of this Agreement, deliver agreements executed by each of the
directors and officers of the Company pursuant to which each such person agrees,
not to offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of any common stock of the Company or any securities convertible into or
exercisable or exchangeable for such common stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such common stock, except to the International Mangers pursuant
to the International Agreement or the U.S. Underwriters pursuant to this
Agreement, for a period of 90 days after the date of the Prospectus without the
prior written consent of UBS Securities LLC, subject to certain exceptions set
forth in such agreements. Notwithstanding the foregoing, during such period (i)
the Company may grant stock options pursuant to the Company's existing stock
option plan and (ii) the Company may issue shares of its common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof.
3. Terms of Public Offering. The Company is advised by you
that the U.S. Underwriters propose (i) to make a public offering of their
respective portions of the U.S. Firm Shares as soon after the effective date of
the Registration Statement as in your judgment is advisable and (ii) initially
to offer the U.S. Firm Shares upon the terms set forth in the Prospectus.
Each U.S. Underwriter hereby makes to and with the Company the
representations and agreements of such U.S. Underwriter contained in the fifth
paragraph of Section 3 of the U.S. Underwriters and International Managers
Agreement.
4. Delivery and Payment. Delivery to the U.S. Underwriters of
and payment for the U.S. Firm Shares shall be made at 10:00 A.M., New York City
time, on the latest to occur of (a) the third (3rd) full business day following
the first day that the U.S. Firm Shares are traded, (b) if this Agreement is
executed and delivered after 1:30 p.m., California time, the fourth (4th) full
business day following the day that this Agreement is executed and delivered, or
(c) such time and date, not later than the seventh (7th) full business day
following the day that the U.S. Firm Shares are traded, as the U.S.
Representatives and the Company may determine pursuant to Rule 15c6-1 of the
4.
<PAGE> 5
Securities Exchange Act of 1934, as amended (the "Exchange Act") (the "Closing
Date"), at such place outside the State of New York as you shall designate. The
location of delivery of and the form of payment for the U.S. Firm Shares may be
varied by agreement between you and the Company.
Delivery to the U.S. Underwriters of and payment for any
Additional Shares to be purchased by the U.S. Underwriters shall be made at such
place as the U.S. Representatives shall designate at 10:00 A.M., New York City
time, on the date specified in the applicable exercise notice given by you
pursuant to Section 2 (an "Option Closing Date"). Any such Option Closing Date
and the location of delivery of and the form of payment for such Additional
Shares may be varied by agreement between the U.S.
Representatives and the Company.
Certificates for the U.S. Firm Shares or the Additional
Shares, as the case may be, shall be registered in such names and issued in such
denominations as you shall request in writing not later than two full business
days prior to the Closing Date or an Option Closing Date, as the case may be.
Such certificates shall be made available to you for inspection not later than
9:30 A.M., New York City time, on the business day next preceding the Closing
Date or an Option Closing Date, as the case may be. Certificates in definitive
form evidencing the U.S. Firm Shares or the Additional Shares, as the case may
be, shall be delivered to you on the Closing Date or an Option Closing Date, as
the case may be, with any transfer taxes thereon duly paid by the Company for
the respective accounts of the several U.S. Underwriters, against payment of the
Purchase Price therefor by certified or official bank checks payable in same day
funds to the order of the Company or wire transfer of immediately available
funds. If the U.S. Representatives so elect, delivery of the U.S. Shares may be
made by credit through full fast transfer to the accounts at the Depository
Trust Company designated by the U.S.
Representatives.
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration
Statement to become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment to it becomes
effective, (ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions
5.
<PAGE> 6
to or changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable
effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to you, without charge, one signed copy of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
U.S. Underwriter designated by you such number of conformed copies of
the Registration Statement as so filed and of each amendment to it,
without exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object; and to prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the
Shares by you, and to use its best efforts to cause the same to become
promptly effective.
(e) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in the
opinion of counsel for the U.S. Underwriters a prospectus is required
by law to be delivered in connection with sales by a U.S. Underwriter
or a dealer, to furnish to each U.S. Underwriter and dealer as many
copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such U.S. Underwriter or dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
U.S. Underwriters it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
to comply with any law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented,
will not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law, and to
furnish to each U.S. Underwriter and to such dealers as you shall
specify, such number of copies thereof as such U.S.
Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Shares, to cooperate
with you and counsel for the U.S. Underwriters in connection with the
registration or qualification of the Shares for offer and sale by the
several U.S. Underwriters and by
6.
<PAGE> 7
dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such qualification in
effect so long as required for distribution of the Shares and to file
such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification.
(h) To mail and make generally available to its stockholders
as soon as reasonably practicable an earnings statement covering a
period of at least twelve months after the effective date of the
Registration Statement (but in no event commencing later than 90 days
after such date) which shall satisfy the provisions of Section 11(a) of
the Act, and to advise you in writing when such statement has been so
made available.
(i) During the period of five years after the date of this
Agreement, (i) to mail as soon as reasonably practicable after the end
of each fiscal year to the record holders of its Common Stock a
financial report of the Company, all such financial reports to include
a balance sheet, a statement of operations, a statement of cash flows
and a statement of stockholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and
for the preceding year, certified by independent certified public
accountants, and (ii) to mail and make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a balance sheet,
a statement of operations and a statement of cash flows as of the end
of and for such period, and for the period from the beginning of such
year to the close of such quarterly period, together with comparable
information for the corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), to furnish
to you as soon as available a copy of each report or other publicly
available information of the Company mailed to the holders of Common
Stock or filed with the Commission and such other publicly available
information concerning the Company as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i)
the preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e), (ii)
the printing and delivery of the Prospectus and all amendments or
supplements to it during the period specified in paragraph (e), (iii)
the printing and delivery of this Agreement, the Preliminary and
Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection
with the offering of the Shares (including in each case any
disbursements of counsel for the U.S. Underwriters relating to such
printing and delivery), (iv) the registration or qualification of the
Shares for offer and sale under the securities or Blue Sky laws of the
several states and the applicable securities laws, rules and
regulations of Canada
7.
<PAGE> 8
(including in each case the fees and disbursements of counsel for the
U.S. Underwriters relating to such registration or qualification and
memoranda relating thereto), (v) filings and clearance with the
National Association of Securities Dealers, Inc. ("the NASD") in
connection with the offering, (vi) the listing of the Shares on the
Nasdaq National Market, (vii) furnishing such copies of the
Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the
offering or sale of the Shares by the U.S. Underwriters or by dealers
to whom Shares may be sold and (viii) the performance by the Sellers of
their other obligations under this Agreement.
(l) To use its best efforts to maintain the inclusion of the
Common Stock in the Nasdaq National Market (or on a national securities
exchange) for a period of five years after the effective date of the
Registration Statement.
(m) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date or any Option Closing Date, as
the case may be, and to satisfy all conditions precedent to the
delivery of the Shares.
6. Representations and Warranties of the Company. The Company
represents and warrants to each U.S. Underwriter that:
(a) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects requirements of the
Act and the Rules and Regulations and, as of its date, has not included
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, other than
any untrue statement or omission which has been corrected in the
Prospectus. At the time the Registration Statement and any amendment
thereto becomes effective and at all times subsequent thereto, up to
and including each Closing Date hereinafter mentioned, the Registration
Statement and the Prospectus, and any amendments thereto, will contain
all material statements and information required to be included therein
by the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements herein not
misleading; provided, however, no representation or warranty contained
in this subsection 6(a) shall be applicable to information contained in
or omitted from any Preliminary Prospectus, the Registration Statement,
the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by or
on behalf of any U.S. Underwriter or International Manager, directly or
through the U.S. Representatives or International Representatives,
8.
<PAGE> 9
specifically for use in the preparation thereof. The Company has filed
with the Commission and the NASD on a timely basis all documents
required by the Commission or the NASD to be so filed by the Company,
and such documents, when they were filed with the Commission or the
NASD, conformed in all material respects to the requirements of the
Act, the Rules and Regulations, the Exchange Act, the rules and
regulations of the Commission thereunder, and the rules and regulations
of the NASD, as applicable, and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(b) The Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation, with
full power and authority (corporate and other) to own and lease its
properties and conduct its business as described in the Prospectus; the
Company is in possession of and operating in compliance with all
material authorizations, licenses, permits, consents, certificates and
orders material to the conduct of its business as described in the
Prospectus, all of which are valid and in full force and effect; the
Company is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the ownership or
leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect upon the Company; and
no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(c) The Company has an authorized and outstanding capital
stock as set forth under the heading "Capitalization" in the
Prospectus; the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable,
are duly approved for listing and will, upon notice of issuance, be
duly listed on the Nasdaq National Market, have been issued in
compliance with the registration and qualification requirements (or
exemptions therefrom) of all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other
contractual rights to subscribe for or purchase securities and conform
to the description thereof contemplated in the Prospectus. Except as
disclosed in or contemplated by the Prospectus and the financial
statements of the Company and the related notes thereto included in the
Prospectus, the Company has no outstanding options to purchase, or any
preemptive rights or other contractual rights to subscribe for or to
purchase, any securities or obligations convertible into, or any acts
or commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and
9.
<PAGE> 10
fairly presents the information required by the Act and the Rules and
Regulations to be shown with respect to such plans, arrangements,
options and rights.
(d) The Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner
provided herein and in the International Underwriting Agreement, will
be duly authorized, validly issued, fully paid and nonassessable, and
will conform to the description thereof contained in the Prospectus. No
preemptive rights or other contractual rights to subscribe for or
purchase securities of the Company exist with respect to the issuance
and sale of the Shares by the Company pursuant to this Agreement and
the International Underwriting Agreement. No stockholder of the Company
has any right which has not been waived, or complied with, to require
the Company to register the sale of any shares owned by such
stockholder under the Act in the public offering contemplated by this
Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the issuance and
sale of the Shares to be sold by the Company as contemplated herein and
the International Underwriting Agreement.
(e) The Company has full corporate power and authority to
enter into this Agreement and the International Underwriting Agreement
and perform the transactions contemplated hereby and thereby. This
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may
be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium laws affecting creditors' rights generally
and except as to those provisions relating to indemnity or contribution
for liabilities arising under federal and state securities laws. The
making and performance of this Agreement and the International
Underwriting Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby (i) will not violate any
provisions of the Certificate of Incorporation, Bylaws or other
organizational documents of the Company, and (ii) will not conflict
with, result in a material breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
material default under (A) any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to
which the Company is a party or by which the Company or any of its
properties may be bound or affected, or (B) any statute or any
authorization, judgment, decree, order, rule or regulation of any court
or any regulatory body, administrative agency or other governmental
body applicable to the Company or any of its properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body which has not already
been obtained is required for the execution and delivery of this
Agreement and the International Underwriting Agreement or the
consummation of the transactions contemplated hereby or thereby, except
for compliance with the Act, the Blue Sky laws applicable to the
10.
<PAGE> 11
public offering of the Shares by the several U.S. Underwriters and
International Managers, and the clearance of such offering with the
NASD.
(f) Price Waterhouse LLP, who have expressed their opinion
with respect to the financial statements and schedules filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent accountants as required by the Act and the
Rules and Regulations.
(g) The consolidated financial statements and schedules of the
Company and the related notes thereto included in the Registration
Statement and the Prospectus present fairly on a consolidated basis the
financial position of the Company as of the respective dates of such
financial statements and schedules, and the results of operations and
cash flows of the Company for the respective periods covered thereby.
Such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods specified, as certified by the
independent accountants named in subsection 6(f). No other financial
statements or schedules are required to be included in the Registration
Statement. The selected financial data set forth in the Prospectus
under the captions "Capitalization" and "Selected Consolidated
Financial Information" fairly present the information set forth therein
on the basis stated in the Registration Statement.
(h) The Company is not (i) in violation or default of any
provision of its Certificate of Incorporation, Bylaws or other
organizational documents, or (ii) in breach of or default with respect
to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other
instrument to which it is a party or by which it or any of its
properties are bound, which individually or in the aggregate is likely
to have a material adverse effect on the Company; and, to its
knowledge, there does not exist any state of facts which, with notice
or lapse of time or both, would constitute such a violation, breach or
default on the part of the Company.
(i) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been described or filed as required. The contracts so
described in the Prospectus are in full force and effect on the date
hereof; and neither the Company nor to the best of the Company's
knowledge any other party thereto is in material breach of or default
under any of such contracts.
(j) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings pending or, to the best
of the Company's knowledge, threatened to which the Company is or is
threatened to be made a party or of which property owned or leased by
the Company is or is threatened to be made the subject, which actions,
suits or proceedings might reasonably be
11.
<PAGE> 12
expected to, individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise),
properties, business or results of operations of the Company; and no
labor disturbance by the employees of the Company exists or, to the
best knowledge of the Company, is imminent which might reasonably be
expected to materially and adversely affect such condition, properties,
business or results of operations of the Company. The Company is not a
party or subject to the provisions of any injunction, judgment, decree
or order of any court, regulatory body, administrative agency or other
governmental body, which is reasonably likely to have a material
adverse effect on the Company.
(k) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i)
those, if any, reflected in such financial statements (or elsewhere in
the Prospectus), or (ii) those which are not material in amount to the
Company, and do not materially and adversely effect the use made and
proposed to be made of such property by the Company as described in the
Registration Statement. The Company holds its leased properties under
valid and binding leases. Except as disclosed in the Prospectus, the
Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(l) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (i) the
Company has not (A) incurred any liabilities or obligations, indirect,
direct or contingent, or (B) entered into any verbal or written
agreement or other transaction, which in the case of (A) or (B) is not
in the ordinary course of business and which is reasonably likely to
have a material adverse effect on the Company; (ii) the Company has not
sustained any material loss or interference with its businesses or
properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance; (iii) the Company has not paid or
declared any dividends or other distributions with respect to its
capital stock and the Company is not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale
of the Shares or upon the exercise of any options or warrants disclosed
in the Prospectus); (v) there has not been any material increase in the
short or long-term debt of the Company; and (vi) there has not been any
material adverse change or any development which may reasonably be
expected to involve a prospective material adverse change in the
condition (financial or otherwise), business, properties or results of
operations of the Company.
(m) Except as disclosed in or specifically contemplated by the
Prospectus, the Company has sufficient trademarks, trade names,
patent rights, copyrights,
12.
<PAGE> 13
licenses, approvals and governmental authorizations to conduct its
businesses as now conducted; the expiration of any trademarks, trade
names, patent rights, copyrights, licenses, approvals or governmental
authorizations are not likely to have a material adverse effect on the
condition (financial or otherwise), business or results of operations
of the Company; the Company has no knowledge of any infringement by it
of trademark, trade name rights, patent rights, copyrights, licenses,
trade secret or other similar rights of others; and there is no claim
being made against the Company regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which might
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), business or results of operations
of the Company.
(n) The Company is conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations
("Environmental Laws"), except where the failure to be so in compliance
is not reasonably likely to materially and adversely affect the
condition (financial or otherwise), business or results of operations
of the Company.
(o) The Company has filed all necessary federal, state and
foreign income and franchise tax returns, and all such tax returns are
complete and correct in all material respects, and the Company has not
failed to pay any taxes which were payable pursuant to said returns or
any assessments with respect thereto, except such taxes as are being
contested by the Company in good faith and under due process. The
Company has no knowledge of any tax deficiency which has been or is
threatened to be asserted or threatened against the Company, except any
deficiency which is being contested in good faith in appropriate
proceedings.
(p) The Company is not now, and upon closing of the offering
contemplated hereby will not be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(q) The Company has not distributed, and will not distribute
prior to the later to occur of (i) the Closing Date and (ii) completion
of the distribution of the Shares, any offering material in connection
with the offering and sale of the Shares other than the Prospectus, the
Registration Statement and any other materials permitted by the Act.
(r) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
13.
<PAGE> 14
(s) Neither the Company nor, to the best of the Company's
knowledge, any of its employees or agents has at any time during the
last five years (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in
violation of law or (ii) made any payment to any foreign, federal or
state governmental officer or official or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(t) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(u) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls any U.S.
Underwriter within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto)
or any Preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any U.S.
Underwriter or International Manager furnished in writing to the
Company by or on behalf of any U.S. Underwriter or International
Manager through any U.S. Representative or International Representative
expressly for use therein.
(b) In case any action shall be brought against any U.S.
Underwriter or any person controlling such U.S. Underwriter, based upon
any Preliminary Prospectus, the Registration Statement or the
Prospectus or any amendment or supplement thereto and with respect to
which indemnity may be sought against the Company, such U.S.
Underwriter shall promptly notify the Company in writing and the
Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such indemnified party and payment
of all fees and expenses. Any U.S. Underwriter or any such controlling
person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such U.S.
Underwriter or such controlling person unless (i) the employment of
such
14.
<PAGE> 15
counsel shall have been specifically authorized in writing by the
Company, (ii) the Company shall have failed to assume the defense and
employ counsel or (iii) the named parties to any such action (including
any impleaded parties) include both such U.S. Underwriter or such
controlling person and the Company and such U.S. Underwriter or such
controlling person shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different
from or additional to those available to the Company (in which case the
Company shall not have the right to assume the defense of such action
on behalf of such U.S. Underwriter or such controlling person, it being
understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local
counsel) for all such U.S. Underwriters and controlling persons, which
firm shall be designated in writing by UBS Securities LLC and that all
such fees and expenses shall be reimbursed as they are incurred). The
Company shall not be liable for any settlement of any such action
effected without the written consent of the Company, but if settled
with the written consent of the Company, the Company agrees to
indemnify and hold harmless any U.S. Underwriter and any such
controlling person from and against any loss or liability by reason of
such settlement. Notwithstanding the immediately preceding sentence, if
in any case where the fees and expenses of counsel are at the expense
of the indemnifying party and an indemnified party shall have requested
the indemnifying party to reimburse the indemnified party for such fees
and expenses of counsel as incurred, such indemnifying party agrees
that it shall be liable for any settlement of any action effected
without its written consent if (i) such settlement is entered into more
than ten business days after the receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall have
failed to reimburse the indemnified party in accordance with such
request for reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(c) Each U.S. Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and any person controlling the
Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the
Company to each U.S. Underwriter but only with reference to information
relating to such U.S. Underwriter furnished in writing by or on behalf
of such U.S. Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Preliminary Prospectus.
In case any action shall be brought against the Company, any of its
directors, any such officer
15.
<PAGE> 16
or any person controlling the Company based on the Registration
Statement, the Prospectus or any Preliminary Prospectus and in respect
of which indemnity may be sought against any U.S. Underwriter, the U.S.
Underwriter shall have the rights and duties given to the Company
(except that if the Company shall have assumed the defense thereof,
such U.S. Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
U.S. Underwriter), and the Company, its directors, any such officers
and any person controlling the Company shall have the rights and duties
given to the U.S. Underwriter pursuant to Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand from the offering of the U.S. Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the U.S. Underwriters in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the U.S. Underwriters shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company, and the total underwriting discounts and
commissions received by the U.S. Underwriters, bear to the total price
to the public of the U.S. Shares, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the
Company and the U.S. Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company or the U.S. Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the U.S. Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 7(d)
were determined by pro rata allocation (even if the U.S. Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any
16.
<PAGE> 17
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the U.S. Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount
of any damages which such U.S. Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the
respective number of U.S. Shares purchased by each of the U.S.
Underwriters hereunder and not joint.
8. Conditions of U.S. Underwriters' Obligations. The several
obliga- tions of the U.S. Underwriters to purchase the U.S. Firm Shares under
this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date.
(b) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City time, on the date of this Agreement
or at such later date and time as you may approve in writing, and at
the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been commenced or shall be pending before or
contemplated by the Commission.
(c) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, affairs or business prospects, whether
or not arising in the ordinary course of business, of the Company, (ii)
since the date of the latest balance sheet included in the Registration
Statement and the Prospectus there shall not have been any change, or
any development involving a prospective material adverse change, in the
capital stock or in the long-term debt of the Company from that set
forth in the Registration Statement and Prospectus, (iii) the Company
shall have no liability or obligation, direct or contingent, which is
material to the Company, other than those reflected in the Registration
Statement and the Prospectus and (iv) on the Closing Date you shall
have received a certificate dated the Closing Date, signed by David C.
King and Keith E. Glover, in their capacities as the Chief Executive
Officer and Vice President of Finance and Administration and Chief
Financial Officer of the
17.
<PAGE> 18
Company, confirming the matters set forth in paragraphs (a), (b), and
(c) of this Section 8.
(d) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the U.S. Underwriters), dated the
Closing Date, of Wilson, Sonsini, Goodrich & Rosati counsel for the
Company, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation and has the corporate power and
authority required to carry on its business as it is currently being
conducted and to own, lease and operate its properties;
(ii) the Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Company;
(iii) all the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iv) the Shares to be issued and sold by the Company
have been duly authorized, and when issued and delivered to the U.S.
Underwriters and International Managers against payment therefor as
provided by this Agreement and the International Underwriting
Agreement, respectively, will have been validly issued and will be
fully paid and non-assessable, and the issuance of such Shares is not
subject to any preemptive or similar rights;
(v) this Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company and are each valid and binding agreements of the Company
enforceable in accordance with their respective terms (except as rights
to indemnity and contribution hereunder may be limited by applicable
law);
(vi) the authorized capital stock of the Company,
including the Common Stock, conforms as to legal matters to the
description thereof contained in the Prospectus;
(vii) the Registration Statement has become effective
under the Act, no stop order suspending its effectiveness has been
issued and no proceedings for that purpose are, to the knowledge of
such counsel, pending before or contemplated by the Commission;
18.
<PAGE> 19
(viii) the documents incorporated by reference in the
Prospectus (except for any financial statements and schedules and
financial and statistical information included in such documents, as to
which such counsel need express no opinion), when they were filed with
the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder;
(ix) the statements under the captions "Risk
Factors--Uncertain Government Regulation," "Business--Government
Regulation," "Description of Capital Stock" and "Underwriting" in the
Prospectus, insofar as such statements constitute a summary of legal
matters documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings;
(x) the Company is not in violation of its charter or
by-laws and, to such counsel's knowledge after due inquiry, the Company
is not in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence
of indebtedness or in any other agreement, indenture or instrument
material to the conduct of the business of the Company, to which the
Company is a party or by which it or its property is bound;
(xi) the execution, delivery and performance of this
Agreement and the International Underwriting Agreement by the Company,
compliance by the Company with all the provisions hereof and thereof
and the consummation of the transactions contemplated hereby and
thereby will not require any consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body (except as such may be required under the Act or
other securities or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any agreement,
indenture or other instrument to which the Company is a party or by
which the Company or its properties are bound, or violate or conflict
with any laws, administrative regulations or rulings or court decrees
applicable to the Company or its properties;
(xii) after due inquiry, such counsel does not know
of any legal or governmental proceeding pending or threatened to which
the Company is a party or to which any of its property is subject which
is required to be described in the Registration Statement or the
Prospectus and is not so described, or of any contract or other
document which is required to be described in the Registration
Statement or the Prospectus or is required to be filed as an exhibit to
the Registration Statement which is not described or filed as required;
(xiii) to such counsel's knowledge, after due
inquiry, the Company has not violated any Environmental Laws, nor any
federal or state law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable
19.
<PAGE> 20
federal or state wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act or the rules and regulations
promulgated thereunder, which in each case might result in any material
adverse change in the business, prospects, financial condition or
results of operation of the Company;
(xiv) the Company has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any Environmental
Laws, as are necessary to own, lease and operate its property and to
conduct its business in the manner described in the Prospectus; to the
best of such counsel's knowledge, after due inquiry, the Company has
fulfilled and performed all of its material obligations with respect to
such permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results
in any other material impairment of the rights of the holder of any
such permit, subject in each case to such qualification as may be set
forth in the Prospectus; and, except as described in the Prospectus,
such permits contain no restrictions that are materially burdensome to
the Company;
(xv) the Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(xvi) to such counsel's knowledge, after due inquiry,
no holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company;
(xvii) (1) the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for
financial statements as to which no opinion need be expressed) comply
as to form in all material respects with the Act, and (2) such counsel
believes that (except for financial statements, as aforesaid) the
Registration Statement and the prospectus included therein at the time
the Registration Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and that the Prospectus, as amended or supplemented, if
applicable (except for financial statements, as aforesaid) does not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
In giving such opinion with respect to the matters covered by
clause (xvii), such counsel may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
20.
<PAGE> 21
(e) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Brobeck, Phleger & Harrison LLP, counsel for
the U.S. Underwriters, as to certain matters relating to the sale of
the Shares.
(f) You shall have received a letter on and as of the Closing
Date, in form and substance satisfactory to you, from Price Waterhouse
LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus and substantially in the form
and substance of the letter delivered to you by Price Waterhouse LLP on
the date of this Agreement.
(g) The Company shall have delivered to you the agreements
specified in Section 2 hereof.
(h) The Company not have failed at or prior to the Closing
Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company at or
prior to the Closing Date.
The several obligations of the U.S. Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to the U.S. Representatives on the
applicable Option Closing Date of such documents as you may reasonably request
with respect to the good standing of the Company, the due authorization and
issuance of such Additional Shares and other matters related to the issuance of
such Additional Shares.
9. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
of the Company or the earnings, affairs, or business prospects of the Company,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or limitation on prices for
securities on any such exchange or National Market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
21.
<PAGE> 22
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the
case may be, any one or more of the U.S. Underwriters shall fail or refuse to
purchase the U.S. Firm Shares or Additional Shares, as the case may be, which it
or they have agreed to purchase hereunder on such date and the aggregate number
of U.S. Firm Shares or Additional Shares, as the case may be, which such
defaulting U.S. Underwriter or U.S. Underwriters, as the case may be, agreed but
failed or refused to purchase is not more than one-tenth of the total number of
U.S. Firm Shares or Additional Shares, as the case may be, to be purchased on
such date by all U.S. Underwriters, each non-defaulting U.S. Underwriter shall
be obligated severally, in the proportion which the number of U.S. Firm Shares
set forth opposite its name in Schedule I bears to the total number of U.S. Firm
Shares which all the non-defaulting U.S. Underwriters have agreed to purchase,
or in such other proportion as you may specify, to purchase the U.S. Firm Shares
or Additional Shares, as the case may be, which such defaulting U.S. Underwriter
or U.S. Underwriters, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the number of U.S. Firm
Shares or Additional Shares, as the case may be, which any U.S. Underwriter has
agreed to purchase pursuant to Section 2 hereof be increased pursuant to this
Section 9 by an amount in excess of one-ninth of such number of U.S. Firm Shares
or Additional Shares, as the case may be, without the written consent of such
U.S. Underwriter. If on the Closing Date or on an Option Closing Date, as the
case may be, any U.S. Underwriter or U.S. Underwriters shall fail or refuse to
purchase U.S. Firm Shares or Additional Shares, as the case may be, and the
aggregate number of U.S. Firm Shares or Additional Shares, as the case may be,
with respect to which such default occurs is more than one-tenth of the
aggregate number of U.S. Firm Shares or Additional Shares, as the case may be,
to be purchased on such date by all U.S. Underwriters and arrangements
satisfactory to you and the Company for purchase of such U.S. Firm Shares or
Additional Shares, as the case may be, are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting U.S. Underwriter and the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date or the applicable Option Closing Date, as
the case may be, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting U.S. Underwriter from liability in
respect of any default of any such U.S. Underwriter under this Agreement.
22.
<PAGE> 23
If this Agreement shall be terminated by the U.S. Underwriters
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement or the International
Underwriting Agreement, the Company agrees to reimburse the several U.S.
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to the Company, to Proxim,
Inc., 295 North Bernardo Avenue, Mountain View, California 94043, Attention:
David C. King, Chief Executive Officer and (b) if to any U.S. Underwriter or to
you, to you c/o UBS Securities LLC, 299 Park Avenue, New York, New York 10171,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, its officers
and directors and of the several U.S. Underwriters set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the U.S. Firm Shares and the Additional
Shares, as the case may be, regardless of (i) any investigation, or statement as
to the results thereof, made by or on behalf of any U.S. Underwriter or by or on
behalf of the officers or directors of the Company, (ii) acceptance of the U.S.
Firm Shares and the Additional Shares, as the case may be, and payment for them
hereunder and (iii) termination of this Agreement.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the U.S.
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the U.S. Shares from any of the several U.S. Underwriters merely because
of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
23.
<PAGE> 24
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several U.S. Underwriters.
Very truly yours,
PROXIM, INC.
By
-------------------------
David C. King
Chief Executive Officer
UBS SECURITIES LLC
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
Acting severally on behalf of
themselves and the several
U.S. Underwriters named in
Schedule I hereto
By UBS Securities LLC
By
---------------------------
Authorized Signatory
24.
<PAGE> 25
SCHEDULE I
<TABLE>
<CAPTION>
Number of U.S.
U.S. Underwriters Shares to be Purchased
----------------- ----------------------
<S> <C>
UBS Securities LLC
Montgomery Securities
Unterberg Harris
Volpe, Welty & Company
Total
---------
1,825,000
=========
</TABLE>
25.
<PAGE> 1
675,000 Shares
PROXIM, INC.
Common Stock
INTERNATIONAL UNDERWRITING AGREEMENT
________ __, 1996
UBS LIMITED
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
As representatives of the
several international
managers named in Schedule I
hereto
c/o UBS Limited
100 Liverpool Street
EC2M 2RH London
ENGLAND
Ladies and Gentlemen:
Proxim, Inc., a Delaware corporation (the "Company") proposes
to issue and sell to the several U.S. Underwriters and International Managers
(as defined below) an aggregate of 2,500,000 shares of its common stock, $0.001
par value per share, ("Common Stock"). The 2,500,000 shares of Common Stock to
be issued and sold by the Company are hereinafter called the "Firm Shares."
It is understood that, subject to the conditions hereinafter
stated, 625,000 Firm Shares (the "International Shares") will be sold to the
several International Managers named in Schedule I hereto (the "International
Managers") in connection with the offering and sale of such International Shares
outside the United States and Canada to persons other than United States Persons
and Canadian Persons (as such terms are defined in the Agreement Between U.S.
Underwriters and International Managers of even date herewith (the "U.S.
Underwriters and International Managers Agreement)). It is further understood
that the Company is concurrently entering into an agreement of even date
herewith (the "U.S. Underwriting Agreement") providing for the sale of 1,875,000
Firm Shares (the "U.S. Shares") to be sold to the several U.S. Underwriters
<PAGE> 2
named in Schedule I thereto (the "U.S. Underwriters") in connection with the
offering and sale of such U.S. Shares in the United States and Canada to United
States Persons and Canadian Persons. UBS Securities LLC, Montgomery Securities,
Unterberg Harris and Volpe, Welty & Company shall act as representatives (the
"U.S. Representatives") of the several U.S. Underwriters, and UBS Limited,
Montgomery Securities, Unterberg Harris and Volpe, Welty & Company shall act as
representatives (the "International Representatives") of the several
International Managers.
Pursuant to the U.S. Underwriting Agreement, the Company also
proposes to issue and sell to the several U.S. Underwriters not more than an
additional 375,000 shares of its Common Stock (the "Additional Shares"), if
requested by the U.S. Underwriters as provided in Section 2 thereof. The Firm
Shares and the Additional Shares are herein collectively called the "Shares."
1. Registration Statement and Prospectus. A registration
statement on Form S-3 (File No. 333-[ ]), including a prospectus relating to the
Shares and each amendment thereto, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission. The Company meets the requirements for filing such
registration statement on Form S-3. There have been delivered to you three
signed copies of such registration statement and amendments, together with three
copies of each exhibit filed therewith. Copies of such registration statement
and amendments (but without exhibits) and of the related preliminary prospectus
have been delivered to you in such reasonable quantities as you have requested
for each of the International Managers. If such registration statement has not
become effective, a further amendment to such registration statement, including
a form of final prospectus, necessary to permit such registration statement to
become effective will be filed promptly by the Company with the Commission. If
such registration statement has become effective, a final prospectus containing
all Rule 430A Information (as hereinafter defined) will be filed by the Company
with the Commission in accordance with Rule 424(b) of the Rules and Regulations
on or before the second business day after the date hereof (or such earlier time
as may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement
shall mean such registration statement (including all exhibits and financial
statements and all documents incorporated by reference therein) at the time such
registration statement becomes or became effective and, in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall include all Rule 430A Information deemed
to be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations and shall also mean any registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations with respect to the Shares. The
2.
<PAGE> 3
Registration Statement contains two prospectuses to be used in connection with
the offering and sale of the Shares: the prospectus to be used in connection
with the offering and sale of Shares in the United States and Canada to United
States Persons and Canadian Persons (the "U.S. Prospectus"), and the prospectus
to be used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States Persons and Canadian
Persons (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus are identical except for the outside front and back
cover pages. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes effective that
omits Rule 430A Information. The term "Prospectus" as used in this Agreement
shall collectively mean the U.S. Prospectus and the International Prospectus
relating to the Shares in the form in which they are first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, shall mean the
form of final U.S. Prospectus and International Prospectus included in the
Registration Statement at the time the Registration Statement becomes effective.
The term "Rule 430A Information" means information with respect to the Shares
and the offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A of the Rules and Regulations.
2. Agreements to Sell and Purchase. The Company hereby agrees
to issue and sell the International Shares to the International Managers named
in Schedule I hereto, and each of the International Managers, upon the basis of
the representations and warranties contained in this Agreement, and subject to
its terms and conditions, agrees, severally and not jointly, to purchase from
the Company at a price per share of $_________ (the "Purchase Price") the
respective number of International Shares set forth opposite the name of such
International Manager in Schedule I hereto.
The Company hereby agrees, and the Company shall, concurrently
with the execution of this Agreement, deliver agreements executed by each of the
directors and officers of the Company pursuant to which each such person agrees
not to offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of any common stock of the Company or any securities convertible into or
exercisable or exchangeable for such common stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such common stock, except to the U.S. Underwriters pursuant to
the U.S. Underwriting Agreement or the International Managers pursuant to this
Agreement, for a period of 90 days after the date of the Prospectus without the
prior written consent of UBS Securities LLC, subject to certain exceptions set
forth in such agreements. Notwithstanding the foregoing, during such period (i)
the Company may grant stock options pursuant to the Company's existing stock
option plan and (ii) the Company may issue shares of its common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof.
3.
<PAGE> 4
3. Terms of Public Offering. The Company is advised by you
that the International Managers propose (i) to make a public offering of the
respective portions of the International Shares as soon after the effective date
of the Registration Statement as in your judgment is advisable and (ii)
initially to offer the International Shares upon the terms set forth in the
Prospectus.
Each International Manager hereby makes to and with the
Company the representations and agreements of such International Manager
contained in the seventh, eighth, ninth and tenth paragraphs of Section 3 of the
U.S. Underwriters and International Managers Agreement.
4. Delivery and Payment. Delivery to the International
Managers of and payment for the International Shares shall be made at 10:00
A.M., New York City time, on the latest to occur of (a) the third (3rd) full
business day following the first day that the Firm Shares are traded, (b) if
this Agreement is executed and delivered after 1:30 p.m., California time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered, or (c) such time and date, not later than the seventh (7th) full
business day following the day that the Firm Shares are traded as the
International Representatives and the Company may determine pursuant to Rule
15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(the "Closing Date"), at such place outside the State of New York as you shall
designate. The location of delivery of and the form of payment for the
International Shares may be varied by agreement between you and the Company.
Certificates for the International Shares registered in such
names and issued in such denominations as you shall request in writing not later
than two full business days prior to the Closing Date. Such certificates shall
be made available to you for inspection not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date. Certificates in
definitive form evidencing the International Shares shall be delivered to you on
the Closing Date with any transfer taxes thereon duly paid by the Company for
the respective accounts of the several International Managers, against payment
of the Purchase Price therefor by certified or official bank checks payable in
same day funds to the order of the Company or wire transfer of immediately
available funds. If the International Representatives so elect, delivery of the
International Shares may be made by credit through full fast transfer to the
accounts at the Depository Trust Company designated by the International
Representatives.
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration
Statement to become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment to it becomes
effective, (ii) of any request by
4.
<PAGE> 5
the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes,
and (iv) of the happening of any event during the period referred to in
paragraph (e) below which makes any statement of a material fact made
in the Registration Statement or the Prospectus untrue or which
requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal or lifting
of such order at the earliest possible time.
(c) To furnish to you, without charge, one signed copy of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
International Manager designated by you such number of conformed copies
of the Registration Statement as so filed and of each amendment to it,
without exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object; and to prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the
Shares by you, and to use its best efforts to cause the same to become
promptly effective.
(e) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in the
opinion of counsel for the International Managers a prospectus is
required by law to be delivered in connection with sales by an
International Manager or a dealer, to furnish to each International
Manager and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such International
Manager or dealer may reasonably request.
(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
International Managers it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
to comply with any law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so
5.
<PAGE> 6
that the statements in the Prospectus, as so amended or supplemented,
will not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law, and to
furnish to each International Manager and to such dealers as you shall
specify, such number of copies thereof as such International Manager or
dealers may reasonably request.
(g) Prior to any public offering of the Shares, to cooperate
with you and counsel for the International Managers in connection with
the registration or qualification of the Shares for offer and sale by
the several International Managers and by dealers under the securities
laws of such jurisdictions as you may request, to continue such
qualification in effect so long as required for distribution of the
Shares and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification.
(h) To mail and make generally available to its stockholders
as soon as reasonably practicable an earnings statement covering a
period of at least twelve months after the effective date of the
Registration Statement (but in no event commencing later than 90 days
after such date) which shall satisfy the provisions of Section 11(a) of
the Act, and to advise you in writing when such statement has been so
made available.
(i) During the period of five years after the date of this
Agreement, (i) to mail as soon as reasonably practicable after the end
of each fiscal year to the record holders of its Common Stock a
financial report of the Company, all such financial reports to include
a balance sheet, a statement of operations, a statement of cash flows
and a statement of stockholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and
for the preceding year, certified by independent certified public
accountants, and (ii) to mail and make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a balance sheet,
a statement of operations and a statement of cash flows as of the end
of and for such period, and for the period from the beginning of such
year to the close of such quarterly period, together with comparable
information for the corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i) to furnish
to you as soon as available a copy of each report or other publicly
available information of the Company mailed to the holders of Common
Stock or filed with the Commission and such other publicly available
information concerning the Company as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i)
the preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any
of them prior to or during the period speci-
6.
<PAGE> 7
fied in paragraph (e), (ii) the printing and delivery of the Prospectus
and all amendments or supplements to it during the period specified in
paragraph (e), (iii) the printing and delivery of this Agreement, the
Preliminary and Supplemental Blue Sky Memoranda and all other
agreements, memoranda, correspondence and other documents printed and
delivered in connection with the offering of the Shares (including in
each case any disbursements of counsel for the International Managers
relating to such printing and delivery), (iv) the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the several states, the applicable securities laws,
rules and regulations of Canada, and the applicable securities laws,
rules and regulations of all other relevant countries outside the
United States (including in each case the fees and disbursements of
counsel for the International Managers relating to such registration or
qualification and memoranda relating thereto), (v) filings and
clearance with the National Association of Securities Dealers, Inc.
(the "NASD") in connection with the offering, (vi) the listing of the
Shares on the Nasdaq National Market, (vii) furnishing such copies of
the Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the
offering or sale of the Shares by the International Managers or by
dealers to whom Shares may be sold and (viii) the performance by the
Company of its other obligations under this Agreement.
(l) To use its best efforts to maintain the inclusion of the
Common Stock in the Nasdaq National Market (or on a national securities
exchange) for a period of five years after the effective date of the
Registration Statement.
(m) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Shares.
6. Representations and Warranties of the Company. The Company
represents and warrants to each International Manager that:
(a) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects requirements of the
Act and the Rules and Regulations and, as of its date, has not included
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, other than
any untrue statement or omission which has been corrected in the
Prospectus. At the time the Registration Statement and any amendment
thereto becomes effective and at all times subsequent thereto, up to
and including each Closing Date hereinafter mentioned, the Registration
Statement and the Prospectus, and any amendments thereto, will contain
all material statements and information required to be included therein
by the Act and the Rules and Regulations,
7.
<PAGE> 8
and will in all material respects conform to the requirements of the
Act and the Rules and Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
will include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements herein not misleading; provided, however, no representation
or warranty contained in this subsection 6(a) shall be applicable to
information contained in or omitted from any Preliminary Prospectus,
the Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any International Manager
or U.S. Underwriter, directly or through the International
Representatives or U.S. Representatives, specifically for use in the
preparation thereof. The Company has filed with the Commission and the
NASD on a timely basis all documents required by the Commission or the
NASD to be so filed by the Company, and such documents, when they were
filed with the Commission or the NASD, conformed in all material
respects to the requirements of the Act, the Rules and Regulations, the
Exchange Act, the rules and regulations of the Commission thereunder,
and the rules and regulations of the NASD, as applicable, and none of
such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) The Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation, with
full power and authority (corporate and other) to own and lease its
properties and conduct its business as described in the Prospectus; the
Company is in possession of and operating in compliance with all
material authorizations, licenses, permits, consents, certificates and
orders material to the conduct of its business as described in the
Prospectus, all of which are valid and in full force and effect; the
Company is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the ownership or
leasing of properties or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect upon the Company; and
no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(c) The Company has an authorized and outstanding capital
stock as set forth under the heading "Capitalization" in the
Prospectus; the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable,
are duly approved for listing and will, upon notice of issuance, be
duly listed on the Nasdaq National Market, have been issued in
compliance with the registration and qualification requirements (or
exemptions therefrom) of all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other
contractual rights to
8.
<PAGE> 9
subscribe for or purchase securities and conform to the description
thereof contemplated in the Prospectus. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the
Company and the related notes thereto included in the Prospectus, the
Company has no outstanding options to purchase, or any preemptive
rights or other contractual rights to subscribe for or to purchase, any
securities or obligations convertible into, or any acts or commitments
to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the
Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents
the information required by the Act and the Rules and Regulations to be
shown with respect to such plans, arrangements, options and rights.
(d) The Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner
provided herein and in the U.S. Underwriting Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and will
conform to the description thereof contained in the Prospectus. No
preemptive rights or other contractual rights to subscribe for or
purchase securities of the Company exist with respect to the issuance
and sale of the Shares by the Company pursuant to this Agreement and
the U.S. Underwriting Agreement. No stockholder of the Company has any
right which has not been waived, or complied with, to require the
Company to register the sale of any shares owned by such stockholder
under the Act in the public offering contemplated by this Agreement. No
further approval or authority of the stockholders or the Board of
Directors of the Company will be required for the issuance and sale of
the Shares to be sold by the Company as contemplated herein and in the
U.S. Underwriting Agreement.
(e) The Company has full corporate power and authority to
enter into this Agreement and the U.S. Underwriting Agreement and
perform the transactions contemplated hereby and thereby. This
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may
be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium laws affecting creditors' rights generally
and except as to those provisions relating to indemnity or contribution
for liabilities arising under all U.S. federal and state and all
foreign securities laws. The making and performance of this Agreement
and the U.S. Underwriting Agreement by the Company and the consummation
of the transactions contemplated hereby and thereby (i) will not
violate any provisions of the Certificate of Incorporation, Bylaws or
other organizational documents of the Company, and (ii) will not
conflict with, result in a material breach or violation of, or
constitute, either by itself or upon notice or the passage of time or
both, a material default under (A) any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument
to which the Company is
9.
<PAGE> 10
a party or by which the Company or any of its properties may be bound
or affected, or (B) any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the
Company or any of its properties. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body which has not already been obtained is required
for the execution and delivery of this Agreement and the U.S.
Underwriting Agreement or the consummation of the transactions
contemplated hereby or thereby, except for compliance with the Act, the
securities laws applicable to the public offering of the Shares by the
several International Managers and U.S. Underwriters and the clearance
of such offering with the NASD.
(f) Price Waterhouse LLP, who have expressed their opinion
with respect to the financial statements and schedules filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent accountants as required by the Act and the
Rules and Regulations.
(g) The consolidated financial statements and schedules of the
Company and the related notes thereto included in the Registration
Statement and the Prospectus present fairly on a consolidated basis the
financial position of the Company as of the respective dates of such
financial statements and schedules, and the results of operations and
cash flows of the Company for the respective periods covered thereby.
Such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods specified, as certified by the
independent accountants named in subsection 6(f). No other financial
statements or schedules are required to be included in the Registration
Statement. The selected financial data set forth in the Prospectus
under the captions "Capitalization" and "Selected Consolidated
Financial Information" fairly present the information set forth therein
on the basis stated in the Registration Statement.
(h) The Company is not (i) in violation or default of any
provision of its Certificate of Incorporation, Bylaws or other
organizational documents, or (ii) in breach of or default with respect
to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other
instrument to which it is a party or by which it or any of its
properties are bound, which individually or in the aggregate is likely
to have a material adverse effect on the Company; and, to its
knowledge, there does not exist any state of facts which, with notice
or lapse of time or both, would constitute such a violation, breach or
default on the part of the Company.
(i) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations
which have not been
10.
<PAGE> 11
described or filed as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof; and neither
the Company nor to the best of the Company's knowledge any other party
thereto is in material breach of or default under any of such
contracts.
(j) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings pending or, to the best
of the Company's knowledge, threatened to which the Company is or is
threatened to be made a party or of which property owned or leased by
the Company is or is threatened to be made the subject, which actions,
suits or proceedings might reasonably be expected to, individually or
in the aggregate, prevent or adversely affect the transactions
contemplated by this Agreement or result in a material adverse change
in the condition (financial or otherwise), properties, business or
results of operations of the Company; and no labor disturbance by the
employees of the Company exists or, to the best knowledge of the
Company, is imminent which might reasonably be expected to materially
and adversely affect such condition, properties, business or results of
operations of the Company. The Company is not a party or subject to the
provisions of any injunction, judgment, decree or order of any court,
regulatory body, administrative 'agency or other governmental body,
which is reasonably likely to have a material adverse effect on the
Company.
(k) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i)
those, if any, reflected in such financial statements (or elsewhere in
the Prospectus), or (ii) those which are not material in amount to the
Company, and do not materially and adversely effect the use made and
proposed to be made of such property by the Company as described in the
Registration Statement. The Company holds its leased properties under
valid and binding leases. Except as disclosed in the Prospectus, the
Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(l) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (i) the
Company has not (A) incurred any liabilities or obligations, indirect,
direct or contingent, or (B) entered into any verbal or written
agreement or other transaction, which in the case of (A) or (B) is not
in the ordinary course of business and which is reasonably likely to
have a material adverse effect on the Company; (ii) the Company has not
sustained any material loss or interference with its businesses or
properties from fire, flood, windstorm, accident or other calamity,
whether or not covered by insurance; (iii) the Company has not paid or
declared any dividends or other distributions with respect to its
capital stock and the Company is not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there
has not been any change in
11.
<PAGE> 12
the capital stock (other than upon the sale of the Shares or upon the
exercise of any options or warrants disclosed in the Prospectus); (v)
there has not been any material increase in the short or long-term debt
of the Company; and (vi) there has not been any material adverse change
or any development which may reasonably be expected to involve a
prospective material adverse change in the condition (financial or
otherwise), business, properties or results of operations of the
Company.
(m) Except as disclosed in or specifically contemplated by the
Prospectus, the Company has sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations
to conduct its businesses as now conducted; the expiration of any
trademarks, trade names, patent rights, copyrights, licenses, approvals
or governmental authorizations are not likely to have a material
adverse effect on the condition (financial or otherwise), business or
results of operations of the Company; the Company has no knowledge of
any infringement by it of trademark, trade name rights, patent rights,
copyrights, licenses, trade secret or other similar rights of others;
and there is no claim being made against the Company regarding
trademark, trade name, patent, copyright, license, trade secret or
other infringement which might reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company.
(n) The Company is conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it
is conducting business, including, without limitation, all applicable
local, state and federal environmental laws and regulations
("Environmental Laws"), except where the failure to be so in compliance
is not reasonably likely to materially and adversely affect the
condition (financial or otherwise), business or results of operations
of the Company.
(o) The Company has filed all necessary federal, state and
foreign income and franchise tax returns, and all such tax returns are
complete and correct in all material respects, and the Company has not
failed to pay any taxes which were payable pursuant to said returns or
any assessments with respect thereto, except such taxes as are being
contested by the Company in good faith and under due process. The
Company has no knowledge of any tax deficiency which has been or is
threatened to be asserted or threatened against the Company, except any
deficiency which is being contested in good faith in appropriate
proceedings.
(p) The Company is not now, and upon closing of the offering
contemplated hereby will not be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
12.
<PAGE> 13
(q) The Company has not distributed, and will not distribute
prior to the later to occur of (i) the Closing Date and (ii) completion
of the distribution of the Shares, any offering material in connection
with the offering and sale of the Shares other than the Prospectus, the
Registration Statement and any other materials permitted by the Act.
(r) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(s) Neither the Company nor, to the best of the Company's
knowledge, any of its employees or agents has at any time during the
last five years (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in
violation of law or (ii) made any payment to any foreign, federal or
state governmental officer or official or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(t) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(u) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Interna- tional Manager and each person, if any, who controls any
International Manager within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or sup-
plemented if the Company shall have furnished any amendments or
supplements thereto) or any Preliminary Prospectus, or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities
or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any International Manager or U.S. Underwriter furnished in writing to
the Company by or on behalf of any International Manager or U.S.
Underwriter
13.
<PAGE> 14
through any International Representative or U.S. Representative
expressly for use therein.
(b) In case any action shall be brought against any
International Manager or any person controlling such International
Manager, based upon any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto and
with respect to which indemnity may be sought against the Company, such
International Manager shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses. Any International Manager or any such
controlling person shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such
International Manager or such controlling person unless (i) the
employment of such counsel shall have been specifically authorized in
writing by the Company, (ii) the Company shall have failed to assume
the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such
International Manager or such controlling person and the Company, and
such International Manager or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the
right to assume the defense of such action on behalf of such
International Manager or such controlling person, it being understood,
however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
such International Managers and controlling persons, which firm shall
be designated in writing by UBS Securities LLC and that all such fees
and expenses shall be reimbursed as they are incurred). The Company
shall not be liable for any settlement of any such action effected
without the written consent of the Company but if settled with the
written consent of the Company, the Company agrees to indemnify and
hold harmless any International Manager and any such controlling person
from and against any loss or liability by reason of such settlement.
Notwithstanding the immediately preceding sentence, if in any case
where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its
written consent if (i) such settlement is entered into more than ten
business days after the receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying
party shall, without the prior
14.
<PAGE> 15
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(c) Each International Manager agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from
the Company to each International Manager but only with reference to
information relating to such International Manager furnished in writing
by or on behalf of such International Manager through you expressly for
use in the Registration Statement, the Prospectus or any Preliminary
Prospectus. In case any action shall be brought against the Company,
any of its directors, any such officer or any person controlling the
Company based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought
against any International Manager, the International Manager shall have
the rights and duties given to the Company (except that if the Company
shall have assumed the defense thereof, such International Manager
shall not be required to do so, but may employ separate counsel therein
and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such International Manager),
and the Company, its directors, any such officers and any person
controlling the Company shall have the rights and duties given to the
International Manager pursuant to Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
International Managers on the other hand from the offering of the
International Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the
International Managers in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the International
Managers shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company, and the total underwriting discounts and commissions received
by the Interna-
15.
<PAGE> 16
tional Managers, bear to the total price to the public of the
International Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and the
International Managers shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the Company, the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the International Managers agree that it would
not be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the International Managers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no International Managers shall be required to contribute any amount
in excess of the amount by which the total price at which the International
Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such International Manager has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The International Manager's obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of International Shares purchased by each of the International Managers
hereunder and not joint.
8. Conditions of International Managers' Obligations. The
several obligations of the International Managers to purchase the International
Shares under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing
Date.
(b) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City time, on the date of this Agreement
or at such later date and time as you may approve in writing, and at
the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been commenced or shall be pending before or
contemplated by the Commission.
16.
<PAGE> 17
(c) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have
been any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, affairs or business prospects, whether
or not arising in the ordinary course of business, of the Company, (ii)
since the date of the latest balance sheet included in the Registration
Statement and the Prospectus there shall not have been any change, or
any development involving a prospective material adverse change, in the
capital stock or in the long-term debt of the Company from that set
forth in the Registration Statement and Prospectus, (iii) the Company
shall have no liability or obligation, direct or contingent, which is
material to the Company, other than those reflected in the Registration
Statement and the Prospectus and (iv) on the Closing Date you shall
have received a certificate dated the Closing Date, signed by David C.
King and Keith E. Glover, in their capacities as the Chief Executive
Officer and Vice President of Finance and Administration and Chief
Financial Officer of the Company, confirming the matters set forth in
paragraphs (a), (b), and (c) of this Section 8.
(d) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the International Managers), dated
the Closing Date, of Wilson, Sonsini, Goodrich & Rosati counsel for the
Company, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease
and operate its properties;
(ii) the Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a
material adverse effect on the Company;
(iii) all the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar
rights;
(iv) the Shares to be issued and sold by the Company
have been duly authorized, and when issued and delivered to
the International Managers and the U.S. Underwriters against
payment therefor as provided by this Agreement and the U.S.
Underwriting Agreement, respectively, will have been validly
issued and will be fully paid and non-assessable, and the
issuance of such Shares is not subject to any preemptive or
similar rights;
17.
<PAGE> 18
(v) this Agreement and the U.S. Underwriting
Agreement have been duly authorized, executed and delivered by
the Company and are each valid and binding agreements of the
Company enforceable in accordance with their respective terms
(except as rights to indemnity and contribution hereunder may
be limited by applicable law);
(vi) the authorized capital stock of the Company,
including the Common Stock, conforms as to legal matters to
the description thereof contained in the Prospectus;
(vii) the Registration Statement has become effective
under the Act, no stop order suspending its effectiveness has
been issued and no proceedings for that purpose are, to the
knowledge of such counsel, pending before or contemplated by
the Commission;
(viii) the documents incorporated by reference in the
Prospectus (except for any financial statements and schedules
and financial and statistical information included in such
documents, as to which such counsel need express no opinion),
when they were filed with the Commission, complied as to form
in all material respects with the requirements of the Exchange
Act and the rules and regulations of the Commission
thereunder;
(ix) the statements under the captions "Risk
Factors--Uncertain Government Regulation,"
"Business--Government Regulation," "Description of Capital
Stock" and "Underwriting" in the Prospectus, insofar as such
statements constitute a summary of legal matters documents or
proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings;
(x) the Company is not in violation of its charter or
by-laws and, to such counsel's knowledge after due inquiry,
the Company is not in default in the performance of any
obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in
any other agreement, indenture or instrument material to the
conduct of the business of the Company, to which the Company
is a party or by which it or its property is bound;
(xi) the execution, delivery and performance of this
Agreement and the U.S. Underwriting Agreement by the Company,
compliance by the Company with all the provisions hereof and
thereof and the consummation of the transactions contemplated
hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as
such may be required under the Act or other securities or Blue
Sky laws) and will not conflict with or constitute a breach of
any of the terms or
18.
<PAGE> 19
provisions of, or a default under, the charter or by-laws of
the Company or any agreement, indenture or other instrument to
which the Company is a party or by which the Company or its
properties are bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees
applicable to the Company or its properties;
(xii) after due inquiry, such counsel does not know
of any legal or governmental proceeding pending or threatened
to which the Company is a party or to which any of its
property is subject which is required to be described in the
Registration Statement or the Prospectus and is not so
described, or of any contract or other document which is
required to be described in the Registration Statement or the
Prospectus or is required to be filed as an exhibit to the
Registration Statement which is not described or filed as
required;
(xiii) to such counsel's knowledge, after due
inquiry, the Company has not violated any Environmental Laws,
nor any federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable
federal or state wages and hours laws, nor any provisions of
the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might
result in any material adverse change in the business,
prospects, financial condition or results of operation of the
Company;
(xiv) the Company has such permits, licenses,
franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under
any Environmental Laws, as are necessary to own, lease and
operate its property and to conduct its business in the manner
described in the Prospectus; to the best of such counsel's
knowledge, after due inquiry, the Company has fulfilled and
performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the
rights of the holder of any such permit, subject in each case
to such qualification as may be set forth in the Prospectus;
and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the
Company;
(xv) the Company is not an "investment company" or a
company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xvi) to such counsel's knowledge, after due inquiry,
no holder of any security of the Company has any right to
require registration of shares of Common Stock or any other
security of the Company;
19.
<PAGE> 20
(xvii) (1) the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for
financial statements as to which no opinion need be expressed)
comply as to form in all material respects with the Act, and
(2) such counsel believes that (except for financial
statements, as aforesaid) the Registration Statement and the
prospectus included therein at the time the Registration
Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus, as
amended or supplemented, if applicable (except for financial
statements, as aforesaid) does not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
In giving such opinion with respect to the matters covered by
clause (xvii), such counsel may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(e) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Brobeck, Phleger & Harrison LLP, counsel for
the International Managers, as to certain matters relating to the sale
of the Shares.
(f) You shall have received a letter on and as of the Closing
Date, in form and substance satisfactory to you, from Price Waterhouse
LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus and substantially in the form
and substance of the letter delivered to you by Price Waterhouse LLP on
the date of this Agreement.
(g) The Company shall have delivered to you the agreements
specified in Section 2 hereof.
(h) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
9. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.
20.
<PAGE> 21
This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
of the Company or the earnings, affairs, or business prospects of the Company,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change in
economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or limitation on prices for
securities on any such exchange or National Market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the Closing Date any one or more of the International
Managers shall fail or refuse to purchase the International Shares which it or
they have agreed to purchase hereunder on such date and the aggregate number of
International Shares, which such defaulting International Manager or
International Managers, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of International Shares
to be purchased on such date by all International Managers, each non-defaulting
International Manager shall be obligated severally, in the proportion which the
number of International Shares set forth opposite its name in Schedule I bears
to the total number of International Shares which all non-defaulting
International Managers have agreed to purchase, or in such other proportion as
you may specify, to purchase the International Shares, which such defaulting
International Manager or International Managers, as the case may be, agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of International Shares which any International Manager has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of International Shares without
the written consent of such International Manager. If on the Closing Date any
International Manager or International Managers shall fail or refuse to purchase
International Shares and the aggregate number of International Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of International Shares to be purchased on such date by all International
Managers and arrangements satisfactory to you and the Company for purchase
21.
<PAGE> 22
of such International Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting International Manager and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
International Manager from liability in respect of any default of any such
International Manager under this Agreement.
If this Agreement shall be terminated by the International
Managers because of any failure or refusal on the part of the Company to comply
with the terms or to fulfil any of the conditions of this Agreement or the U.S.
Underwriting Agreement, the Company agrees to reimburse the several
International Managers for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to the Company, to Proxim,
Inc., 295 North Bernardo Avenue, Mountain View, California 94043, Attention:
David C. King, Chief Executive Officer, (b) if to any International Manager or
to you, to you c/o UBS Limited, 100 Liverpool Street, EC2M 2RH London, England,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, its officers
and directors and of the several International Managers set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the International Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any International Manager or by or on behalf of the
Company, the officers or directors of the Company, (ii) acceptance of the
International Shares and payment for them hereunder and (iii) termination of
this Agreement.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
International Managers, any controlling persons referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from any of the several International Managers
merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
22.
<PAGE> 23
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the International Managers.
Very truly yours,
PROXIM, INC.
By
----------------------------
David C. King
Chief Executive Officer
UBS LIMITED
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
Acting severally on behalf of themselves
and the several International
Managers named in Schedule I
hereto
By UBS Limited
By
-------------------------
Authorized Signatory
23.
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
Number of International
International Managers Shares to be Purchased
---------------------- -----------------------
<S> <C>
UBS Limited
Montgomery Securities
Unterberg Harris
Volpe, Welty & Company
-------
Total 675,000
=======
</TABLE>
24.
<PAGE> 1
Exhibit 5.1
June 26, 1996
Proxim, Inc.
295 North Bernardo Avenue
Mountain View, California 94043
Attn: David C. King, Chairman of the Board,
President and Chief Executive Officer
Re: Registration Statement on Form S-3
Gentlemen:
We have examined the Registration Statement on Form S-3 filed by you
with the Securities and Exchange Commission (the "Commission") on June 6, 1996,
and Amendment No. 1 thereto to be filed by you with the Commission on or about
June 26, 1996 (together, the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of 2,875,000 shares
of Common Stock, par value $0.001 per share, of Proxim, Inc., a Delaware
corporation (the "Shares"), all of which are authorized but heretofore unissued
(including 375,000 Shares subject to an over-allotment option held by the
underwriters). The Shares are to be sold to the underwriters for resale to the
public as described in the Registration Statement and pursuant to the form U.S.
Underwriting Agreement and form of International Underwriting Agreement filed
as exhibits thereto. As your counsel, we have examined the proceedings proposed
to be taken in connection with the sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the sale and
issuance of the Shares, the Shares, when issued and/or sold in the manner
described in the Registration Statement, will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON, SONSINI, GOODRICH & ROSATI
