<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
COMMISSION FILE NO. 0-22700
PROXIM, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0059429
(State of incorporation) (I.R.S. Employer Identification No.)
295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 960-1630
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------
Former name, former address and former fiscal year, if changed since last
report: Not Applicable.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Title of Class Outstanding as of June 30, 1998
-------------- -------------------------------
Common Stock, par value $.001 per share 10,282,110
<PAGE> 2
PROXIM, INC.
Index
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements:
Balance Sheet at June 30, 1998 and December 31, 1997.................. 3
Statement of Operations for the Three Months and Six Months
Ended June 30, 1998 and 1997........................................ 4
Statement of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 ............................................. 5
Notes to Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 7
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............. 18
Item 5. Other Information................................................ 18
Item 6. Exhibits and Reports on Form 8-K................................. 19
</TABLE>
2
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PROXIM, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 35,008 $ 62,296
Marketable securities ................................. 28,165 --
Accounts receivable, net .............................. 7,467 6,879
Inventories ........................................... 11,302 12,309
Deferred tax assets ................................... 1,625 1,625
Other current assets .................................. 271 346
-------- --------
Total current assets ............................... 83,838 83,455
Property and equipment, net .............................. 3,443 3,786
Deferred tax assets ...................................... 1,818 1,818
-------- --------
$ 89,099 $ 89,059
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 1,611 $ 1,354
Other current liabilities ............................. 6,278 9,030
-------- --------
Total current liabilities .......................... 7,889 10,384
-------- --------
Stockholders' equity:
Common Stock, $.001 par value,
25,000 shares authorized; 10,282 and 10,194 shares
issued and outstanding ............................. 10 10
Additional paid-in capital ........................... 81,577 81,068
Accumulated deficit ..................................... (377) (2,403)
-------- --------
Total stockholders' equity ......................... 81,210 78,675
-------- --------
$ 89,099 $ 89,059
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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PROXIM, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue ........................................ $11,500 $13,100 $21,750 $25,593
Cost of revenue ................................ 5,945 6,804 11,244 13,354
------- ------- ------- -------
Gross profit ................................... 5,555 6,296 10,506 12,239
------- ------- ------- -------
Operating expenses:
Research and development .................... 1,976 1,527 3,787 3,006
Selling, general and administrative ......... 2,743 2,774 5,441 5,478
------- ------- ------- -------
Total operating expenses ................. 4,719 4,301 9,228 8,484
------- ------- ------- -------
Income from operations ......................... 836 1,995 1,278 3,755
Interest and other income, net ................. 820 740 1,615 1,459
------- ------- ------- -------
Income before income taxes ..................... 1,656 2,735 2,893 5,214
Provision for income taxes ..................... 496 957 867 1,825
------- ------- ------- -------
Net income ..................................... $ 1,160 $ 1,778 $ 2,026 $ 3,389
======= ======= ======= =======
Basic net income per share ..................... $ 0.11 $ 0.18 $ 0.20 $ 0.34
======= ======= ======= =======
Weighted average common shares ................. 10,279 10,033 10,265 9,946
======= ======= ======= =======
Diluted net income per share ................... $ 0.11 $ 0.17 $ 0.19 $ 0.32
======= ======= ======= =======
Weighted average common shares and equivalents.. 11,000 10,672 10,944 10,559
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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PROXIM, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................................................... $ 2,026 $ 3,389
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ....................................................... 942 800
Changes in assets and liabilities:
Accounts receivable, net ......................................................... (588) (1,865)
Inventories ...................................................................... 1,007 142
Other assets ..................................................................... 75 (203)
Accounts payable ................................................................. 257 399
Other current liabilities ........................................................ (2,752) 1,494
-------- --------
Net cash provided by operating activities ...................................... 967 4,156
-------- --------
Cash flows used in investing activities:
Purchases of property and equipment .............................................. (510) (961)
Available-for-sale securities, net ............................................... (28,254) --
-------- --------
Net cash used in investing activities .......................................... (28,764) (961)
-------- --------
Cash flows provided by financing activities from issuance of Common Stock .............. 509 1,088
-------- --------
Net increase (decrease) in cash and cash equivalents .................................. (27,288) 4,283
Cash and cash equivalents, beginning of period ........................................ 62,296 54,232
-------- --------
Cash and cash equivalents, end of period ............................................... $ 35,008 $ 58,515
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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PROXIM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying financial statements include all adjustments
(consisting only of normal recurring adjustments) which Proxim, Inc. (the
"Company") considers necessary for a fair presentation of the results of
operations for the interim periods covered and the financial condition of the
Company at the date of the balance sheets. The interim financial information is
unaudited. This Quarterly Report on Form 10-Q should be read in conjunction with
the Company's audited financial statements for the year ended December 31, 1997,
included in the 1997 Annual Report on Form 10-K. The results of operations for
the six months ended June 30, 1998 are not necessarily indicative of results
that may be expected for the entire year ending December 31, 1998.
INVENTORIES (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Raw materials ................................ $ 4,338 $ 6,032
Work-in-process .............................. 6,488 5,831
Finished goods ............................... 476 446
------- -------
$11,302 $12,309
======= =======
</TABLE>
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
130 establishes new rules for the reporting of comprehensive income and its
components. SFAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included in other comprehensive income. Such items were reported in
stockholders' equity prior to the adoption of SFAS 130; however, the adoption of
SFAS 130 had no impact on the Company's net income or stockholders' equity.
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures About
Segments of an Enterprise and Related Information." SFAS 131 is effective for
annual reports for fiscal years beginning after December 15, 1997, and
applicable to interim financial statements beginning in the second year of
application, along with comparative information for interim periods in the
initial year of application.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion and analysis below contain trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company
may from time to time make additional written and oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below under "Certain Factors That May
Affect Future Operating Results" and elsewhere in this report. The Company does
not undertake to update any forward-looking statement that may be made from time
to time by or on behalf of the Company. Readers should carefully review the risk
factors described in other documents the Company files from time to time with
the Securities and Exchange Commission.
The following discussion should be read in conjunction with the
Company's 1997 Financial Statements and Notes thereto.
The following table presents the percentages of total revenue
represented by certain line items from the Statement of Operations for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -----
<S> <C> <C> <C> <C>
Revenue ................................ 100.0% 100.0% 100.0% 100.0%
Cost of revenue ........................ 51.7% 51.9% 51.7% 52.2%
------- ------- ------- -----
Gross profit ........................... 48.3% 48.1% 48.3% 47.8%
------- ------- ------- -----
Operating expenses:
Research and development ............ 17.2% 11.7% 17.4% 11.8%
Selling, general and administrative.. 23.8% 21.1% 25.0% 21.4%
------- ------- ------- -----
Total operating expenses ......... 41.0% 32.8% 42.4% 33.2%
------- ------- ------- -----
Income from operations ................. 7.3% 15.3% 5.9% 14.6%
Interest and other income, net ......... 7.1% 5.6% 7.4% 5.7%
------- ------- ------- -----
Income before income taxes ............. 14.4% 20.9% 13.3% 20.3%
Provision for income taxes ............. 4.3% 7.3% 4.0% 7.1%
------- ------- ------- -----
Net income ............................. 10.1% 13.6% 9.3% 13.2%
======= ======= ======= =====
</TABLE>
RESULTS OF OPERATIONS
REVENUE
Revenue decreased 12% in the second quarter of 1998 compared to the
second quarter of 1997 and 15% in the first six months of 1998 compared to the
first six months of 1997. The decrease in revenue was primarily attributable to
a significant decrease in orders from NTT-IT, one of the Company's major
customers, and lower revenue from 900 MHz products, partially offset by
increased revenue from shipments to distributors and OEM customers that sell
RangeLAN2-based 2.4 GHz product lines in North America and Europe.
7
<PAGE> 8
GROSS PROFIT
Gross profit as a percentage of revenue was 48.3% and 48.1% in the
second quarter of 1998 and 1997, respectively, and 48.3% and 47.8% in the first
six months of 1998 and 1997, respectively. Gross profit as a percentage of
revenue increased in the interim periods of 1998 due to engineering cost
reductions on 2.4 GHz products, partially offset by declining average selling
prices on 2.4 GHz products and a decrease in revenue from higher gross margin
900 MHz products. Gross profit as a percentage of revenue may fluctuate in
future periods depending primarily on the mix of revenue between 900 MHz
products, and existing 2.4 GHz products and recently announced 2.4 GHz products.
RESEARCH AND DEVELOPMENT
Research and development expenses increased in the interim periods of
1998 compared to the interim periods of 1997 primarily due to the increased
number of engineering employees, continued investment in integrating the
Company's technology into application specific integrated circuits ("ASICs"),
development of wireless protocols and network software drivers, costs related to
performance enhancements, cost reductions in the RangeLAN2 architecture, costs
related to both domestic and international product certifications, development
of products based on Institute of Electrical and Electronics Engineers ("IEEE")
802.11 standard and development of 5 GHz high-speed wireless LAN technology.
Research and development expenses increased as percentage of revenue in the
interim periods of 1998 compared to the interim periods of 1997 primarily due to
a decrease in revenue. To date, all of the Company's research and development
costs have been expensed as incurred. 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
Selling, general and administrative expenses were flat in the interim
periods of 1998 compared to the interim periods of 1997. Selling, general and
administrative expenses increased as a percentage of revenue in the interim
periods of 1998 compared to the interim periods of 1997 primarily due to a
decrease in revenue. The Company expects that selling, general and
administrative expenses will vary over time as a percentage of revenue.
INTEREST AND OTHER INCOME, NET
Interest and other income, net increased in the interim periods of
1998 compared to the interim periods of 1997 primarily due to higher average
cash balances.
INCOME TAXES
The Company's estimated effective income tax rate was 30% and 35% for
the interim periods of 1998 and 1997, respectively. The 1998 estimated effective
income tax rate is less than the combined federal and state statutory rates
based primarily on tax credits.
LIQUIDITY AND CAPITAL RESOURCES
In the first six months of 1998, $967,000 of cash and cash equivalents
were provided by operating activities, primarily by net income and a decrease in
inventory, partially offset by cash used to fund an increase in accounts
receivable and a decrease in other current liabilities. In the first six months
of 1997, $4,156,000 of cash and cash equivalents were provided by operating
activities, primarily by net income and a increase in accounts payable and
accrued liabilities, partially offset by cash used to fund an increase in
accounts receivable.
8
<PAGE> 9
In the first six months of 1998 and 1997, the Company purchased
$510,000 and $961,000, respectively, of property and equipment. Capital
expenditures in the first six months of 1998 were primarily for manufacturing
and engineering test equipment. Capital expenditures in the first six months of
1997 were primarily for manufacturing and engineering test equipment, leasehold
improvements and office furniture related to the Company's facilities expansion.
At June 30, 1998, the Company had working capital of $75,948,000,
including $35,008,000 in cash and cash equivalents and $28,165,000 in marketable
securities. The Company believes that its working capital and cash generated
from operations, if any, will be sufficient to finance 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 acquisitions, the Company
will consider raising additional financing. There can be no assurance that such
financing will be available on terms acceptable to the Company, if at all.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information in this Form 10-Q, the following
are important factors that should be considered carefully in evaluating the
Company and its business.
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 major customers, loss of one or more of
the Company's major 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, market adoption of
standards-based products (such as those compliant with the recently approved
IEEE 802.11 standard), the mix of products sold, the effectiveness of the
Company's distribution channels, the failure to anticipate changing customer
product requirements, seasonality in demand, manufacturing capacity and
efficiency, changes in the regulatory environment, product health and safety
concerns, Year 2000 issues 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
1997, the Company experienced a decrease in revenue and an operating loss as a
result of a significant decrease in orders from two of the Company's major
customers. There can be no assurance that the Company will not experience future
quarter to quarter decreases in revenue 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. For
example, in the third quarter of 1997 the Company announced that revenue and
operating results were expected to be significantly below expectations of
securities analysts and investors, resulting in a decrease in the market price
of the Company's Common Stock.
9
<PAGE> 10
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 62%, 62% and 60% of
the Company's revenue during the first six months of 1998, 1997 and 1996,
respectively, were to OEM customers. In addition, sales to one customer
represented approximately 40% of the Company's revenue in the first six months
of 1998. Sales to three customers represented approximately 28%, 17% and 10% of
the Company's revenue during 1997. The Company expects that sales to a limited
number of OEM customers will continue to account for a substantial portion of
its revenue 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.
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 wireless LAN products generally involve significant commitments of capital
and other resources by the Company and its customers, with the attendant delays
associated with procedures to approve such commitments. In this regard, in the
fourth quarter of 1997, the Company took a one-time charge of $2,400,000 to
selling, general and administrative expense related to two investments: one in a
startup wireless services company utilizing wireless LAN technology and the
other in a developer of mobile thin-client computing technology. Due to the
nature of these entities and their operations, there can be no assurance that
these investments will be realizable or will result in marketable and/or
successful products. 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. The loss of one or more of,
or a significant reduction in orders from, the Company's major OEM customers
could have a material adverse effect on the Company's results of operations. For
example, in the third quarter of 1997, the Company experienced a significant
decrease in orders from two of the Company's major customers resulting in a
decrease in revenue, an operating loss and higher inventory levels. 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.
Sole or Limited Sources of Supply. Certain parts and components used in the
Company's products, including the Company's proprietary 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
10
<PAGE> 11
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.
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.
The Company intends to increase its manufacturing capacity during the next
six months and intends to seek additional space near its present facility in
Mountain View, California. There can be no assurance that the Company will be
able to locate sufficient space near its present facility at commercially
reasonable rates. Furthermore, this expansion and relocation could cause
disruption of operations and unexpected costs which could have a material
adverse effect on the Company's business and operating results.
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's research and development efforts are focused on implementing
enhancements to existing products, investigating new technologies and developing
new products. Since 1994
11
<PAGE> 12
the Company's research and development efforts have been concentrated on
enhancing features and performance and reducing the cost of the RangeLAN2-based
products. These efforts include developing and integrating the Company's
technology into ASICs/MMICs, development of wireless protocols and network
software drivers, performance enhancements and cost reductions to wireless
adapter and access point products and efforts related to both domestic and
international product certification. In 1997 and the first six months of 1998
the Company substantially increased its research and development efforts in
developing IEEE 802.11 standard based products and 5 GHz high-speed wireless LAN
technology.
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 or retain qualified engineers to develop such
technologies and products, its future operating results would be materially and
adversely affected. In particular, the Company has expended substantial
resources in developing products that are designed to conform to the IEEE 802.11
standard that received final approval in June 1997. There can be no assurance
that the Company will introduce IEEE 802.11 compliant products in a timely
manner or that this standard will have a meaningful commercial impact. Any delay
in the commercial availability of the Company's IEEE 802.11 compliant products
could have a material adverse effect on the Company's results of operations,
particularly if its competitors are able to develop and introduce competitive
products which conform to this standard more rapidly than the Company.
The Company expects to substantially increase its research and development
expenses to develop new technologies related to 5 GHz high-speed wireless LAN
products. In this regard, in the fourth quarter of 1997, the Company took a
one-time pre-tax charge of $2,500,000 to research and development expense for
the purchase of in-process technology related to developing 5 GHz high-speed
wireless LAN products. Given the emerging nature of the wireless LAN market,
there can be no assurance that this investment will result in marketable and/or
successful products. Additionally, 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.
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 Lucent Technologies, Symbol Technologies and Telxon. In addition,
certain other companies have announced their intention to offer competitive 2.4
GHz products and solutions. Certain of these competitors have developed or
announced their intention to develop IEEE 802.11 standard-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. Moreover, the Company could also face competition from certain of its
OEM customers
12
<PAGE> 13
which have, or could acquire, wireless engineering and product development
capabilities. 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. For
example, in March 1998, an industry consortium known as the Home Radio Frequency
Working Group (HRFWG) was formed. The HRFWG expects to publish in 1998 an open
specification for home wireless communications, called the Shared Wireless
Access Protocol (SWAP). The HRFWG is led by core members Compaq Computer
Corporation, Ericsson Enterprise Networks, Hewlett-Packard, IBM, Intel,
Microsoft, Motorola, Philips Consumer Communications L.P., Proxim and
Symbionics, and supported by Butterfly Communications, Harris Semiconductor,
Intellon, National Semiconductor, Rockwell Semiconductor Systems and Samsung
Electronics America, Inc., among others. There can be no assurance that the
Company will introduce SWAP compliant products in a timely manner or that this
open specification will have a meaningful commercial impact. Any delay in the
commercial availability of the Company's SWAP compliant products could have a
material adverse effect on the Company's results of operations, particularly if
its competitors are able to develop and introduce competitive products which
conform to this open specification more rapidly than the Company. Historically,
a substantial portion of the Company's revenue has been derived from a limited
number of customers, most of which are OEM customers. The Company's future
growth depends, in part, on its ability to successfully penetrate and expand its
revenues in new markets, including the retail industry, as well as increased
revenue from a limited number of OEM customers. There can be no assurance that
penetration and expansion into new and existing markets can be profitably
achieved.
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 16%, 26% and 31% of total revenue
during the first six months of 1998, 1997 and 1996, respectively. The Company
expects that revenue from shipments to international customers will vary over
time as a percentage of revenue. 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 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
customers are usually longer than for customers 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. In the latter part of 1997, capital markets in Asia were highly
volatile resulting in fluctuations in Asian currencies and other economic
instabilities. These instabilities may continue or worsen, either of which could
have a material adverse effect on the
13
<PAGE> 14
Company's results of operations. In this regard, in the third and fourth quarter
of 1997 and first six months of 1998, the Company experienced a significant
decrease in orders from NTT-IT, one of the Company's major Japanese customers,
resulting in a significant decrease in quarterly revenue and an operating loss
in the third quarter of 1997.
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 six 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.
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.
Uncertain Government Regulation. In the United States, the Company is
subject to various Federal Communication Commission ("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
14
<PAGE> 15
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 over 24 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 and IEEE 802.11 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.
Regulatory changes, including changes in the allocation of available
frequency spectrum, could significantly impact the Company's operations by
restricting the Company's development efforts, rendering current products
obsolete or increasing the opportunity for additional competition. In September
1993 and in February 1995, the FCC allocated additional spectrum for personal
communications services. In January 1997, the FCC authorized 300 MHz of
additional unlicensed frequencies in the 5 GHz frequency range. These changes in
the allocation of available frequency spectrum could create opportunities for
other wireless networking products and services. There can be no assurance that
new regulations will not be promulgated which could have a material adverse
effect on the Company's business and results of operations.
Emission of Electromagnetic Radiation. The intentional emission of
electromagnetic radiation has been the subject of recent public concern
regarding possible health and safety risks, and though the Company's products,
when installed in any of the intended configurations, will not exceed the
maximum permissible exposure limits listed in Section 1.1311 of the Federal
Communications Commission Regulations, there can be no assurance that such
safety issues will not arise in the future and will not have a materially
adverse effect on the Company's business.
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 international distributors. In general, distributors offer
15
<PAGE> 16
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.
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. Although the Company has entered change of control
severance agreements with each of Mr. King and Mr. Grau, 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.
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 the
third quarter of 1997, the Company announced revenue and operating results below
expectations of securities analysts and investors, resulting in a decrease in
the market price of the Company's Common Stock. 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 fluctuations in the future, including fluctuations that
are unrelated to the Company's performance.
Year 2000 Impact. Customary computer programming practices, developed prior
to the upcoming change in the century becoming a concern, have used two digits
rather than four to identify the year in a date field. If not corrected, many
computer applications may fail to treat year dates intended to represent years
in the twenty-first century as such but instead treat them as still in the
twentieth century, potentially resulting in system failure or miscalculations
disruptive of business operations, including, among other things, an inability
to initiate, receive, process, invoice or otherwise complete normal business
activities. These Year 2000 issues affect virtually all companies and
organizations.
The Year 2000 issues affect the Company's internal operations. The Company
is working with outside contractors to develop and install a new corporate-wide
information system. The new system was identified as a strategic business
initiative independent of Year 2000 considerations. While the new information
system will permit ongoing improvements as business needs are identified, the
basic operational systems are not expected to be substantially completed until
early 1999 at a total estimated expenditure of approximately $2 million.
16
<PAGE> 17
Those time and cost targets are management's current best estimates based on
presently available information and numerous assumptions. Given the
uncertainties and complexities inherent in any new system installation, there
can be no assurance that the project will be completed within the estimated time
and cost parameters. The portions of the Company's existing information system
which would require correction for Year 2000 issues will be superseded as part
of this larger, new system implementation, which is being designed to be Year
2000 compliant.
The impact of Year 2000 issues on the Company will also be affected by the
Year 2000 readiness of its customers as well as of its suppliers of raw
materials, components and software, outside contract manufacturers, and its
providers of facilities, equipment and services and any failure on their part to
achieve readiness in their own operations or with respect to the items they
supply or otherwise provide to the Company. While the Company is beginning to
consider what inquiries might be appropriate to make of such other parties
(principally of its suppliers and other providers) in these regards, there can
be no assurance that the Year 2000 issues confronting such other parties and any
failure on their part to timely address them will not have a material adverse
effect on the Company.
17
<PAGE> 18
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 22, 1998, the Annual Meeting of Stockholders of Proxim, Inc. (the
"Company") was held at 10:00 am, local time, at the Sunnyvale Hilton Inn, 1250
Lakeside Drive, Sunnyvale, California.
An election of directors was held with the following individuals being elected
to the Board of Directors of Proxim, Inc.:
Raymond Chin
Leslie G. Denend
David C. King
Gregory L. Reyes
Jeffrey D. Saper
Other maters voted upon at the meeting and the number of affirmative and
negative votes cast with respect to each such matter were as follows:
1. To approve an amendment to the Company's 1995 Long-Term Incentive Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 500,000 shares. The number of affirmative votes for this
proposal was 2,871,903, the number of negative votes was 1,782,456 and the
number of abstained votes was 49,345.
2. To approve an amendment to the Company's 1993 Employee Stock Purchase Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder by 200,000 shares. The number of affirmative votes for this
proposal was 4,444,715, the number of negative votes was 213,249 and the
number of abstained votes was 45,740.
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending December 31, 1998.
The number of affirmative votes for this proposal was 8,690,737, the number
of negative votes was 8,600 and the number of abstained votes was 19,937.
ITEM 5. OTHER INFORMATION
Pursuant to Rule 14a-4(c)(1) under the Securities Exchange Act of 1934, the
proxies of management would be allowed to use their discretionary voting
authority with respect to any non Rule 14a-8 stockholder proposal raised at the
Company's annual meeting of stockholders, without any discussion of the matter
in the proxy statement, unless the stockholder has notified the Company of such
proposal at least 45 days prior to the month and day on which the Company mailed
its prior year's proxy statement. Since the Company mailed its proxy statement
for the 1998 annual meeting of stockholders on April 22, 1998, the deadline for
receipt of any such stockholder proposal for the 1999 annual meeting of
stockholders is March 8, 1999.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT # DESCRIPTION OF DOCUMENT
--------- -----------------------
<S> <C>
10.10 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and David C. King.
10.11 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Brian Button.
10.12 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Keith E. Glover.
10.13 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Juan Grau.
27.1 Financial Data Schedule
</TABLE>
B. Reports on Form 8-K:
None.
19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on the 13th day of August, 1998.
PROXIM, INC.
By: /s/ Keith E. Glover
--------------------------------------------
Keith E. Glover,
Vice President of Finance and Administration
and Chief Financial Officer
Dated: August 13, 1998
20
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT # DESCRIPTION OF DOCUMENT
--------- -----------------------
<S> <C>
10.10 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and David C. King.
10.11 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Brian Button.
10.12 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Keith E. Glover.
10.13 Change of Control Severance Agreement entered into June 18, 1998
between Registrant and Juan Grau.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
PROXIM, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between David C. King (the "Employee") and Proxim, Inc., a
Delaware corporation (the "Company"), effective as of June 18, 1998 (the
"Effective Date").
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provide the Employee with enhanced financial security
and provide incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in Section
6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement between the Company and Employee (an
"Employment Agreement").
<PAGE> 2
3. Severance Benefits.
(a) Termination Following Change of Control. If the Employee's
employment terminates at any time within twenty-four (24) months following a
Change of Control, then, subject to Sections 4 and 5, the Employee shall be
entitled to receive the following severance benefits and no other compensation,
severance or benefits:
(i) Involuntary Termination; Not for Cause Termination. If the
Employee's employment is terminated as a result of Involuntary Termination
(whether such termination is initiated by the Company or by the Employee), or as
a result of termination by the Company other than for Cause, then the Employee
shall receive the following severance benefits from the Company:
(A) Severance Payments. Cash payments in an amount equal to
two hundred percent (200%) of the Employee's Annual Compensation (as defined
below) to be paid over a period of twenty-four (24) months following the date of
termination of such Employee (i.e., Employee shall receive one hundred percent
(100%) of his Annual Compensation for two (2) consecutive years).
(B) Continued Employee Benefits. One hundred percent (100%)
Company-paid health, dental, vision and life insurance coverage at the same
level of coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage"), for a period of twenty-four
(24) months after the date of termination of such Employee. Company-Paid
Coverage shall not include the percentage of the payment for such insurance as
contributed by the Employee immediately prior to the Employee's termination (the
"Contribution Percentage"). Company-Paid Coverage is expressly contingent upon
timely payment of the Contribution Percentage by the Employee. If Employee's
health insurance coverage included the Employee's dependents immediately prior
to the Employee's termination, then Employees' Company-Paid Coverage shall
include health insurance coverage for such dependents, subject to timely
payments of the Contribution Percentage, as above. For purposes of the
continuation health coverage required under Section 4980B of the Code ("COBRA"),
the date of the "qualifying event" giving rise to an Employee's COBRA election
period (and that of his "qualifying beneficiaries") shall be the last date on
which the Employee receives Company-Paid Coverage under this Agreement. If the
Employee obtains comparable or better coverage prior to the lapse of the
specified Company-Paid Coverage period, the Employee must inform the Company in
writing within 30 days thereof and Company-Paid Coverage will thereupon be
canceled immediately.
(C) Options; Restricted Stock. In the event that the
employee is entitled to severance benefits pursuant to subsection 3(a)(i), then
upon such termination, in addition to any portion of the Employee's stock
options that were exercisable immediately prior to such termination, or
restricted stock that was not subject to the right of repurchase held by the
Company, such unvested options shall vest immediately upon termination, and such
restricted stock shall immediately be released from the Company's right of
repurchase.
(D) Outplacement Assistance. Employee shall be entitled to
reasonable, pre-approved Company-paid outplacement assistance, including job
counseling and referral
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<PAGE> 3
services, for a period of six (6) months following the date of termination of
employment, not to exceed a total of $10,000.
(b) Timing of Severance Payments. The severance payment or payments
to which Employee is entitled shall be paid by the Company to Employee as salary
continuation on the same basis and timing as in effect immediately prior to the
Change of Control. If Employee should die before all amounts payable to him or
her have been paid, such unpaid amounts shall be paid to Employee's designated
beneficiary, if living, or otherwise to the personal representative of
Employee's estate.
(c) Voluntary Resignation; Termination For Cause. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(d) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing written
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twenty-four (24) month period
following a Change of Control, then the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation except as provided in the
Employee's Employment Agreement (if any) or under the Company's existing written
severance and benefits plans and practices or pursuant to any other written
agreements with the Company.
(f) Exclusive Remedy. In the event of a termination of Employee's
employment within twenty-four (24) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which Employee or the Company may otherwise be
entitled, whether at law, tort or contract, in equity, or under this Agreement.
Employee shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment following a Change in Control other than
those benefits expressly set forth in this Section 3, whichever shall be
applicable.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
either
(a) delivered in full, or
-3-
<PAGE> 4
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Employee otherwise agree in writing, any determination required under this
Section 4 shall be made in writing by the Company's independent public
accountants immediately prior to Change of Control (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. In the event of a reduction in the benefits hereunder,
Employee shall be given the choice of which benefits to reduce. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 4.
5. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. During the period in which Employee is
entitled to severance payments pursuant to this Agreement, Employee shall not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business" in
a "Restricted Territory" (as such terms are defined in Section 6 hereof). It is
agreed that ownership of not greater than 2% of the outstanding voting stock of
a publicly traded corporation shall not constitute a violation of this
provision.
(b) Covenant Not to Solicit. Until the Employee is no longer entitled
to severance payments pursuant to this Agreement, Employee will not directly or
indirectly
(i) solicit, encourage, or take any other action which is
intended to induce any other employee, independent contractor, customer or
supplier of the Company or its parent corporation to terminate his or her
relationship with the Company or its parent corporation; or
(ii) interfere in any manner with the contractual or employment
relationship between the Company or its parent corporation and any such
employee, independent contractor, customer or supplier of the Company or its
parent corporation.
(c) Representations. The parties intend that the covenants contained
in Sections 5(a) and (b) shall be construed as a series of separate covenants,
one for each county, city and state (or analogous entity) and country of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding
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<PAGE> 5
paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced.
(d) Reformation. In the event that the provisions of this Section 5
should ever be deemed to exceed the time or geographic limitations, or the scope
of this covenant, permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations, as the case may be,
permitted by applicable laws.
(e) Reasonableness of Covenants. Employee represents that he (i) is
familiar with the covenants not to compete and not to solicit, and (ii) is fully
aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal
to the sum of Employee's (i) annual Company salary at the highest rate in effect
during the twelve (12) months immediately preceding the Change of Control or the
date of Involuntary Termination or termination by the Company other than for
Cause, whichever is highest and (ii) 100% of Employee's annual target bonus as
in effect immediately prior to the Change of Control or the date of Involuntary
Termination or termination by the Company other than for Cause, whichever is
highest.
(b) Cause. "Cause" shall mean (i) any act of dishonesty taken by
Employee and intended to result in substantial gain or personal enrichment of
the Employee, (ii) Employee personally engaging in knowing and intentional
illegal conduct which is injurious to the Company or its affiliates; (iii)
Employee's continued failure to substantially perform the duties and obligations
of his employment which are not remedied within thirty (30) days after written
notice thereof from the Board of Directors or Chief Executive Officer of the
Company to Employee; (iv) Employee being convicted of a felony, or committing an
act of dishonesty or fraud against, or the misappropriation of property
belonging to, the Company or its affiliates; (v) Employee's engagement in
repeated substance abuse which impairs his ability to perform the duties and
obligations of Employee's employment or impairs the reputation of the Company;
(vi) Employee personally engaging in any act of moral turpitude that impairs the
reputation of the Company; (vii) the performance by Employee of those acts
identified in Section 2924 of the California Labor Code; (viii) Employee's
commencement of employment with another employer while he is an employee of the
Company; or (ix) any material breach by Employee of any material provision
of this Agreement (or any confidentiality agreement or invention or proprietary
information agreement with the Company) which continues uncured for thirty (30)
days following notice thereof.
(c) Change of Control. "Change of Control" means the occurrence of
any of the following events:
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<PAGE> 6
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing forty percent (40%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least forty percent (40%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Employee's employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean (i)
a reduction by the Company in the Base Pay of Employee as in effect immediately
prior to such reduction; (ii) without the Employee's express written consent,
the Company requires the Employee to change the location of his or her job or
office, so that he or she will be based at a location more than twenty-five
(25) miles from the location of his job or office immediately prior to the
Change of Control; (iii) the cost to the Company of Company-provided benefits to
Employee, taken as a whole, under plans, arrangements policies and procedures,
materially decreases below the cost of the Company-provided benefits to Employee
immediately prior to the Change of Control, or the cost to the Employee of such
benefits materially increases above the cost to the Employee immediately prior
to the Change of Control; however, if such decrease or increase results either
from the Company's good faith exercise of business judgment, a decrease that is
implemented affecting the majority of Company's employees, or in response
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<PAGE> 7
to changes in federal or state law, such decrease or increase shall not
constitute Involuntary Termination; (iv) the significant reduction of the
Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or an assignment to Employee of such reduced duties, authority or
responsibilities; provided, however, that a reduction in duties solely by virtue
of the Company being acquired and made part of a larger entity (as for example
when the Chief Financial Officer of Proxim, Inc. remains as such following a
change of control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute "Involuntary Termination"; (v) a successor
company fails or refuses to assume the Company's obligations under this
Agreement.
(f) Restricted Business. "Restricted Business" means the design,
manufacture, marketing or support of wireless local area data networking
products based on spread spectrum radio frequency technology.
(g) Restricted Territory. "Restricted Territory" means worldwide.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, 295 N. Bernardo
Avenue, Mountain View, California 94043, and directed to the attention of its
President.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this
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<PAGE> 8
Agreement. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
30 days after the giving of such notice). The failure by the Employee to include
in the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing his
rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of the State of California.
(e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year set forth below.
COMPANY PROXIM, INC.
By: /s/ Keith E. Glover
------------------------------------
Title: Vice President of Finance and
Administration and Chief
Financial Officer
---------------------------------
Date: June 18, 1998
----------------------------------
EMPLOYEE By: /s/ David C. King
------------------------------------
Title: President and Chief Executive
Officer
---------------------------------
Date: June 18, 1998
----------------------------------
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<PAGE> 1
PROXIM, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Brian T. Button (the "Employee") and Proxim, Inc., a
Delaware corporation (the "Company"), effective as of June 18, 1998 (the
"Effective Date").
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provide the Employee with enhanced financial security
and provide incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in Section
6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement between the Company and Employee (an
"Employment Agreement").
<PAGE> 2
3. Severance Benefits.
(a) Termination Following Change of Control. If the Employee's
employment terminates at any time within twenty-four (24) months following a
Change of Control, then, subject to Sections 4 and 5, the Employee shall be
entitled to receive the following severance benefits and no other compensation,
severance or benefits:
(i) Involuntary Termination; Not for Cause Termination. If the
Employee's employment is terminated as a result of Involuntary Termination
(whether such termination is initiated by the Company or by the Employee), or as
a result of termination by the Company other than for Cause, then the Employee
shall receive the following severance benefits from the Company:
(A) Severance Payments. Cash payments in an amount equal to
one hundred percent (100%) of the Employee's Annual Compensation (as defined
below) for a period of twelve (12) months following the date of termination of
such Employee.
(B) Continued Employee Benefits. One hundred percent (100%)
Company-paid health, dental, vision and life insurance coverage at the same
level of coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage"), for a period of twelve (12)
months after the date of termination of such Employee. Company-Paid Coverage
shall not include the percentage of the payment for such insurance as
contributed by the Employee immediately prior to the Employee's termination (the
"Contribution Percentage"). Company-Paid Coverage is expressly contingent upon
timely payment of the Contribution Percentage by the Employee. If Employee's
health insurance coverage included the Employee's dependents immediately prior
to the Employee's termination, then Employees' Company-Paid Coverage shall
include health insurance coverage for such dependents, subject to timely
payments of the Contribution Percentage, as above. For purposes of the
continuation health coverage required under Section 4980B of the Code ("COBRA"),
the date of the "qualifying event" giving rise to an Employee's COBRA election
period (and that of his "qualifying beneficiaries") shall be the last date on
which the Employee receives Company-Paid Coverage under this Agreement. If the
Employee obtains comparable or better coverage prior to the lapse of the
specified Company-Paid Coverage period, the Employee must inform the Company in
writing within 30 days thereof and Company-Paid Coverage will thereupon be
canceled immediately.
(C) Options; Restricted Stock. In the event that the
Employee is entitled to severance benefits pursuant to subsection 3(a)(i), then
upon such termination, in addition to any portion of the Employee's stock
options that were exercisable immediately prior to such termination, or
restricted stock that was not subject to the right of repurchase held by the
Company, such unvested options shall vest immediately upon termination, and such
restricted stock shall immediately be released from the Company's right of
repurchase.
(D) Outplacement Assistance. Employee shall be entitled to
reasonable, pre-approved Company-paid outplacement assistance, including job
counseling and referral
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<PAGE> 3
services, for a period of six (6) months following the date of termination of
employment, not to exceed a total of $10,000.
(b) Timing of Severance Payments. The severance payment or payments
to which Employee is entitled shall be paid by the Company to Employee as salary
continuation on the same basis and timing as in effect immediately prior to the
Change of Control. If Employee should die before all amounts payable to him or
her have been paid, such unpaid amounts shall be paid to Employee's designated
beneficiary, if living, or otherwise to the personal representative of
Employee's estate.
(c) Voluntary Resignation; Termination For Cause. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(d) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing written
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twenty-four (24) month period
following a Change of Control, then the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation except as provided in the
Employee's Employment Agreement (if any) or under the Company's existing written
severance and benefits plans and practices or pursuant to any other written
agreements with the Company.
(f) Exclusive Remedy. In the event of a termination of Employee's
employment within twenty-four (24) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which Employee or the Company may otherwise be
entitled, whether at law, tort or contract, in equity, or under this Agreement.
Employee shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment following a Change in Control other than
those benefits expressly set forth in this Section 3, whichever shall be
applicable.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
either
(a) delivered in full, or
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<PAGE> 4
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Employee otherwise agree in writing, any determination required under this
Section 4 shall be made in writing by the Company's independent public
accountants immediately prior to Change of Control (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. In the event of a reduction in the benefits hereunder,
Employee shall be given the choice of which benefits to reduce. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 4.
5. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. During the period in which Employee is
entitled to severance payments pursuant to this Agreement, Employee shall not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business" in
a "Restricted Territory" (as such terms are defined in Section 6 hereof). It is
agreed that ownership of not greater than 2% of the outstanding voting stock of
a publicly traded corporation shall not constitute a violation of this
provision.
(b) Covenant Not to Solicit. Until the Employee is no longer entitled
to severance payments pursuant to this Agreement, Employee will not directly or
indirectly
(i) solicit, encourage, or take any other action which is
intended to induce any other employee, independent contractor, customer or
supplier of the Company or its parent corporation to terminate his or her
relationship with the Company or its parent corporation; or
(ii) interfere in any manner with the contractual or employment
relationship between the Company or its parent corporation and any such
employee, independent contractor, customer or supplier of the Company or its
parent corporation.
(c) Representations. The parties intend that the covenants contained
in Sections 5(a) and (b) shall be construed as a series of separate covenants,
one for each county, city and state (or analogous entity) and country of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding
-4-
<PAGE> 5
paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced.
(d) Reformation. In the event that the provisions of this Section 5
should ever be deemed to exceed the time or geographic limitations, or the scope
of this covenant, permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations, as the case may be,
permitted by applicable laws.
(e) Reasonableness of Covenants. Employee represents that he (i) is
familiar with the covenants not to compete and not to solicit, and (ii) is fully
aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal
to the sum of Employee's (i) annual Company salary at the highest rate in effect
during the twelve (12) months immediately preceding the Change of Control or the
date of Involuntary Termination or termination by the Company other than for
Cause, whichever is highest and (ii) 100% of Employee's annual target sales
commissions payable at 100% of the Company's sales plan, as in effect
immediately prior to the Change of Control or the date of Involuntary
Termination or termination by the Company other than for Cause, whichever is
highest.
(b) Cause. "Cause" shall mean (i) any act of dishonesty taken by
Employee and intended to result in substantial gain or personal enrichment of
the Employee, (ii) Employee personally engaging in knowing and intentional
illegal conduct which is injurious to the Company or its affiliates; (iii)
Employee's continued failure to substantially perform the duties and obligations
of his employment which are not remedied within thirty (30) days after written
notice thereof from the Board of Directors or Chief Executive Officer of the
Company to Employee; (iv) Employee being convicted of a felony, or committing an
act of dishonesty or fraud against, or the misappropriation of property
belonging to, the Company or its affiliates; (v) Employee's engagement in
repeated substance abuse which impairs his ability to perform the duties and
obligations of Employee's employment or impairs the reputation of the Company;
(vi) Employee personally engaging in any act of moral turpitude that impairs the
reputation of the Company; (vii) the performance by Employee of those acts
identified in Section 2924 of the California Labor Code; (viii) Employee's
commencement of employment with another employer while he is an employee of the
Company; or (ix) any material breach by Employee of any material provision
of this Agreement (or any confidentiality agreement or invention or proprietary
information agreement with the Company) which continues uncured for thirty (30)
days following notice thereof.
(c) Change of Control. "Change of Control" means the occurrence of
any of the following events:
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<PAGE> 6
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing forty percent (40%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least forty percent (40%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Employee's employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean (i)
a reduction by the Company in the Base Pay of Employee as in effect immediately
prior to such reduction; (ii) without the Employee's express written consent,
the Company requires the Employee to change the location of his or her job or
office, so that he or she will be based at a location more than twenty-five (25)
miles from the location of his job or office immediately prior to the Change of
Control; (iii) the cost to the Company of Company-provided benefits to Employee,
taken as a whole, under plans, arrangements policies and procedures, materially
decreases below the cost of the Company-provided benefits to Employee
immediately prior to the Change of Control, or the cost to the Employee of such
benefits materially increases above the cost to the Employee immediately prior
to the Change of Control; however, if such decrease or increase results either
from the Company's good faith exercise of business
-6-
<PAGE> 7
judgment, a decrease that is implemented affecting the majority of Company's
employees, or in response to changes in federal or state law, such decrease or
increase shall not constitute Involuntary Termination; (iv) the significant
reduction of the Employee's duties, authority or responsibilities, relative to
the Employee's duties, authority or responsibilities as in effect immediately
prior to such reduction, or an assignment to Employee of such reduced duties,
authority or responsibilities; provided, however, that a reduction in duties
solely by virtue of the Company being acquired and made part of a larger entity
(as for example when the Chief Financial Officer of Proxim, Inc. remains as such
following a change of control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute "Involuntary Termination"; (v) a
successor company fails or refuses to assume the Company's obligations under
this Agreement.
(f) Restricted Business. "Restricted Business" means the design,
manufacture, marketing or support of wireless local area data networking
products based on spread spectrum radio frequency technology.
(g) Restricted Territory. "Restricted Territory" means worldwide.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, 295 N. Bernardo
Avenue, Mountain View, California 94043, and directed to the attention of its
President.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated
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<PAGE> 8
by a notice of termination to the other party hereto given in accordance with
Section 8(a) of this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 30 days after the giving of such notice). The
failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of
the Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of the State of California.
(e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.
COMPANY PROXIM, INC.
By: /s/ David C. King
------------------------------------
Title: President and Chief Executive
Officer
---------------------------------
Date: June 18, 1998
----------------------------------
EMPLOYEE By: /s/ Brian T. Button
------------------------------------
Title: Vice Presdient of Sales and
Marketing
---------------------------------
Date: June 18, 1998
----------------------------------
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<PAGE> 1
PROXIM, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Keith E. Glover (the "Employee") and Proxim, Inc., a
Delaware corporation (the "Company"), effective as of June 18, 1998 (the
"Effective Date").
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provide the Employee with enhanced financial security
and provide incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in Section
6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement between the Company and Employee (an
"Employment Agreement").
<PAGE> 2
3. Severance Benefits.
(a) Termination Following Change of Control. If the Employee's
employment terminates at any time within twenty-four (24) months following a
Change of Control, then, subject to Sections 4 and 5, the Employee shall be
entitled to receive the following severance benefits and no other compensation,
severance or benefits:
(i) Involuntary Termination; Not for Cause Termination. If the
Employee's employment is terminated as a result of Involuntary Termination
(whether such termination is initiated by the Company or by the Employee), or as
a result of termination by the Company other than for Cause, then the Employee
shall receive the following severance benefits from the Company:
(A) Severance Payments. Cash payments in an amount equal to
one hundred percent (100%) of the Employee's Annual Compensation (as defined
below) for a period of twelve (12) months following the date of termination of
such Employee.
(B) Continued Employee Benefits. One hundred percent (100%)
Company-paid health, dental, vision and life insurance coverage at the same
level of coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage"), for a period of twelve (12)
months after the date of termination of such Employee. Company-Paid Coverage
shall not include the percentage of the payment for such insurance as
contributed by the Employee immediately prior to the Employee's termination (the
"Contribution Percentage"). Company-Paid Coverage is expressly contingent upon
timely payment of the Contribution Percentage by the Employee. If Employee's
health insurance coverage included the Employee's dependents immediately prior
to the Employee's termination, then Employees' Company-Paid Coverage shall
include health insurance coverage for such dependents, subject to timely
payments of the Contribution Percentage, as above. For purposes of the
continuation health coverage required under Section 4980B of the Code ("COBRA"),
the date of the "qualifying event" giving rise to an Employee's COBRA election
period (and that of his "qualifying beneficiaries") shall be the last date on
which the Employee receives Company-Paid Coverage under this Agreement. If the
Employee obtains comparable or better coverage prior to the lapse of the
specified Company-Paid Coverage period, the Employee must inform the Company in
writing within 30 days thereof and Company-Paid Coverage will thereupon be
canceled immediately.
(C) Options; Restricted Stock. In the event that the
Employee is entitled to severance benefits pursuant to subsection 3(a)(i), then
upon such termination, in addition to any portion of the Employee's stock
options that were exercisable immediately prior to such termination, or
restricted stock that was not subject to the right of repurchase held by the
Company, such unvested options shall vest immediately upon termination, and such
restricted stock shall immediately be released from the Company's right of
repurchase.
(D) Outplacement Assistance. Employee shall be entitled to
reasonable, pre-approved Company-paid outplacement assistance, including job
counseling and referral
-2-
<PAGE> 3
services, for a period of six (6) months following the date of termination of
employment, not to exceed a total of $10,000.
(b) Timing of Severance Payments. The severance payment or payments
to which Employee is entitled shall be paid by the Company to Employee as salary
continuation on the same basis and timing as in effect immediately prior to the
Change of Control. If Employee should die before all amounts payable to him or
her have been paid, such unpaid amounts shall be paid to Employee's designated
beneficiary, if living, or otherwise to the personal representative of
Employee's estate.
(c) Voluntary Resignation; Termination For Cause. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(d) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing written
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twenty-four (24) month period
following a Change of Control, then the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation except as provided in the
Employee's Employment Agreement (if any) or under the Company's existing written
severance and benefits plans and practices or pursuant to any other written
agreements with the Company.
(f) Exclusive Remedy. In the event of a termination of Employee's
employment within twenty-four (24) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which Employee or the Company may otherwise be
entitled, whether at law, tort or contract, in equity, or under this Agreement.
Employee shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment following a Change in Control other than
those benefits expressly set forth in this Section 3, whichever shall be
applicable.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
either
(a) delivered in full, or
-3-
<PAGE> 4
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Employee otherwise agree in writing, any determination required under this
Section 4 shall be made in writing by the Company's independent public
accountants immediately prior to Change of Control (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. In the event of a reduction in the benefits hereunder,
Employee shall be given the choice of which benefits to reduce. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 4.
5. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. During the period in which Employee is
entitled to severance payments pursuant to this Agreement, Employee shall not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business" in
a "Restricted Territory" (as such terms are defined in Section 6 hereof). It is
agreed that ownership of not greater than 2% of the outstanding voting stock of
a publicly traded corporation shall not constitute a violation of this
provision.
(b) Covenant Not to Solicit. Until the Employee is no longer entitled
to severance payments pursuant to this Agreement, Employee will not directly or
indirectly
(i) solicit, encourage, or take any other action which is
intended to induce any other employee, independent contractor, customer or
supplier of the Company or its parent corporation to terminate his or her
relationship with the Company or its parent corporation; or
(ii) interfere in any manner with the contractual or employment
relationship between the Company or its parent corporation and any such
employee, independent contractor, customer or supplier of the Company or its
parent corporation.
(c) Representations. The parties intend that the covenants contained
in Sections 5(a) and (b) shall be construed as a series of separate covenants,
one for each county, city and state (or analogous entity) and country of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding
-4-
<PAGE> 5
paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced.
(d) Reformation. In the event that the provisions of this Section 5
should ever be deemed to exceed the time or geographic limitations, or the scope
of this covenant, permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations, as the case may be,
permitted by applicable laws.
(e) Reasonableness of Covenants. Employee represents that he (i) is
familiar with the covenants not to compete and not to solicit, and (ii) is fully
aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal
to the sum of Employee's (i) annual Company salary at the highest rate in effect
during the twelve (12) months immediately preceding the Change of Control or the
date of Involuntary Termination or termination by the Company other than for
Cause, whichever is highest and (ii) 100% of Employee's annual target bonus as
in effect immediately prior to the Change of Control or the date of Involuntary
Termination or termination by the Company other than for Cause, whichever is
highest.
(b) Cause. "Cause" shall mean (i) any act of dishonesty taken by
Employee and intended to result in substantial gain or personal enrichment of
the Employee, (ii) Employee personally engaging in knowing and intentional
illegal conduct which is injurious to the Company or its affiliates; (iii)
Employee's continued failure to substantially perform the duties and obligations
of his employment which are not remedied within thirty (30) days after written
notice thereof from the Board of Directors or Chief Executive Officer of the
Company to Employee; (iv) Employee being convicted of a felony, or committing an
act of dishonesty or fraud against, or the misappropriation of property
belonging to, the Company or its affiliates; (v) Employee's engagement in
repeated substance abuse which impairs his ability to perform the duties and
obligations of Employee's employment or impairs the reputation of the Company;
(vi) Employee personally engaging in any act of moral turpitude that impairs the
reputation of the Company; (vii) the performance by Employee of those acts
identified in Section 2924 of the California Labor Code; (viii) Employee's
commencement of employment with another employer while he is an employee of the
Company; or (ix) any material breach by Employee of any material provision of
this Agreement (or any confidentiality agreement or invention or proprietary
information agreement with the Company) which continues uncured for thirty (30)
days following notice thereof.
(c) Change of Control. "Change of Control" means the occurrence of
any of the following events:
-5-
<PAGE> 6
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing forty percent (40%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least forty percent (40%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Employee's employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean (i)
a reduction by the Company in the Base Pay of Employee as in effect immediately
prior to such reduction; (ii) without the Employee's express written consent,
the Company requires the Employee to change the location of his or her job or
office, so that he or she will be based at a location more than twenty-five (25)
miles from the location of his job or office immediately prior to the Change of
Control; (iii) the cost to the Company of Company-provided benefits to Employee,
taken as a whole, under plans, arrangements policies and procedures, materially
decreases below the cost of the Company-provided benefits to Employee
immediately prior to the Change of Control, or the cost to the Employee of such
benefits materially increases above the cost to the Employee immediately prior
to the Change of Control; however, if such decrease or increase results either
from the Company's good faith exercise of business judgment, a decrease that is
implemented affecting the majority of Company's employees, or in response
-6-
<PAGE> 7
to changes in federal or state law, such decrease or increase shall not
constitute Involuntary Termination; (iv) the significant reduction of the
Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or an assignment to Employee of such reduced duties, authority or
responsibilities; provided, however, that a reduction in duties solely by virtue
of the Company being acquired and made part of a larger entity (as for example
when the Chief Financial Officer of Proxim, Inc. remains as such following a
change of control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute "Involuntary Termination"; (v) a successor
company fails or refuses to assume the Company's obligations under this
Agreement.
(f) Restricted Business. "Restricted Business" means the design,
manufacture, marketing or support of wireless local area data networking
products based on spread spectrum radio frequency technology.
(g) Restricted Territory. "Restricted Territory" means worldwide.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, 295 N. Bernardo
Avenue, Mountain View, California 94043, and directed to the attention of its
President.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this
-7-
<PAGE> 8
Agreement. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
30 days after the giving of such notice). The failure by the Employee to include
in the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing his
rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of the State of California.
(e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year set forth below.
COMPANY PROXIM, INC.
By: /s/ David C. King
------------------------------------
Title: President and Chief Executive
Officer
---------------------------------
Date: June 18, 1998
----------------------------------
EMPLOYEE By: /s/ Keith E. Glover
------------------------------------
Title: Vice President of Finance and
Administration and Chief
Financial Officer
---------------------------------
Date: June 18, 1998
----------------------------------
-9-
<PAGE> 1
PROXIM, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Juan Grau (the "Employee") and Proxim, Inc., a
Delaware corporation (the "Company"), effective as of June 18, 1998 (the
"Effective Date").
RECITALS
A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provide the Employee with enhanced financial security
and provide incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. Certain capitalized terms used in the Agreement are defined in Section
6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that
all of the obligations of the parties hereto with respect to this Agreement have
been satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement between the Company and Employee (an
"Employment Agreement").
<PAGE> 2
3. Severance Benefits.
(a) Termination Following Change of Control. If the Employee's
employment terminates at any time within twenty-four (24) months following a
Change of Control, then, subject to Sections 4 and 5, the Employee shall be
entitled to receive the following severance benefits and no other compensation,
severance or benefits:
(i) Involuntary Termination; Not for Cause Termination. If the
Employee's employment is terminated as a result of Involuntary Termination
(whether such termination is initiated by the Company or by the Employee), or as
a result of termination by the Company other than for Cause, then the Employee
shall receive the following severance benefits from the Company:
(A) Severance Payments. Cash payments in an amount equal to
one hundred percent (100%) of the Employee's Annual Compensation (as defined
below) for a period of twelve (12) months following the date of termination of
such Employee.
(B) Continued Employee Benefits. One hundred percent (100%)
Company-paid health, dental, vision and life insurance coverage at the same
level of coverage as was provided to such employee immediately prior to the
Change of Control (the "Company-Paid Coverage"), for a period of twelve (12)
months after the date of termination of such Employee. Company-Paid Coverage
shall not include the percentage of the payment for such insurance as
contributed by the Employee immediately prior to the Employee's termination (the
"Contribution Percentage"). Company-Paid Coverage is expressly contingent upon
timely payment of the Contribution Percentage by the Employee. If Employee's
health insurance coverage included the Employee's dependents immediately prior
to the Employee's termination, then Employees' Company-Paid Coverage shall
include health insurance coverage for such dependents, subject to timely
payments of the Contribution Percentage, as above. For purposes of the
continuation health coverage required under Section 4980B of the Code ("COBRA"),
the date of the "qualifying event" giving rise to an Employee's COBRA election
period (and that of his "qualifying beneficiaries") shall be the last date on
which the Employee receives Company-Paid Coverage under this Agreement. If the
Employee obtains comparable or better coverage prior to the lapse of the
specified Company-Paid Coverage period, the Employee must inform the Company in
writing within 30 days thereof and Company-Paid Coverage will thereupon be
canceled immediately.
(C) Options; Restricted Stock. In the event that the
Employee is entitled to severance benefits pursuant to subsection 3(a)(i), then
upon such termination, in addition to any portion of the Employee's stock
options that were exercisable immediately prior to such termination, or
restricted stock that was not subject to the right of repurchase held by the
Company, such unvested options shall vest immediately upon termination, and such
restricted stock shall immediately be released from the Company's right of
repurchase.
(D) Outplacement Assistance. Employee shall be entitled to
reasonable, pre-approved Company-paid outplacement assistance, including job
counseling and referral
-2-
<PAGE> 3
services, for a period of six (6) months following the date of termination of
employment, not to exceed a total of $10,000.
(b) Timing of Severance Payments. The severance payment or payments
to which Employee is entitled shall be paid by the Company to Employee as salary
continuation on the same basis and timing as in effect immediately prior to the
Change of Control. If Employee should die before all amounts payable to him or
her have been paid, such unpaid amounts shall be paid to Employee's designated
beneficiary, if living, or otherwise to the personal representative of
Employee's estate.
(c) Voluntary Resignation; Termination For Cause. If the Employee's
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary Termination), or if the Employee is terminated for Cause,
then the Employee shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(d) Disability; Death. If the Company terminates the Employee's
employment as a result of the Employee's Disability, or such Employee's
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing written
severance and benefits plans and practices or pursuant to other written
agreements with the Company.
(e) Termination Apart from Change of Control. In the event the
Employee's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twenty-four (24) month period
following a Change of Control, then the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation except as provided in the
Employee's Employment Agreement (if any) or under the Company's existing written
severance and benefits plans and practices or pursuant to any other written
agreements with the Company.
(f) Exclusive Remedy. In the event of a termination of Employee's
employment within twenty-four (24) months following a Change of Control, the
provisions of this Section 3 are intended to be and are exclusive and in lieu of
any other rights or remedies to which Employee or the Company may otherwise be
entitled, whether at law, tort or contract, in equity, or under this Agreement.
Employee shall be entitled to no benefits, compensation or other payments or
rights upon termination of employment following a Change in Control other than
those benefits expressly set forth in this Section 3, whichever shall be
applicable.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this
Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code, then the Employee's severance benefits under Section 3(a)(i) shall be
either
(a) delivered in full, or
-3-
<PAGE> 4
(b) delivered as to such lesser extent which would result in no
portion of such severance benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Unless the Company and
the Employee otherwise agree in writing, any determination required under this
Section 4 shall be made in writing by the Company's independent public
accountants immediately prior to Change of Control (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. In the event of a reduction in the benefits hereunder,
Employee shall be given the choice of which benefits to reduce. For purposes of
making the calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 4.
5. Covenants Not to Compete and Not to Solicit.
(a) Covenant Not to Compete. During the period in which Employee is
entitled to severance payments pursuant to this Agreement, Employee shall not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a "Restricted Business" in
a "Restricted Territory" (as such terms are defined in Section 6 hereof). It is
agreed that ownership of not greater than 2% of the outstanding voting stock of
a publicly traded corporation shall not constitute a violation of this
provision.
(b) Covenant Not to Solicit. Until the Employee is no longer entitled
to severance payments pursuant to this Agreement, Employee will not directly or
indirectly
(i) solicit, encourage, or take any other action which is
intended to induce any other employee, independent contractor, customer or
supplier of the Company or its parent corporation to terminate his or her
relationship with the Company or its parent corporation; or
(ii) interfere in any manner with the contractual or employment
relationship between the Company or its parent corporation and any such
employee, independent contractor, customer or supplier of the Company or its
parent corporation.
(c) Representations. The parties intend that the covenants contained
in Sections 5(a) and (b) shall be construed as a series of separate covenants,
one for each county, city and state (or analogous entity) and country of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding
-4-
<PAGE> 5
paragraphs. If, in any judicial proceeding, a court shall refuse to enforce any
of the separate covenants (or any part thereof) deemed included in said
paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced.
(d) Reformation. In the event that the provisions of this Section 5
should ever be deemed to exceed the time or geographic limitations, or the scope
of this covenant, permitted by applicable law, then such provisions shall be
reformed to the maximum time or geographic limitations, as the case may be,
permitted by applicable laws.
(e) Reasonableness of Covenants. Employee represents that he (i) is
familiar with the covenants not to compete and not to solicit, and (ii) is fully
aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants.
6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Annual Compensation. "Annual Compensation" means an amount equal
to the sum of Employee's (i) annual Company salary at the highest rate in effect
during the twelve (12) months immediately preceding the Change of Control or the
date of Involuntary Termination or termination by the Company other than for
Cause, whichever is highest and (ii) 100% of Employee's annual target bonus as
in effect immediately prior to the Change of Control or the date of Involuntary
Termination or termination by the Company other than for Cause, whichever is
highest.
(b) Cause. "Cause" shall mean (i) any act of dishonesty taken by
Employee and intended to result in substantial gain or personal enrichment of
the Employee, (ii) Employee personally engaging in knowing and intentional
illegal conduct which is injurious to the Company or its affiliates; (iii)
Employee's continued failure to substantially perform the duties and obligations
of his employment which are not remedied within thirty (30) days after written
notice thereof from the Board of Directors or Chief Executive Officer of the
Company to Employee; (iv) Employee being convicted of a felony, or committing an
act of dishonesty or fraud against, or the misappropriation of property
belonging to, the Company or its affiliates; (v) Employee's engagement in
repeated substance abuse which impairs his ability to perform the duties and
obligations of Employee's employment or impairs the reputation of the Company;
(vi) Employee personally engaging in any act of moral turpitude that impairs the
reputation of the Company; (vii) the performance by Employee of those acts
identified in Section 2924 of the California Labor Code; (viii) Employee's
commencement of employment with another employer while he is an employee of the
Company; or (ix) any material breach by Employee of any material provision of
this Agreement (or any confidentiality agreement or invention or proprietary
information agreement with the Company) which continues uncured for thirty (30)
days following notice thereof.
(c) Change of Control. "Change of Control" means the occurrence of
any of the following events:
-5-
<PAGE> 6
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing forty percent (40%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least forty percent (40%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(d) Disability. "Disability" shall mean that the Employee has been
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee's
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least 30 days' written notice by the Company of its intention to terminate the
Employee's employment. In the event that the Employee resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. "Involuntary Termination" shall mean (i)
a reduction by the Company in the Base Pay of Employee as in effect immediately
prior to such reduction; (ii) without the Employee's express written consent,
the Company requires the Employee to change the location of his or her job or
office, so that he or she will be based at a location more than twenty-five (25)
miles from the location of his job or office immediately prior to the Change of
Control; (iii) the cost to the Company of Company-provided benefits to Employee,
taken as a whole, under plans, arrangements policies and procedures, materially
decreases below the cost of the Company-provided benefits to Employee
immediately prior to the Change of Control, or the cost to the Employee of such
benefits materially increases above the cost to the Employee immediately prior
to the Change of Control; however, if such decrease or increase results either
from the Company's good faith exercise of business
-6-
<PAGE> 7
judgment, a decrease that is implemented affecting the majority of Company's
employees, or in response to changes in federal or state law, such decrease or
increase shall not constitute Involuntary Termination; (iv) the significant
reduction of the Employee's duties, authority or responsibilities, relative to
the Employee's duties, authority or responsibilities as in effect immediately
prior to such reduction, or an assignment to Employee of such reduced duties,
authority or responsibilities; provided, however, that a reduction in duties
solely by virtue of the Company being acquired and made part of a larger entity
(as for example when the Chief Financial Officer of Proxim, Inc. remains as such
following a change of control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute "Involuntary Termination"; (v) a
successor company fails or refuses to assume the Company's obligations under
this Agreement.
(f) Restricted Business. "Restricted Business" means the design,
manufacture, marketing or support of wireless local area data networking
products based on spread spectrum radio frequency technology.
(g) Restricted Territory. "Restricted Territory" means worldwide.
7. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee's Successors. The terms of this Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, 295 N. Bernardo
Avenue, Mountain View, California 94043, and directed to the attention of its
President.
(b) Notice of Termination. Any termination by the Company for Cause
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated
-7-
<PAGE> 8
by a notice of termination to the other party hereto given in accordance with
Section 8(a) of this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 30 days after the giving of such notice). The
failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of
the Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto and supersedes in their entirety all prior
representations, understandings, undertakings or agreements (whether oral or
written and whether expressed or implied) of the parties with respect to the
subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of the State of California.
(e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year set
forth below.
COMPANY PROXIM, INC.
By: /s/ David C. King
------------------------------------
Title: President and Chief Executive
Officer
---------------------------------
Date: June 18, 1998
----------------------------------
EMPLOYEE By: /s/ Juan Grau
------------------------------------
Title: Vice President of Engineering
---------------------------------
Date: June 18, 1998
----------------------------------
-9-
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