<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, 1999
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.)
510 DEGUIGNE DRIVE
SUNNYVALE, CALIFORNIA 94086
(408) 731-2700
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------
295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 960-1630
(Former address, if change since last report)
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.
<TABLE>
<CAPTION>
Title of Class Outstanding as of June 30, 1999
- --------------------------------------- -------------------------------
<S> <C>
Common Stock, par value $.001 per share 11,464,023
</TABLE>
<PAGE> 2
PROXIM, INC.
Index
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements:
Balance Sheet at June 30, 1999 and December 31, 1998 ........................ 3
Statement of Operations for the Three Months and Six Months
Ended June 30, 1999 and 1998 .............................................. 4
Statement of Cash Flows for the Six Months Ended
June 30, 1999 and 1998 .................................................... 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 ..................... 19
Item 5. Other Information .................................................. 19
Item 6. Exhibits and Reports on Form 8-K ................................... 20
</TABLE>
2
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PROXIM, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 42,060 $ 38,509
Marketable securities ........................................ 45,988 28,178
Accounts receivable, net ..................................... 9,106 9,193
Inventories .................................................. 12,544 11,825
Deferred tax assets .......................................... 1,612 1,612
Other current assets ......................................... 278 297
-------- --------
Total current assets ...................................... 111,588 89,614
Property and equipment, net ..................................... 6,299 3,355
Deferred tax assets and other assets ............................ 3,273 1,273
-------- --------
$121,160 $ 94,242
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................. $ 2,331 $ 2,321
Other current liabilities ..................................... 9,306 6,451
-------- --------
Total current liabilities .................................. 11,637 8,772
-------- --------
Stockholders' equity:
Common Stock, $.001 par value, 25,000 shares authorized;
11,464 and 10,435 shares issued and outstanding ............ 11 10
Additional paid-in capital .................................... 105,270 83,165
Retained earnings ............................................. 4,242 2,295
-------- --------
Total stockholders' equity ................................. 109,523 85,470
-------- --------
$121,160 $ 94,242
======== ========
</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,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ................................................. $ 16,002 $ 11,500 $ 30,752 $ 21,750
Cost of revenue ......................................... 8,403 5,945 16,077 11,244
-------- -------- -------- --------
Gross profit ............................................ 7,599 5,555 14,675 10,506
-------- -------- -------- --------
Operating expenses:
Research and development ............................. 3,081 1,976 6,189 3,787
Selling, general and administrative .................. 3,140 2,743 6,236 5,441
-------- -------- -------- --------
Total operating expenses .......................... 6,221 4,719 12,425 9,228
-------- -------- -------- --------
Income from operations .................................. 1,378 836 2,250 1,278
Interest and other income, net .......................... 969 820 1,821 1,615
-------- -------- -------- --------
Income before income taxes .............................. 2,347 1,656 4,071 2,893
Provision for income taxes .............................. 1,136 496 2,124 867
-------- -------- -------- --------
Net income .............................................. $ 1,211 $ 1,160 $ 1,947 $ 2,026
======== ======== ======== ========
Basic net income per share .............................. $ 0.11 $ 0.11 $ 0.18 $ 0.20
======== ======== ======== ========
Weighted average common shares .......................... 11,114 10,279 10,854 10,265
======== ======== ======== ========
Diluted net income per share ............................ $ 0.10 $ 0.11 $ 0.16 $ 0.19
======== ======== ======== ========
Weighted average common shares and equivalents .......... 12,697 11,000 12,344 10,944
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PROXIM, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 1,947 $ 2,026
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................................... 815 942
Changes in assets and liabilities:
Accounts receivable, net ....................................... 87 (588)
Inventories .................................................... (719) 1,007
Other assets ................................................... 19 75
Accounts payable ............................................... 10 257
Other current liabilities ...................................... 2,855 (2,752)
-------- --------
Net cash provided by operating activities .................... 5,014 967
-------- --------
Cash flows used in investing activities:
Purchase of property and equipment ............................. (3,759) (510)
Purchase of marketable securities .............................. (17,810) (28,254)
Minority investments ........................................... (2,000) --
-------- --------
Net cash used in investing activities ........................ (23,569) (28,764)
-------- --------
Cash flows provided by financing activities from issuance of
Common Stock ..................................................... 22,106 509
-------- --------
Net increase (decrease) in cash and cash equivalents ................. 3,551 (27,288)
Cash and cash equivalents, beginning of period ....................... 38,509 62,296
-------- --------
Cash and cash equivalents, end of period ............................. $ 42,060 $ 35,008
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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, 1998, included in
the 1998 Annual Report on Form 10-K. The results of operations for the six
months ended June 30, 1999 are not necessarily indicative of results that may be
expected for the entire year ending December 31, 1999.
INVENTORIES (IN THOUSANDS):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Raw materials .......................... $ 5,785 $ 5,149
Work-in-process ........................ 5,810 6,028
Finished goods ......................... 949 648
-------- --------
$ 12,544 $ 11,825
======== ========
</TABLE>
NET INCOME PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA):
The following table is a reconciliation of the numerators and denominators
of the basic and diluted net income per share calculations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC NET INCOME PER SHARE:
Net income available to Common Stockholders ............. $ 1,211 $ 1,160 $ 1,947 $ 2,026
======== ======== ======== ========
Weighted average common shares .......................... 11,114 10,279 10,854 10,265
======== ======== ======== ========
Basic net income per share .............................. $ .11 $ .11 $ .18 $ .20
======== ======== ======== ========
DILUTED NET INCOME PER SHARE:
Net income available to Common Stockholders ............. $ 1,211 $ 1,160 $ 1,947 $ 2,026
======== ======== ======== ========
Weighted average common shares .......................... 11,114 10,279 10,854 10,265
Dilutive common stock equivalents ....................... 1,583 721 1,490 679
-------- -------- -------- --------
Weighted average common shares and equivalents .......... 12,697 11,000 12,344 10,944
======== ======== ======== ========
Diluted net income per share ............................ $ .10 $ .11 $ .16 $ .19
======== ======== ======== ========
</TABLE>
Options to purchase 5,000 and 167,919 shares of common stock were excluded
from the dilutive net income per share calculations for the three months and six
months ended June 30, 1999 and 1998, respectively. Warrants to purchase 181,714
shares of common stock were excluded from the dilutive net income per share
calculations for the three months and six months ended June 30, 1999. The above
options and warrants to purchase common stock were antidilutive and excluded
from the dilutive net income per share calculations because the options' and
warrants' exercise prices were greater than the average market price of the
common shares.
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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 this report and 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
1998 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,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue ....................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenue ............................... 52.5% 51.7% 52.3% 51.7%
------ ------ ------ ------
Gross profit .................................. 47.5% 48.3% 47.7% 48.3%
------ ------ ------ ------
Operating expenses:
Research and development ................... 19.3% 17.2% 20.1% 17.4%
Selling, general and administrative ........ 19.6% 23.8% 20.3% 25.0%
------ ------ ------ ------
Total operating expenses ................ 38.9% 41.0% 40.4% 42.4%
------ ------ ------ ------
Income from operations ........................ 8.6% 7.3% 7.3% 5.9%
Interest and other income, net ................ 6.1% 7.1% 5.9% 7.4%
------ ------ ------ ------
Income before income taxes .................... 14.7% 14.4% 13.2% 13.3%
Provision for income taxes .................... 7.1% 4.3% 6.9% 4.0%
------ ------ ------ ------
Net income .................................... 7.6% 10.1% 6.3% 9.3%
====== ====== ====== ======
</TABLE>
RESULTS OF OPERATIONS
REVENUE
Revenue increased 39% in the second quarter of 1999 compared to the second
quarter of 1998 and 41% in the first six months of 1999 compared to the first
six months of 1998. The increases in revenue were primarily attributable to
increased shipments to distributors and OEM customers that sell RangeLAN2-based
2.4 GHz product lines in North America, Europe and Japan and, to a lesser
extent, shipments of Symphony and RangeLAN802 products. The increases were
partially offset by decreased revenue from sales of 900 MHz products.
7
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GROSS PROFIT
Gross profit as a percentage of revenue was 47.5% and 48.3% in the second
quarter of 1999 and 1998, respectively, and 47.7% and 48.3% in the first six
months of 1999 and 1998, respectively. The decreases in gross profit as a
percentage of revenue were due to declining average selling prices on RangeLAN2
products, increased revenue from lower margin Symphony and RangeLAN802 products
and a decrease in revenue from higher gross margin 900 MHz products. The
decreases in gross profit as a percentage of revenue were partially offset by
cost reductions on RangeLAN2 products.
RESEARCH AND DEVELOPMENT
Research and development expenses increased in absolute dollars during the
interim periods of 1999 compared to the interim periods of 1998 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 product 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 the Home RF SWAP
standard, development of 5 GHz high-speed wireless LAN technology based on the
HyperLAN standard and a $2,000,000 charge related to an investment in a startup
company developing ultra-broadband wireless products. Research and development
expenses increased as percentage of revenue in the interim periods of 1999
compared to the interim periods of 1998 primarily due to the increase in
personnel and development program costs and the charge in the interim periods of
1999. 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 in absolute dollars but may vary over time as a
percentage of revenue.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased in absolute dollars
during the interim periods of 1999 compared to the interim periods of 1998
primarily due to the hiring of additional marketing and sales personnel to
support the Company's growth, particularly its expansion into international and
consumer markets, as well as increased trade show and promotional expenses.
Selling, general and administrative expenses decreased as a percentage of
revenue in the interim periods of 1999 compared to the interim periods of 1998
primarily due to the increases in revenue, partially offset by higher personnel
and promotional expenses. 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 interim periods of 1999
compared to the interim periods of 1998 primarily due to higher invested cash
balances.
INCOME TAXES
The Company's estimated effective income tax rate was 35% for the interim
periods of 1999 before the non-deductible charge, compared to 30% for the
interim periods of 1998. The 1998 estimated effective income tax rate was less
than the combined federal and state statutory rates based primarily on tax
credits.
8
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LIQUIDITY AND CAPITAL RESOURCES
In the first six months of 1999, $5,014,000 of cash and cash equivalents
were provided by operating activities, primarily by net income and an increase
in other current liabilities, partially offset by cash used to fund an increase
in inventory. 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 1999 and 1998, the Company purchased $3,759,000
and $510,000, respectively, of property and equipment. Capital expenditures in
the first six months of 1999 were primarily for leasehold improvement and
furniture for the Company's new corporate headquarters. Capital expenditures in
the first six months of 1998 were primarily for manufacturing and engineering
test equipment. In addition, the Company made a minority investment in a startup
wireless services company during the second quarter of 1999, which resulted in a
cash payment of $2,000,000.
The Company generated $22,106,000 from financing activities during the first
six months of 1999 from equity investments by Intel and Motorola and the
exercise of employee stock options.
At June 30, 1999, the Company had working capital of $99,951,000, including
$42,060,000 in cash and cash equivalents and $45,988,000 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.
YEAR 2000 READINESS DISCLOSURE
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. This failure could potentially result 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. Management is
engaged in a comprehensive program to assess its Year 2000 risk exposure and to
plan and implement remedial and corrective action where necessary. The Company
has several computer software programs and operating systems in its internal
operations, including applications used in its financial, human resources (HR),
order management and manufacturing information systems. Management has reviewed
all of its major internal systems, including HR, financial and manufacturing
systems, to assess Year 2000 readiness and to identify critical systems that
require correction or remediation. The Company believes that its existing
financial, HR, order management and manufacturing information systems are Year
2000 ready.
Management is working with consultants to develop and implement a new
financial, order management and manufacturing information system. The new system
was identified as a strategic business initiative independent of Year 2000
considerations. While the new information system will be a dynamic one
permitting ongoing improvements as business needs are identified, the basic
operational systems are expected to be substantially completed in 1999 at a
total estimated expenditure of approximately $2 million. These time and cost
targets are management's current best estimates based on presently available
information and numerous
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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. A significant disruption of the
Company's financial, order management or manufacturing information systems would
adversely effect its ability to process orders, manage production and issue and
pay invoices, and may have a material adverse effect on operating results and
financial condition.
The Company's manufacturing processes incorporate sophisticated computer
integrated manufacturing test systems that depend on a mix of proprietary
software and systems and software purchased from third parties. Failure of these
systems would cause a disruption in the manufacturing process and could result
in a delay in completion and shipment of products. Management's assessment of
the Year 2000 readiness of its manufacturing test systems is approximately 90%
complete. Based on information currently available, management believes that its
internal systems will not be materially impacted by Year 2000 issues. However,
the Company cannot guaranty that a significant disruption in its systems
resulting from a Year 2000 problem will not occur. If the manufacturing test
system fails for this or any other reason, there could be a material adverse
effect on operating results and financial condition.
Management is working with critical suppliers of products and services to
assess their Year 2000 readiness with respect both to their operations and the
products and services they supply to the Company. Comprehensive inquiries have
been sent and responses are being monitored, with appropriate follow-up where
required. This analysis will continue throughout 1999, with corrective action
taken commensurate with the criticality of affected products and services.
Management is currently developing various types of contingency plans to
address potential problems with critical internal systems and third party
interactions. Management's contingency plans include procedures for dealing with
a major disruption of internal business systems, plans for a long term factory
shutdown and identification of alternative vendors of critical materials in the
event of a Year 2000 related disruption in supply. Contingency planning will
continue through at least 1999, and will depend on the results of the
remediation and testing of critical systems. The potential ramifications of a
Year 2000 type failure are potentially far-reaching and largely unknown. The
Company cannot guaranty that a contingency plan in effect at the time of a
system failure will adequately address the immediate or long term effects of a
failure, or that such a failure would not have a material adverse effect on its
operations or financial results in spite of prudent planning.
The Company's costs to date related to the Year 2000 issue consist primarily
of reallocation of internal resources to evaluate and assess the system as
described above and to plan remediation and testing efforts. The Company has not
maintained detailed accounting records, but based on its review of department
budgets and staff allocations, the Company believes these costs to be
immaterial. Management currently estimates that the total cost of ongoing
assessment, remediation, testing and planning directly related to Year 2000
issues will amount to approximately $2.5 million. Of this, approximately $2
million is expected to consist of expenses attributed to cost of software and
external consulting fees and five hundred thousand dollars for capital
expenditures. The capital expenditures represent early replacement of
information technology equipment and software to obtain the full benefits of
Year 2000 protections versus the normal technical obsolescence replacement
cycle. The estimate is based on the current assessment of the projects and is
subject to change as the projects progress. The Company cannot guaranty that
remediation and testing will identify issues which require additional
expenditure of material amounts which could result in an adverse effect on
financial results in future reporting periods.
Based on currently available information, management does not believe that
the Year 2000 issues discussed above related to internal systems will have a
material adverse effect on the Company's operations and financial condition.
However, the Company is uncertain to what extent it may be affected by such
matters. In addition,
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<PAGE> 11
the Company cannot assure you that the failure to ensure Year 2000 capability by
a supplier not considered critical or another third party would not have a
material adverse effect on its operations and financial condition.
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, many 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 contract and subcontract manufacturers, the lengthy sales and design-in
cycles for OEM products, delays in the introduction of the Company's new
products, competitive product announcements and introductions, market adoption
of new technologies, market adoption of standards-based products (such as those
compliant with the IEEE 802.11 standard, the proposed IEEE 802.11b standard or
the Home RF SWAP standard), the mix of products sold, the effectiveness of the
Company's distribution channels, the success of the Company in developing new
distribution channels, the sell through rate of the Company's Symphony products
through consumer retail channels, management of retail channel inventories, 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 operating
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 the potential fluctuations identified above 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 decline. 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.
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 59%, 59% and 62% of
the Company's sales during the first six months of 1999, and calendar years 1998
and 1997, respectively, were to OEM customers. In addition, sales to one
customer represented approximately 33% of the Company's revenue during the first
six months of 1999. Sales to two customers represented approximately 41% and 11%
of the Company's revenue during 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
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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 quarters of 1997 and 1998, the Company recorded charges of $2,400,000 and
$1,000,000 respectively, to selling, general and administrative expense related
to investments in two startup companies: 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 Application Specific
Integrated Circuits ("ASICs"), Monolithic Microwave Integrated Circuits
("MMICs") and assembled circuit boards, are only available from single sources,
and certain other parts and components are only available from a limited number
of sources. The Company's reliance on these sole source or limited source
suppliers involves certain risks and uncertainties, including the possibility of
a shortage or discontinuation of certain key components and reduced control over
delivery schedules, manufacturing capability, quality and costs. Any reduced
availability of such parts or components when required could materially impair
the Company's ability to manufacture and deliver its products on a timely basis
and result in the cancellation of orders, which could have a material adverse
effect on the Company's operating results. In addition, the purchase of certain
key components involves long lead times and, in the event of unanticipated
increases in demand for the Company's products, the Company has in the past
been, and may in the future be, unable to manufacture certain products in a
quantity sufficient to meet its customers' demand in any particular period. The
Company has no guaranteed supply arrangements with its sole or limited source
suppliers, does not maintain an extensive inventory of parts or components, and
customarily purchases sole or limited source parts and components pursuant to
purchase orders placed from time to time in the ordinary course of business.
Business disruptions, production shortfalls or financial difficulties of a sole
or limited source supplier could materially and adversely effect 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
12
<PAGE> 13
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 concurrently place orders for unexpectedly large quantities of
the Company's products, the Company's present manufacturing capacity might be
inadequate to meet such demand. There can be no assurance that the Company will
be able to develop or contract for additional manufacturing capacity on
acceptable terms on a timely basis. In addition, in order to compete
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 its new corporate headquarters in
Sunnyvale, California. In addition, the Company relies on certain contract and
subcontract manufacturers for turnkey manufacturing and circuit board assemblies
which subjects the Company to a number of risks, including a potential inability
to obtain an adequate supply of finished assemblies and assembled circuit boards
as well as reduced control over the price, timely delivery and quality of such
finished assemblies and assembled circuit boards. If the Company's Sunnyvale
facility were to become incapable of operating, even temporarily, or were unable
to operate at or near its current or full capacity for an extended period, the
Company's business and operating results could be materially adversely affected.
Further, in order to remain competitive the Company expects to continue to
introduce new processes into its manufacturing environment. Changes in the
manufacturing operations to incorporate new products and processes could cause
disruptions, which, in turn, could adversely affect customer relationships,
cause a loss of market opportunities and have a material adverse effect on the
Company's business and operating results.
The Company has in the past 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.
In July 1999, the Company moved its corporate headquarters, including its
primary research and development and manufacturing operations to a new 139,000
square foot facility in Sunnyvale, California under a lease that expires August
31, 2003. In addition, the Company maintains 40,000 square feet of office space
in Mountain View, California under a lease that expires March 31, 2006.
Management considers the above facilities suitable and adequate to meet the
Company's requirements. The current expansion 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 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 the Company's research and development efforts have
been concentrated on enhancing features and performance and reducing the cost of
the RangeLAN2-based products, including development of the Symphony and HomeRF
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
13
<PAGE> 14
international product certification. In calendar 1997 and 1998, and the first
six months of 1999 the Company substantially increased its research and
development efforts in developing low cost products for the home networking
market, IEEE 802.11 standard based commercial products and 5 GHz high-speed
wireless LAN technology based on the HiperLAN standard.
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's IEEE 802.11 compliant products or the IEEE 802.11 standard
will have a meaningful commercial impact.
The Company has substantially increased 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
charge of $2,500,000 to research and development expense for the acquisition of
certain technology to be used in developing a new family of 5 GHz high-speed
wireless LAN products. Additionally, in the first six months of 1999, the
Company took a $2,000,000 charge related to a minority investment in a startup
company developing ultra-broadband wireless products. In addition, the Company
is a core member of the Home RF Working Group, an industry consortium that is
establishing an open industry standard (SWAP specification) for wireless digital
communications between PCs and consumer electronic devices, including a common
interface specification that supports wireless data and voice services in and
around the home. There can be no assurance that the Home RF SWAP specification,
or products developed by the Company to comply with the specification will have
a meaningful commercial impact. Given the emerging nature of the wireless LAN
market, there can be no assurance that the RangeLAN2 products and technology, or
the Company's other products or technology, will not be rendered obsolete by
alternative technologies.
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 competitors in its commercial wireless LAN business,
including Aironet, Lucent Technologies and Symbol Technologies among others.
Proxim also faces competition from a variety of companies that offer different
technologies in the nascent home networking market, including several companies
developing competing wireless networking products. Additionally, numerous
companies have announced their intention to develop competing products in both
the commercial wireless LAN and home networking markets. 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 companies,
PC peripheral companies as well as networking equipment companies. Furthermore,
the Company could also face competition from certain of its OEM customers which
have, or could acquire, wireless engineering and product
14
<PAGE> 15
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.
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 that have 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 distributors and
OEM customers, represented 23%, 17% and 26% of total revenue during the first
six months of 1999, and calendar years 1998 and 1997. The Company expects that
revenue from shipments to international customers will vary as a percentage of
total 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 typically extends limited credit terms, fluctuations in currency
exchange rates could cause the Company's products to become relatively more
expensive to customers in a particular country, leading to a reduction in sales
or profitability in that country. Additionally, payment cycles for international
distributors are typically longer than for distributors in the United States.
There can be no assurance that foreign markets will continue to develop or that
the Company will receive additional orders to supply its products to foreign
customers. The Company's business and operating results could be materially and
adversely affected if foreign markets do not continue to develop or if the
Company does not receive additional orders to supply its products for use by
foreign customers. In the latter part of 1997 and throughout 1998, 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 Company's
results of operations. In this regard, in the third quarter of 1997 and
continuing through the second quarter 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 five U.S. patents which
were issued in 1991, 1993, 1995 and 1999, and are important to the current
business of the Company, and has four patent applications pending in the U.S.
which relate to the Company's core technology. There can be no assurance that
patents will issue from any of these pending applications or, if patents do
issue, that the claims allowed will be sufficiently broad to protect the
Company's technology. In addition, there can be no assurance that any patents
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will adequately protect 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 tends to
lag behind such inventions by several months, the Company cannot be certain that
it was the first
15
<PAGE> 16
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 and invention assignment agreements with employees and
other security measures. However, although the Company intends to protect its
rights vigorously, there can be no assurance that these measures will be
successful. Litigation may be necessary to enforce the Company's patents,
trademarks or other intellectual property rights, to protect the Company's trade
secrets, to determine the validity and scope of the proprietary rights of others
or to defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business and operating results. No intellectual property
of the Company has been invalidated or declared unenforceable. However, there
can be no assurance that in the future such rights will be upheld. Furthermore,
there can be no assurance that any issued patents will provide the Company with
a competitive advantage or will not be challenged by third parties or that the
patents of others will not have an adverse effect on the Company's ability to do
business. As the number of products in the wireless LAN market increase, and
related functionalities and features overlap, the Company may become
increasingly subject to infringement claims. These claims also might require the
Company to enter into royalty or license agreements. Any such claims, with or
without merit, could cause costly litigation and could require significant
management time. There can be no assurance that, if required, the Company could
obtain such royalty or license agreement on terms acceptable to management.
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 management, operational and financial
processes and controls as well as the related information and communications
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 effect on the Company's results of operations.
Uncertain Government Regulation. In the United States, the Company is
subject to various FCC rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio spectrum.
Proxim's spread spectrum wireless products are certified for unlicensed
operation in the 902-928 MHz and 2.4-2.4835 GHz frequency bands. Operation in
these frequency bands is governed by rules set forth in Part 15 of the FCC
regulations. The Part 15 rules are designed to minimize the probability of
interference to other users of the spectrum and, thus, accord Part 15 systems
secondary status. In the event that there is interference between a primary user
and a Part 15 user, a higher priority user can require the Part 15 user to
curtail transmissions that create interference. In this regard, if users of the
Company's products experience excessive interference from primary users, market
acceptance of the Company's products could be adversely affected, thereby
materially and adversely affecting the Company's business and results of
operations. The FCC, however, has established certain standards which create an
irrebuttable presumption of noninterference for Part 15 users and the Company
believes that its products comply with such requirements. There can be no
assurance that the occurrence of regulatory changes, including changes in the
allocation of available frequency
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<PAGE> 17
spectrum or modification to the standards establishing an irrebuttable
presumption for unlicensed Part 15 users, would not significantly effect 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 extensive 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 or authorizations to ship the Company's products into over 50 countries.
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, RangeLAN802,
Symphony and HomeRF products to minimize the design modifications required to
meet various 2.4 GHz international spread spectrum regulations. In addition, the
Company will seek to obtain international certifications for the Symphony and
HomeRF product lines in countries where there is a substantial market for home
PCs and Internet connectivity. 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 or use of available
frequency spectrum, could significantly effect 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. In June 1999,
the FCC issued a Notice of Proposed Rulemaking that proposed changing the way
allocated frequencies are utilized by Part 15 spread spectrum systems. These
approved and proposed changes in the allocation and use 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. The Company is also
establishing new distribution channels for its Symphony family of cordless home
and small office networking products. Symphony products are currently sold
through national retailers such as OfficeMax, computer retailers such as Fry's
Electronics, J&R Computer World, and Micro Center, leading computer catalogs
such as CDW, MobilePlanet and PC Connection, and numerous on-line retail sites
over the Internet, including Proxim's e-commerce Web site. In general,
distributors and retailers offer products of several different companies,
including products that may compete with the Company's products. Accordingly,
they may give higher priority to products of other suppliers, thus reducing
their efforts to sell the Company's products. Agreements with
17
<PAGE> 18
distributors and retailers are generally terminable at their option. A reduction
in sales efforts or termination of a relationship with the Company may have a
material adverse effect on the Company's future operating results. Use of
distributors and retailers also entails the risk that they will build up
inventories in anticipation of substantial growth in sales. If such growth does
not occur as anticipated, they 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. 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.
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<PAGE> 19
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 25, 1999, the Annual Meeting of Stockholders of Proxim, Inc. (the
"Company") was held at 11:00 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 900,000 shares. The number of affirmative votes for this
proposal was 3,624,666, the number of negative votes was 3,348,660 and the
number of abstained votes was 26,890.
2. To approve an amendment to the Company's 1994 Director Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 100,000 shares. The number of affirmative votes for this
proposal was 4,164,761, the number of negative votes was 2,802,923 and the
number of abstained votes was 32,532.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending December 31, 1999.
The number of affirmative votes for this proposal was 9,808,310, the number
of negative votes was 10,629 and the number of abstained votes was 13,800.
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 1999 annual meeting of stockholders on April 30, 1999, the deadline for
receipt of any such stockholder proposal for the 1999 annual meeting of
stockholders is March 16, 2000.
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<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT # DESCRIPTION OF DOCUMENT
--------- -----------------------
<S> <C>
4.1 Warrant to Purchase Common Stock of Proxim, Inc. issued to
Intel Corporation on April 27, 1999.
4.2 Investor Rights Agreement dated as of April 27, 1999
between Proxim, Inc. and Intel Corporation.
4.3 Warrant to Purchase Common Stock of Proxim, Inc. issued to
Motorola, Inc. on June 2, 1999.
4.4 Investor Rights Agreement dated as of June 2, 1999 between
Proxim, Inc. and Motorola, Inc.
27.1 Financial Data Schedule
</TABLE>
B. Reports on Form 8-K: A Report on Form 8-K (File No. 0-22700) was filed
pursuant to the Securities Exchange Act of 1934, as amended, on April 30,
1999, to file a press release issued by Proxim, Inc., and Intel Corporation
on April 28, 1999, regarding a technology agreement and an investment
agreement between Proxim, Inc. and Intel Corporation.
20
<PAGE> 21
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 Sunnyvale, State of
California, on the 13th day of August, 1999.
PROXIM, INC.
By: /s/ Keith E. Glover
------------------------------------
Keith E. Glover,
Vice President of Finance and
Administration
and Chief Financial Officer
Dated: August 13, 1999
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT # DESCRIPTION OF DOCUMENT
--------- -----------------------
<S> <C>
4.1 Warrant to Purchase Common Stock of Proxim, Inc. issued to
Intel Corporation on April 27, 1999.
4.2 Investor Rights Agreement dated as of April 27, 1999
between Proxim, Inc. and Intel Corporation.
4.3 Warrant to Purchase Common Stock of Proxim, Inc. issued to
Motorola, Inc. on June 2, 1999.
4.4 Investor Rights Agreement dated as of June 2, 1999 between
Proxim, Inc. and Motorola, Inc.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
WARRANT
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF PROXIM, INC.
(Subject to Adjustment)
NO. 1
THIS CERTIFIES THAT, for value received, Intel Corporation, or its
permitted registered assigns ("Holder"), is entitled, subject to the terms and
conditions of this Warrant, at any time or from time to time after April 27,
2000, the "Effective Date"), and before 5:00 p.m. Pacific Time on April 28, 2002
(the "Expiration Date"), to purchase from Proxim, Inc., a Delaware corporation
(the "Company") Ninety-Six Thousand (96,000) shares of Common Stock of the
Company at a price per share of Forty-Five Dollars ($45.00) (the "Purchase
Price"). Both the number of shares of Common Stock purchasable upon exercise of
this Warrant and the Purchase Price are subject to adjustment and change as
provided herein. This Warrant is issued pursuant to that certain Common Stock
and Warrant Purchase Agreement, dated as of April 27, 1999 (the "Agreement"),
between the Company and Holder. Unless otherwise provided for herein, all
capitalized terms in this Warrant shall have the meanings set forth in the
Agreement.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the
closing prices of the Common Stock of the Company on such exchange or
market over the 3 business days ending on the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the 30-day
period ending immediately prior to the applicable date of valuation; and
<PAGE> 2
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as agreed upon by the Company and the Holder;
provided, however, that if the Company and the Holder cannot agree on such
value, such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly selected
in good faith by the Company and the Holder. Fees and expenses of the
valuation firm shall be paid for by the Company.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
"Registered Holder" shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
"Common Stock" shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in whole
or in part at any time or from time to time, on or before the Expiration Date by
the delivery (including, without limitation, delivery by facsimile) of the form
of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"),
duly executed by the Holder, at the principal office of the Company, and as soon
as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder;
or (iii) by a combination of (i) and (ii), of an amount equal to the
product obtained by multiplying the number of shares of Common Stock being
purchased upon such exercise by the then effective Purchase Price (the
"Exercise Amount"), except that if Holder is subject to HSR Act
Restrictions (as defined in Section 2.5 below), the Exercise Amount shall
be paid to the Company within five (5) business days of the termination of
all HSR Act Restrictions.
2.2. Net Issue Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, the Holder may elect to exchange all or some of the
Warrant for a number of shares (rounded down to the nearest whole share) of
Common Stock equal to the value of the amount of the Warrant being exchanged on
the date of exchange. If Holder elects to exchange this Warrant as provided in
this Section 2.2, Holder shall tender to the Company the Warrant for the amount
being exchanged, along with written notice of Holder's election to exchange some
or all of the Warrant, and the Company shall issue to Holder the number of
shares (rounded down to the nearest whole share) of the Common Stock computed
using the following formula:
2
<PAGE> 3
X = Y (A-B)
------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Warrant on the date the
net issue election is made pursuant to Section 2.2.
All references herein to an "exercise" of the Warrant shall include an
exchange pursuant to this Section 2.2.
2.3. "Easy Sale" Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, when permitted by law and applicable regulations
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of Securities Dealers (a "NASD
Dealer")), whereby the Holder irrevocably elects to exercise this Warrant and to
sell a portion of the Shares so purchased to pay for the Purchase Price and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such Shares to forward the Purchase Price
directly to the Company.
2.4. Stock Certificates; Fractional Shares. As soon as practicable on or
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
whole shares of Common Stock issuable upon such exercise, rounded down to the
nearest whole share. No fractional shares or scrip representing fractional
shares shall be issued upon an exercise of this Warrant.
2.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR Act Restrictions"). If on or before the Expiration
Date Holder has sent the Notice of Exercise to Company and Holder has not been
able to complete the exercise of this Warrant prior to the Expiration Date
because of HSR Act Restrictions, the Holder shall be entitled to complete the
process of exercising this Warrant, for a period of ten (10) business days
following termination of the HSR Act Restrictions, in accordance with the
procedures contained herein notwithstanding the fact that completion of the
exercise of this Warrant would take place after the Expiration Date.
2.6. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Common Stock
3
<PAGE> 4
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. However, if Holder is subject to HSR Act filing
requirements this Warrant shall be deemed to have been exercised on the date
immediately following the date of the expiration of all HSR Act Restrictions.
The person entitled to receive the shares of Common Stock issuable upon exercise
of this Warrant shall be treated for all purposes as the holder of record of
such shares as of the close of business on the date the Holder is deemed to have
exercised this Warrant.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all transfer or stamp taxes and other similar governmental
charges that may be imposed in respect of the issue or delivery thereof. The
Company shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issuance of any certificate for
shares of Common Stock in any name other than that of the Registered Holder of
this Warrant, and in such case the Company shall not be required to issue or
deliver any stock certificate or security until such tax or other charge has
been paid, or it has been established to the Company's reasonable satisfaction
that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property receivable or issuable upon exercise of this
Warrant) and the Purchase Price are subject to adjustment upon occurrence of the
following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Common Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained earnings), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Common Stock (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and
4
<PAGE> 5
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
the Common Stock which is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
4.5. Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "Termination Date"),
shall receive, in
5
<PAGE> 6
lieu of the number of shares of Common Stock that would have been issuable upon
such exercise immediately prior to the Termination Date, the securities or
property that would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been simultaneously converted
immediately prior to the Termination Date, all subject to further adjustment as
provided in this Warrant. Additionally, the Purchase Price shall be immediately
adjusted to equal the quotient obtained by dividing (x) the aggregate Purchase
Price of the maximum number of shares of Common Stock for which this Warrant was
exercisable immediately prior to the Termination Date by (y) the number of
shares of Common Stock of the Company for which this Warrant is exercisable
immediately after the Termination Date, all subject to further adjustment as
provided herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of the adjusted Purchase Price. The Company
shall promptly send (by facsimile and by either first class mail, postage
prepaid or overnight delivery) a copy of each such certificate to the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.
8. TRANSFER AND EXCHANGE.
8.1 Subject to the terms and conditions of this Warrant and compliance
with all applicable securities laws, this Warrant and all rights hereunder (and
any shares of Common Stock acquired on exercise of the Warrant) may be
transferred, in whole or in part, only (a) to a Majority Owned Subsidiary (as
defined below) of the Registered Holder, (b) to an Institutional Investor (as
defined below) or (c) in a sale effectuated pursuant to Rule 144 promulgated
under
6
<PAGE> 7
the Securities Act of 1933, as amended (the "1933 Act"), or in an offering
registered under Section 5 of the 1933 Act. Any such transfer shall be made on
the books of the Company maintained for such purpose at the principal office of
the Company referred to above, by the Registered Holder hereof in person, or by
duly authorized attorney, upon surrender of this Warrant properly endorsed and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. Upon any permitted partial transfer of the Warrant, the
Company will issue and deliver to the Registered Holder a new Warrant or
Warrants with respect to the shares of Common Stock not so transferred. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that when this Warrant shall have been so endorsed, the person in
possession of this Warrant may be treated by the Company, and all other persons
dealing with this Warrant, as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, any notice to the
contrary notwithstanding; provided, however that until a transfer of this
Warrant is duly registered on the books of the Company, the Company may treat
the Registered Holder hereof as the owner for all purposes. Upon any full or
partial transfer of the Warrant or the shares of Common Stock acquired on
exercise of the Warrant pursuant to clause (b) or clause (c) of the first
sentence of this Section 8.1, all restrictions applicable to the transfer of the
Warrant or such Common Stock, or portion thereof, so transferred shall cease.
8.2 Majority Owned Subsidiary. A "Majority Owned Subsidiary" shall mean a
subsidiary of which the Registered Holder beneficially owns, either directly or
indirectly, at least 50% of the voting securities.
8.3 Institutional Investor. An "Institutional Investor" shall mean any
person considered to be an "accredited investor" under Rule 501(a)(i) of
Regulation D under the 1933 Act; provided, however, that "Institutional
Investor" shall not include (i) any of the entities that the Company and the
Registered Holder agree in writing (with specific reference to this provision)
are significant competitors of the Company or (ii) any Majority Owned
Subsidiary.
9. SECURITIES LAW RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof,
agrees that, absent an effective registration statement filed with the SEC under
the 1933 Act covering the disposition or sale of this Warrant or the Common
Stock issued or issuable upon exercise hereof, and registration or qualification
under applicable state securities laws, such Holder will not sell, transfer,
pledge, or hypothecate any or all such Warrants or Common Stock, as the case may
be, unless either (i) the Company has received an opinion of counsel, in form
and substance reasonably satisfactory to the Company, to the effect that such
registration is not required in connection with such disposition or (ii) the
sale of such securities is made pursuant to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of Common Stock
purchased upon exercise of this Warrant or acquired upon conversion thereof
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof; that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the Holder to evaluate
7
<PAGE> 8
the merits and risks of its investment in the company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired pursuant to
the exercise of this Warrant for an indefinite period; that the Holder
understands that the shares of Common Stock acquired pursuant to the exercise of
this Warrant will not be registered under the 1933 Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the 1933 Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the SEC
for exercise of this Warrant pursuant to Section 2.2, and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and that all stock
certificates representing shares of Common Stock issued to the Holder upon
exercise of this Warrant may have affixed thereto a legend substantially in the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company. In
the absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a stockholder of the Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise of
this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to the Investor Rights
Agreement, dated as of the date hereof, between the Company and the Holder, and
are entitled, subject to the terms and conditions of that agreement, to all
registration rights granted to holders of Registrable Securities thereunder.
8
<PAGE> 9
13. NOTICES. All notices and other communications from the Company to the Holder
shall be given in accordance with the Agreement.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of Delaware.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such stock or
securities as at the time are receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable
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<PAGE> 10
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
twenty (20) days prior to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holder of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to holders of the Company's securities under any other agreements, except rights
that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a Saturday,
Sunday or legal holiday, the Expiration Date shall automatically be extended
until 5:00 p.m. the next business day.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
INTEL CORPORATION PROXIM, INC.
By: /s/ Arvind Sodhani By: /s/ David C. King
------------------------------- --------------------------------------
Arvind Sodhani
- ---------------------------------- David C. King
Printed Name -----------------------------------------
Printed Name
Vice President and Treasurer
- ---------------------------------- Chairman of the Board of Directors,
Title President and Chief Executive
Officer
-----------------------------------------
Title
SIGNATURE PAGE TO WARRANT
11
<PAGE> 12
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
PROXIM, INC. WARRANT NO. 1
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Proxim, Inc., as provided for therein, and (check the
applicable box):
[ ] Tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ shares of such securities.
[ ] Elects the Net Issue Exercise option pursuant to Section 2.2 of the Warrant,
and accordingly requests delivery of a net of ______________ shares of such
securities, according to the following calculation:
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- ---------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Warrant on the date the
net issue election is made pursuant to Section 2.2.
[ ] Elects the Easy Sale Exercise option pursuant to Section 2.3 of the Warrant,
and accordingly requests delivery of a net of ______________ shares of such
securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
taxpayer identification number):
Name:
--------------------------------
Address:
-----------------------------
Taxpayer Identification Number:
------
Signature:
----------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
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<PAGE> 13
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
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<PAGE> 14
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant WARRANT NO. 1
Certificate)
For value received, the undersigned hereby sells, assigns and transfers unto
________________ the within Warrant Certificate, together with all right,
title and interest therein, and does hereby authorize [transfer agent], to
transfer said Warrant Certificate on the books of Proxim, Inc. with respect
to the number of shares set forth below, with full power of substitution in
the premises:
- -------------------------------------------------------------------------------
Name(s) of Assignee(s) Address # of Shares
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If said number of shares shall not be all the shares represented by the Warrant
Certificate, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares covered by said Warrant
Certificate.
Dated: , 19__
--------------------------
Signature:
----------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
14
<PAGE> 1
PROXIM, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered into
as of April 27, 1999, by and between Proxim, Inc., a Delaware corporation (the
"Company"), and Intel Corporation, a Delaware corporation (the "Investor").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares (the "Purchased Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock") and a
Warrant (the "Warrant") to purchase additional shares (the "Warrant Shares") of
the Company's Common Stock on the terms and conditions set forth in that certain
Common Stock and Warrant Purchase Agreement, dated of even date herewith by and
between the Company and the Investor (the "Purchase Agreement"); and
WHEREAS, the Purchase Agreement provides that the Investor shall be
granted certain information rights, registration rights and other rights, all as
more fully set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INFORMATION RIGHTS.
(a) Financial Information. The Company covenants and agrees
that, commencing on the date of this Agreement and continuing for so long as the
Investor holds at least 40,000 Purchased Shares or shares of Common Stock issued
or issuable pursuant to exercise of the Warrant, the Company shall:
(i) Annual Reports. Furnish to the Investor promptly
following the filing of such report with the SEC a copy of the Company's
Annual Report on Form 10-K for each fiscal year, which shall include a
consolidated balance sheet as of the end of such fiscal year, a
consolidated statement of income and a consolidated statement of cash
flows of the Company and its subsidiaries for such year, setting forth in
each case in comparative form the figures from the Company's previous
fiscal year, all prepared in accordance with generally accepted accounting
principles and practices and audited by nationally recognized independent
certified public accountants. In the event the Company shall no longer be
required to file Annual Reports on Form 10-K, the Company shall, within
ninety (90) days following the end of each respective fiscal year, deliver
to the Investor a copy of such balance sheets, statements of income and
statements of cash flows.
<PAGE> 2
(ii) Quarterly Reports. Furnish to the Investor promptly
following the filing of such report with the SEC, a copy of each of the
Company's Quarterly Reports on Form 10-Q, which shall include a
consolidated balance sheet as of the end of the respective fiscal quarter,
consolidated statements of income and consolidated statements of cash
flows of the Company and its subsidiaries for the respective fiscal
quarter and for the year to-date, setting forth in each case in
comparative form the figures from the comparable periods in the Company's
immediately preceding fiscal year, all prepared in accordance with
generally accepted accounting principles and practices (except, in the
case of any Form 10-Q, as may otherwise be permitted by Form 10-Q), but
all of which may be unaudited. In the event the Company shall no longer be
required to file Quarterly Reports on Form 10-Q, the Company shall, within
forty-five (45) days following the end of each of the first three (3)
fiscal quarters of each fiscal year, deliver to the Investor a copy of
such balance sheets, statements of income and statements of cash flows.
(b) SEC Filings. The Company shall deliver to the Investor
copies of each other document filed with the SEC on a non-confidential basis
promptly following the filing of such document with the SEC.
2. REGISTRATION RIGHTS.
(a) Definitions. For purposes of this Section 2:
(i) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and
filing a registration statement in compliance with the Securities Act of
1933, as amended, (the "Securities Act"), and the declaration or ordering
of effectiveness of such registration statement
(ii) Registrable Securities. The term "Registrable
Securities" means: (x) the Purchased Shares, and any shares of Common
Stock of the Company issued or issuable upon exercise of the Warrant; (y)
any other shares of Common Stock of the Company acquired by the Investor
[from the Company] after the date hereof; and (z) any shares of Common
Stock of the Company or other securities of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, any of the securities
described in the immediately preceding Clauses (x) or (y). Notwithstanding
the foregoing, "Registrable Securities" shall exclude any Registrable
Securities sold by a person in a transaction in which rights under this
Section 2 are not assigned in accordance with this Agreement or any
Registrable Securities sold in a public offering, whether sold pursuant to
Rule 144 promulgated under the Securities Act, or in a registered
offering, or otherwise.
(iii) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding" shall mean
the number of shares of Purchased Shares, shares of Common Stock and other
securities that are Registrable Securities and are then issued and
outstanding.
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<PAGE> 3
(iv) Holder. For purposes of this Section 2, the term
"Holder" means Investor or any subsidiary or affiliate of Investor owning
of record Registrable Securities that have not been sold to the public or
pursuant to Rule 144 promulgated under the Securities Act or any permitted
assignee of record of such Registrable Securities to whom rights under
this Section 2 have been duly assigned in accordance with Section 4 of
this Agreement.
(v) Form S-3. The term "Form S-3" means such form under
the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC
that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(b) Demand Registration.
(i) Request by Holders. If, at any time following the
first anniversary of the Closing, as defined in the Purchase Agreement,
during which the Company is not eligible to file a registration statement
on Form S-3, the Company receives a written request from the Holders of
twenty-five percent (25%) of the Purchased Shares issued as of the Closing
that the Company file a registration statement under the Securities Act on
Form S-1 or such other form as such Holders may request covering the
registration of Registrable Securities, then the Company shall, within ten
(10) business days of the receipt of such written request, give written
notice of such request ("Request Notice") to all Holders, and use
commercially reasonable efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that
Holders request to be registered and included in such registration by
written notice given by such Holders to the Company within twenty (20)
days after receipt of the Request Notice; provided that the Company shall
not be obligated to effect any such registration if the Company has,
within the six (6) month period preceding the date of such request,
already effected a registration under the Securities Act pursuant to this
Section 2(b) or Section 2(c) or (d), other than a registration from which
the Registrable Securities of Holders have been excluded with respect to
all or any portion of the Registrable Securities the Holders requested be
included in such registration; provided, further, that the Company shall
have no obligation to file any registration statement contemplated by this
Section 2(b) if the expected gross proceeds of the sale of Registrable
Securities under such registration statement, based on the market price of
the Common Stock as of the date of the initial request for such
registration delivered by the Holders, does not exceed Three Million
Dollars ($3,000,000). If requested by such Holders, the Company shall
register such Registrable Securities on Form S-1 or any successor
registration form.
(ii) Underwriting. If the Holders initiating the
registration request under this Section 2(b) ("Initiating Holders") intend
to distribute the Registrable Securities covered by their request by means
of an underwriting, then they shall so advise the Company as a part of
their request, and the Company shall include such information in the
written notice referred to in Section 2(b)(i). In such event, the right of
any Holder
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<PAGE> 4
to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the
initiating Holders and such Holder determined based on the number of
Registrable Securities held by such Holders being registered). All Holders
proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the Holders
of a majority of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market stand-off
agreement of up to 180 days if required by such underwriters).
Notwithstanding any other provision of this Section 2(b), if the
underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then
the Company shall so advise all Holders of Registrable Securities that
would otherwise be registered and underwritten pursuant hereto, and the
number of Registrable Securities that may be included in the underwriting
shall be reduced as required by the underwriter(s) and allocated among the
Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities then outstanding held by each Holder
requesting registration (including the initiating Holders); provided,
however, that the number of shares of Registrable Securities to be
included in such underwriting and registration shall not be reduced unless
all other securities of the Company and any selling securityholder other
than the Holders are first entirely excluded from the underwriting and
registration. Any Registrable Securities excluded and withdrawn from such
underwriting shall be withdrawn from the registration.
(iii) Maximum Number of Demand Registrations. The
Company shall be obligated to effect only three (3) such registrations
pursuant to this Section 2(b).
(iv) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2(b), a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment
of the Board, it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then the Company
shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the initiating Holders;
provided, however, that the Company may not utilize this right more than
once in any twelve (12) month period.
(v) Expenses. All expenses incurred in connection with
any registration pursuant to this Section 2(b), including all federal and
"blue sky" registration, filing and qualification fees, printer's and
accounting fees, and fees and disbursements of counsel for the Company
(but excluding underwriters' discounts and commissions relating to shares
sold by the Holders and any fees and disbursements of counsel to the
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2(b) shall bear such Holder's
proportionate share (based on the total number of shares sold in such
registration other than for the account of the
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<PAGE> 5
Company) of all discounts, commissions or other amounts payable to
underwriters or brokers in connection with such offering by the Holders.
Notwithstanding the foregoing, the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to this
Section 2(b) if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered, unless the Holders of such majority agree that such
registration constitutes the use by the Holders of one (1) demand
registration pursuant to this Section 2(b) (in which case such
registration shall also constitute the use by all Holders of Registrable
Securities of one (l) such demand registration); provided further,
however, that if at the time of such withdrawal, the Holders have learned
of a material adverse change relating to the business or operations of the
Company not known to the Holders at the time of their request for such
registration and have withdrawn their request for registration after
learning of such material adverse change, then the Holders shall not be
required to pay any of such expenses and such registration shall not
constitute the use of a demand registration pursuant to this Section 2(b).
(c) Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least twenty (20) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any employee benefit plan or any
merger or other corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(i) Underwriting. If a registration statement under
which the Company gives notice under this Section 2(c) is for an
underwritten offering, then the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in such a registration pursuant
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their Registrable Securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting (including a
market stand-off agreement of up to 180 days if required by such
underwriters); provided, however, that it shall not be considered
customary to require any of the Holders to provide representations and
warranties regarding the Company or indemnification of the
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<PAGE> 6
underwriters for material misstatements or omissions in the registration
statement or prospectus for such offering. Notwithstanding any other
provision of this Agreement, if the managing underwriter determine(s) in
good faith that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may exclude
shares from the registration and the underwriting; provided; however, that
the securities to be included in the registration and the underwriting
shall be allocated, (A) first to the Company (provided, however, that a
minimum of fifteen percent (15%) of the number of Registrable Securities
that each Holder (where any Registrable Securities that are not shares of
Common Stock but are exercisable or exchangeable for, or convertible into,
shares of Common Stock, shall be deemed to have been so exercised,
exchanged or converted for such purpose) must also in any event be
included), (B) second, to the extent the managing underwriter determines
additional securities can be included after compliance with Clause (A), to
each of the Holders (to the extent not included pursuant to Clause (A))
requesting inclusion of their Registrable Securities in such registration
statement on a pro rata basis based on the total number of Registrable
Securities and other securities entitled to registration then held by each
such Holder, and (C) third, to the extent the managing underwriter
determines additional securities can be included after compliance with
Clauses (A) and (B), any other shares of Common Stock or other securities
of the Company. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For
any Holder that is a partnership, the Holder and the partners and retired
partners of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons, and for any Holder that is a corporation, the Holder
and all corporations that are affiliates of such Holder, shall be deemed
to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(ii) Expenses. All expenses incurred in connection with
a registration pursuant to this Section 2(c) (excluding underwriters' and
brokers' discounts and commissions relating to shares sold by the Holders
and any fees and disbursements of counsel to the Holders), including all
federal and "blue sky" registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for
the Company, shall be borne by the Company.
(iii) Not Demand Registration. Registration pursuant to
this Section 2(c) shall not be deemed to be a demand registration as
described in Section 2(b) above. Except as otherwise provided herein,
there shall be no limit on the number of times the Holders may request
registration of Registrable Securities under this Section 2(c).
(d) Form S-3 Registration. If, at any time after the first
anniversary of the Closing, as defined in the Purchase Agreement, the Company is
so requested by any Holder, the Company shall use all reasonable commercial
efforts to cause to be filed and become effective with the SEC a registration
statement on Form S-3, if available, relating to all of the
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<PAGE> 7
Registrable Securities; provided, however, that the Company shall have no
obligation to file any registration statement contemplated by this Section 2(d)
if the expected gross proceeds of the sale of Registrable Securities under such
registration statement, based on the market price of the Common Stock as of the
date of such request, does not exceed Three Million Dollars ($3,000,000). The
Company shall use commercially reasonable efforts to cause any such registration
statement to become effective as promptly as practicable after such filing and
shall also use commercially reasonable efforts to obtain any related
qualifications, registrations or other compliances that may be necessary under
any applicable "blue sky" laws. In connection with such registration, the
Company will:
(i) Notice. Promptly give written notice to the
Holders of the proposed registration and any related qualification or
compliance; and
(ii) Registration. Effect such registration and all such
qualifications and compliances and as would permit or facilitate the sale
and distribution of all or such portion of such Holders or Holders'
Registrable Securities; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 2(d) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(iii) Number of Form S-3 Registrations. The Company
shall be obligated to effect only three (3) registrations upon the request
of the Holders under this Section 2(d).
(iv) Expenses. The Company shall pay all expenses
incurred in connection with each registration requested pursuant to this
Section 2(d), excluding underwriters' or brokers' discounts and
commissions relating to shares sold by the Holders and any fees and
disbursements of counsel to the Holders, but including federal and "blue
sky" registration, filing and qualification fees, printers' and accounting
fees, and fees and disbursements of counsel.
(v) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2(d), a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment
of the Board, it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then the Company
shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the initiating Holders;
provided, however, that the Company may not utilize this right more than
once in any twelve (12) month period, and the period of time that the
Company is obligated to maintain the effectiveness of any registration
statement under Clause (vii) below shall be extended for the length of any
such period of deferral.
(vi) Not Demand Registration. Form S-3 registrations
shall not be deemed to be demand registrations as described in Section
2(b) above.
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<PAGE> 8
(vii) Maintenance. The Company shall use all reasonable
commercial efforts to maintain the effectiveness of any Form S-3
registration statement filed under this Section 2(d) until the earlier of:
(a) the date on which all of the Registrable Securities have been sold;
and (b) sixty (60) days after the effective date of such registration
statement; provided, however, that unless all of the Registrable
Securities held by the Investor as of such anniversary date could then be
sold in a single transaction in accordance with Rule 144 under the
Securities Act without exceeding the volume limitations thereof, if the
Company receives written notice from the Investor that the Investor may be
deemed to be an "affiliate" of the Company for purposes of the Securities
Act, the date in this Clause (b) shall be extended until the Investor
advises the Company that it no longer believes it may be deemed such an
"affiliate."
(e) Obligations of the Company. Whenever required to effect
the registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(i) Registration Statement. Prepare and file with the
SEC a registration statement with respect to such Registrable Securities
and use commercially reasonable efforts to cause such registration
statement to become effective; provided, however, that, except as
otherwise required in this Section 2, the Company shall not be required to
keep any such registration statement effective for more than sixty (60)
days.
(ii) Amendments and Supplements. Prepare and file with
the SEC such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
(iii) Prospectuses. Furnish to the Holders such number
of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included
in such registration.
(iv) Blue Sky. Use commercially reasonable efforts to
register and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process
in any such states or jurisdictions.
(v) Underwriting. In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), with the managing
underwriter(s) of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such
an
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<PAGE> 9
agreement; provided, however, that it shall not be considered customary to
require any of the Holders to provide representations and warranties
regarding the Company or indemnification of the underwriters for material
misstatements or omissions in the registration statement or prospectus for
such offering.
(vi) Notification. Notify each Holder of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(f) Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Sections 2(b), (c)
or (d) that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
(g) Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 2(b), (c) or (d):
(i) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, the partners,
officers, shareholders, employees, representatives and directors of each
Holder, any underwriter (as determined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of
1934, as amended, against any losses, claims, damages, or Liabilities
(joint or several) to which they may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"):
(A) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto;
(B) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or
(C) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any federal or state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any
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<PAGE> 10
federal or state securities law in connection with the offering covered by
such registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling person of such Holder.
(ii) By Selling Holders. To the extent permitted by law,
each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, officers, shareholders, employees, representatives and
directors and any person who controls such Holder within the meaning of
the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
officer or director, controlling person, underwriter or other such Holder,
partner, officer, shareholder, employee, representative, director or
controlling person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such officer or director, controlling person,
underwriter or other Holder, partner, officer, shareholder, employee,
representative, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action: provided, however, that the indemnity agreement
contained in this subsection shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and provided, further, that the total amounts
payable in indemnity by a Holder under this subsection or otherwise in
respect of any and all Violations shall not exceed in the aggregate the
net proceeds received by such Holder in the registered offering out of
which such Violations arise.
(iii) Notice. Promptly after receipt by an indemnified
party under of notice of the commencement of any action (including any
governmental action),
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such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, to the extent that
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
conflict of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party
of liability under this Section 2(g) except to the extent the indemnifying
party is prejudiced as a result thereof.
(iv) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are subject to
the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement in
question becomes effective or the amended prospectus filed with the SEC
pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the
Final Prospectus was timely furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at
or prior to the time such action is required by the Securities Act.
(v) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any
case in which either (A) any Holder exercising rights under this
Agreement, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this section, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this section provides for
indemnification in such case, or (B) contribution under the Securities Act
may be required on the part of any such selling Holder or any such
controlling person in circumstances for which indemnification is provided
under this section; then, and in each such case, the Company and such
Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration
statement bears to the public offering price of all securities offered by
and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided,
however, that, in any such case: (X) no such Holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Securities offered
11
<PAGE> 12
and sold by such Holder pursuant to such registration statement; and (Y)
no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(vi) Survival. The obligations of the Company and
Holders under this Section 2(g) shall survive until the third anniversary
of the completion of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any statutes of
limitation or extensions of such statutes.
(h) Termination of the Company's Obligations. The Company
shall have no obligations pursuant to this Section 2 with respect to any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 2(b), (c) or (d) more than five (5) years after the date of
this Agreement or if, in the opinion of counsel to the Company, all such
Registrable Securities to be sold by any Holder may then be sold under Rule 144
in a single transaction without exceeding the volume limits thereunder.
(i) No Superior Registration Rights to Third Parties. Without
the prior written consent of Investor, the Company covenants and agrees that it
shall not grant, or cause or permit to be created, for the benefit of any person
or entity any registration rights of any kind (whether similar to the demand,
"piggyback" or Form S-3 registration rights described in this Section 2, or
otherwise) relating to shares of the Company's Common Stock or any other
securities of the Company that are superior to the rights granted under this
Section 2. The Company reserves the right to grant registration rights relating
to the Company's Common Stock or any other securities of the Company that are
pari passu with the rights granted to Investor under this Section 2.
(j) Suspension Provisions. Notwithstanding the foregoing
subsections of this Section 2, the Company shall not be required to take any
action with respect to the registration or the declaration of effectiveness of
the registration statement following written notice to the Holders from the
Company (a "Suspension Notice") of the existence of any state of facts or the
happening of any event (including pending negotiations relating to, or the
consummation of, a transaction, or the occurrence of any event that the Company
believes, in good faith, requires additional disclosure of material, non-public
information by the Company in the registration statement that the Company
believes it has a bona fide business purpose for preserving confidentiality or
that renders the Company unable to comply with the published rules and
regulations of the SEC promulgated under the Securities Act or the Securities
Exchange Act, as in effect at any relevant time (the "Rules and Regulations"))
that would result in (i) the registration statement, any amendment or
post-effective amendment thereto, or any document incorporated therein by
reference containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the prospectus issued under the
registration statement, any prospectus supplement, or any document incorporated
therein by reference including an untrue statement of material fact or omitting
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
provided that the
12
<PAGE> 13
Company (X) shall not issue a Suspension Notice more than once in any 12 month
period, (Y) shall use its best efforts to remedy, as promptly as practicable,
but in any event within 90 days of the date on which the Suspension Notice was
delivered, the circumstances that gave rise to the Suspension Notice and deliver
to the Holders notification that the Suspension Notice is no longer in effect
and (Z) shall not issue a Suspension Notice for any period during which the
Company's executive officers are not similarly restrained from disposing of
shares of the Company's Common Stock. Upon receipt of a Suspension Notice from
the Company, all time limits applicable to the Holders under this Section 2
shall automatically be extended by an amount of time equal to the amount of time
the Suspension Notice is in effect, the Holders will forthwith discontinue
disposition of all such shares pursuant to the registration statement until
receipt from the Company of copies of prospectus supplements or amendments
prepared by or on behalf of the Company (which the Company shall prepare
promptly), together with a notification that the Suspension Notice is no longer
in effect, and if so directed by the Company, the Holders will deliver to the
Company all copies in their possession of the prospectus covering such shares
current at the time of receipt of any Suspension Notice.
3. RIGHTS IN THE EVENT OF A CORPORATE EVENT.
(a) Corporate Events. A "Corporate Event" shall mean any of
the following, whether accomplished through one or a series of related
transactions: (i) any transaction, other than an issuance of securities in
connection with the acquisition of an unaffiliated third party in an arms length
transaction, that results in a greater than thirty percent (30%) change in the
total outstanding number of voting securities (which, for purposes of this
Agreement, shall mean all securities of the Company that presently are, or would
be upon conversion, exchange or exercise, entitled to vote in the election of
directors) of the Company immediately prior to such issuance (other than any
such change solely as a result of a stock split, stock dividend or other
recapitalization affecting holders of Common Stock and other classes of voting
securities of the Company on a pro rata basis); (ii) an acquisition of the
Company or any of its "Significant Subsidiaries" (as defined in the SEC's Rule
1-02(w) of Regulation S-X) by consolidation, merger (regardless of whether the
Company is the survivor of such merger or not), share purchase or exchange or
other reorganization or transaction in which the holders of the Company's or
such Significant Subsidiary's outstanding voting securities immediately prior to
such transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) of the voting power of the Company,
any such Significant Subsidiary or the person issuing such securities or
surviving such transaction, as the case may be, provided that this clause (ii)
shall not apply to the pro rata distribution by the Company to its shareholders
of all the voting securities of any of its subsidiaries; (iii) the acquisition
of all or substantially all the assets of the Company or any Significant
Subsidiary; (iv) the grant by the Company or any of its Significant Subsidiaries
of an exclusive license for any material portion of the Company's or such
Significant Subsidiary's intellectual property to a person other than the
Investor or any of its subsidiaries; and (v) any transaction or series of
related transactions that results in the failure of the majority of the members
of the Board immediately prior to the closing of such transaction or series of
related transactions failing to constitute a majority of the Board (or its
successor) immediately following such transaction or series of related
transactions.
13
<PAGE> 14
(b) Notice of Corporate Events. Until the expiration of the
second anniversary of the Closing, as defined in the Purchase Agreement, (such
period from the date hereof through such second anniversary being referred to
herein as the "Initial Rights Period"), the Company shall provide the Investor
with written notice of the existence of any offer (written or oral) from any
Person for a proposed Corporate Event. Any notice shall be delivered to the
Investor within two (2) business days after the date the Company first becomes
aware of such offer or proposed Corporate Event.
4. ASSIGNMENT. The rights of the Investor under Sections 1 and 2 are
transferable to any purchaser or transferee of the Purchased Shares, the Warrant
or the Warrant Shares; provided, however, that Investor shall only be permitted
to assign its rights under Section 1 and 2 appurtenant to the Warrant and/or the
Warrant Shares to any person or entity that is a permitted transferee of the
Warrant under Section 8 of the Warrant; and provided, further, that any such
assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement.
5. MISCELLANEOUS.
(a) Successors and Assigns. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
(b) Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of Delaware, without reference to
principles of conflict of laws or choice of laws.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as Federal Express for next business day delivery under circumstances in
which such service guarantees next business day delivery, or one (1) business
day after facsimile with copy delivered by registered or certified mail, in any
case, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other
14
<PAGE> 15
address as the Investor or the Company may designate by giving at least ten (10)
days advance written notice pursuant to this Section 5(e).
(f) Amendments and Waivers. This Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of Purchased Shares and
Warrant Shares representing at least a majority of the total aggregate number of
Purchased Shares and Warrant Shares then outstanding (excluding any of such
shares that have been sold in a transaction in which rights under Section 2 are
not assigned in accordance with this Agreement or sold to the public pursuant to
SEC Rule 144 or otherwise). Any amendment or waiver effected in accordance with
this Section 5(f) will be binding upon the Investor, the Company and their
respective successors and assigns. Notwithstanding the foregoing, the provisions
of Sections 2 and 3 may not be amended without the written consent of the
Company and the Investor, which may be withheld in either of their sole and
absolute discretions.
(g) Severability. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
(h) Entire Agreement. This Agreement, together with the
Purchase Agreement and all exhibits and schedules hereto and thereto constitutes
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof.
(i) Further Assurances. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(j) Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(k) Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of this Agreement and
the Purchase Agreement and the consummation of the transactions contemplated
hereby and thereby (including the costs associated with any filings with, or
compliance with any of the requirements of, any governmental authorities), shall
be the sole and exclusive responsibility of such party.
15
<PAGE> 16
(l) Competition. Nothing set forth herein shall be deemed to
preclude, limit or restrict the Company's or the Investor's ability to compete
with the other.
(m) Stock Splits, Dividends and other Similar Events. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
PROXIM, INC. INTEL CORPORATION
By: /s/ David C. King By: /s/ Arvind Sodhani
------------------------------- ------------------------------------
Name: David C. King Name: Arvind Sodhani
---------------------------- ---------------------------------
Title: Chairman of the Board of Title: Vice President and Treasurer
Directors, President and ---------------------------------
Chief Executive Officer Date Signed: April 28, 1999
--------------------------- --------------------------
Date Signed: April 28, 1999 Address: 2200 Mission College Road
----------------------------- Santa Clara, CA 95052
Address: 295 North Bernardo Avenue
Mountain View, CA 94043 Telephone No.: (408) 765-8080
Facsimile No.: (408) 765-6038
Telephone No: (650) 960-1630
Facsimile No: (650) 965-4690 with copies to:
with copies to: Intel Corporation
Attention: M&A Portfolio Manager
Proxim, Inc. 2200 Mission College Road
Attention: Keith E. Glover Santa Clara, CA 95052
Chief Financial Officer
295 North Bernardo Avenue and
Mountain View, CA 94043
Gibson, Dunn & Crutcher LLP
and Attention: Bradford P. Weirick
333 South Grand Avenue, Suite
Wilson, Sonsini, Goodrich & Rosati 4700
Attention: Jeffrey D. Saper Los Angeles, California 90071
650 Page Mill Road Telephone No.: (213) 229-7765
Palo Alto, California 94304-1050 Facsimile No.: (213) 229-6765
Telephone No.: (650) 320-4626
Facsimile No.: (650) 493-6811
{Signature page to Investor Rights Agreement between Intel Corporation and
Proxim, Inc.}
17
<PAGE> 1
WARRANT
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF PROXIM, INC.
(Subject to Adjustment)
NO. 2
THIS CERTIFIES THAT, for value received, Motorola, Inc., or its
permitted registered assigns ("Holder"), is entitled, subject to the terms and
conditions of this Warrant, at any time or from time to time after June 2, 2000,
the "Effective Date"), and before 5:00 p.m. Pacific Time on June 2, 2002 (the
"Expiration Date"), to purchase from Proxim, Inc., a Delaware corporation (the
"Company") Eighty-Five Thousand Seven Hundred Fourteen (85,714) shares of Common
Stock of the Company at a price per share of Fifty Dollars ($50.00) (the
"Purchase Price"). Both the number of shares of Common Stock purchasable upon
exercise of this Warrant and the Purchase Price are subject to adjustment and
change as provided herein. This Warrant is issued pursuant to that certain
Common Stock and Warrant Purchase Agreement, dated as of June 2, 1999 (the
"Agreement"), between the Company and Holder. Unless otherwise provided for
herein, all capitalized terms in this Warrant shall have the meanings set forth
in the Agreement.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the
closing prices of the Common Stock of the Company on such exchange or
market over the 3 business days ending on the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the
30-day period ending immediately prior to the applicable date of
valuation; and
<PAGE> 2
(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as agreed upon by the Company and the
Holder; provided, however, that if the Company and the Holder cannot
agree on such value, such value shall be determined by an independent
valuation firm experienced in valuing businesses such as the Company and
jointly selected in good faith by the Company and the Holder. Fees and
expenses of the valuation firm shall be paid for by the Company.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Registered Holder" shall mean any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Warrant" as used herein, shall include this Warrant and any warrant
delivered in substitution or exchange therefor as provided herein.
"Common Stock" shall mean the Common Stock of the Company and any other
securities at any time receivable or issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions of
this Warrant and applicable securities laws, this Warrant may be exercised, in
whole or in part at any time or from time to time, on or before the Expiration
Date by the delivery (including, without limitation, delivery by facsimile) of
the form of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of
Exercise"), duly executed by the Holder, at the principal office of the Company,
and as soon as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder;
or (iii) by a combination of (i) and (ii), of an amount equal to the
product obtained by multiplying the number of shares of Common Stock
being purchased upon such exercise by the then effective Purchase Price
(the "Exercise Amount"), except that if Holder is subject to HSR Act
Restrictions (as defined in Section 2.5 below), the Exercise Amount
shall be paid to the Company within five (5) business days of the
termination of all HSR Act Restrictions.
2.2. Net Issue Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, the Holder may elect to exchange all or some of the
Warrant for a number of shares (rounded down to the nearest whole share) of
Common Stock equal to the value of the amount of the Warrant being exchanged on
the date of exchange. If Holder elects to exchange this Warrant as provided in
this Section 2.2, Holder shall tender to the Company the Warrant for the amount
being exchanged, along with written notice of Holder's election to exchange some
or all of the Warrant, and the Company shall issue to Holder the number of
shares (rounded down to the nearest whole share) of the Common Stock computed
using the following formula:
2
<PAGE> 3
X = Y (A-B)
------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Warrant on the date the
net issue election is made pursuant to Section 2.2.
All references herein to an "exercise" of the Warrant shall include an
exchange pursuant to this Section 2.2.
2.3. "Easy Sale" Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, when permitted by law and applicable regulations
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of Securities Dealers (a "NASD
Dealer")), whereby the Holder irrevocably elects to exercise this Warrant and to
sell a portion of the Shares so purchased to pay for the Purchase Price and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such Shares to forward the Purchase Price
directly to the Company.
2.4. Stock Certificates; Fractional Shares. As soon as practicable on or
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
whole shares of Common Stock issuable upon such exercise, rounded down to the
nearest whole share. No fractional shares or scrip representing fractional
shares shall be issued upon an exercise of this Warrant.
2.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR Act Restrictions"). If on or before the Expiration
Date Holder has sent the Notice of Exercise to Company and Holder has not been
able to complete the exercise of this Warrant prior to the Expiration Date
because of HSR Act Restrictions, the Holder shall be entitled to complete the
process of exercising this Warrant, for a period of ten (10) business days
following termination of the HSR Act Restrictions, in accordance with the
procedures contained herein notwithstanding the fact that completion of the
exercise of this Warrant would take place after the Expiration Date.
2.6. Partial Exercise; Effective Date of Exercise. In case of any
partial exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor and
date for the balance of the shares of Common Stock
3
<PAGE> 4
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. However, if Holder is subject to HSR Act filing
requirements this Warrant shall be deemed to have been exercised on the date
immediately following the date of the expiration of all HSR Act Restrictions.
The person entitled to receive the shares of Common Stock issuable upon exercise
of this Warrant shall be treated for all purposes as the holder of record of
such shares as of the close of business on the date the Holder is deemed to have
exercised this Warrant.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all transfer or stamp taxes and other similar governmental
charges that may be imposed in respect of the issue or delivery thereof. The
Company shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issuance of any certificate for
shares of Common Stock in any name other than that of the Registered Holder of
this Warrant, and in such case the Company shall not be required to issue or
deliver any stock certificate or security until such tax or other charge has
been paid, or it has been established to the Company's reasonable satisfaction
that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares of
Common Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities or property receivable or issuable upon exercise of this
Warrant) and the Purchase Price are subject to adjustment upon occurrence of the
following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Common Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained earnings), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Common Stock (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and
4
<PAGE> 5
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
the Common Stock which is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
4.5. Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "Termination Date"),
shall receive, in
5
<PAGE> 6
lieu of the number of shares of Common Stock that would have been issuable upon
such exercise immediately prior to the Termination Date, the securities or
property that would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been simultaneously converted
immediately prior to the Termination Date, all subject to further adjustment as
provided in this Warrant. Additionally, the Purchase Price shall be immediately
adjusted to equal the quotient obtained by dividing (x) the aggregate Purchase
Price of the maximum number of shares of Common Stock for which this Warrant was
exercisable immediately prior to the Termination Date by (y) the number of
shares of Common Stock of the Company for which this Warrant is exercisable
immediately after the Termination Date, all subject to further adjustment as
provided herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of the adjusted Purchase Price. The Company
shall promptly send (by facsimile and by either first class mail, postage
prepaid or overnight delivery) a copy of each such certificate to the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the exercise of this Warrant.
8. TRANSFER AND EXCHANGE.
8.1 Subject to the terms and conditions of this Warrant and compliance
with all applicable securities laws, this Warrant and all rights hereunder (and
any shares of Common Stock acquired on exercise of the Warrant) may be
transferred, in whole or in part, only (a) to a Majority Owned Subsidiary (as
defined below) of the Registered Holder, (b) to an Institutional Investor (as
defined below) or (c) in a sale effectuated pursuant to Rule 144 promulgated
under
6
<PAGE> 7
the Securities Act of 1933, as amended (the "1933 Act"), or in an offering
registered under Section 5 of the 1933 Act. Any such transfer shall be made on
the books of the Company maintained for such purpose at the principal office of
the Company referred to above, by the Registered Holder hereof in person, or by
duly authorized attorney, upon surrender of this Warrant properly endorsed and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. Upon any permitted partial transfer of the Warrant, the
Company will issue and deliver to the Registered Holder a new Warrant or
Warrants with respect to the shares of Common Stock not so transferred. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that when this Warrant shall have been so endorsed, the person in
possession of this Warrant may be treated by the Company, and all other persons
dealing with this Warrant, as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, any notice to the
contrary notwithstanding; provided, however that until a transfer of this
Warrant is duly registered on the books of the Company, the Company may treat
the Registered Holder hereof as the owner for all purposes. Upon any full or
partial transfer of the Warrant or the shares of Common Stock acquired on
exercise of the Warrant pursuant to clause (b) or clause (c) of the first
sentence of this Section 8.1, all restrictions applicable to the transfer of the
Warrant or such Common Stock, or portion thereof, so transfered shall cease.
8.2 Majority Owned Subsidiary. A "Majority Owned Subsidiary" shall mean
a subsidiary of which the Registered Holder beneficially owns, either directly
or indirectly, at least 50% of the voting securities.
8.3 Institutional Investor. An "Institutional Investor" shall mean any
person considered to be an "accredited investor" under Rule 501(a)(i) of
Regulation D under the 1933 Act; provided, however, that "Institutional
Investor" shall not include (i) any of the entities that the Company and the
Registered Holder agree in writing (with specific reference to this provision)
are significant competitors of the Company or (ii) any Majority Owned
Subsidiary.
9. SECURITIES LAW RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof,
agrees that, absent an effective registration statement filed with the SEC under
the 1933 Act covering the disposition or sale of this Warrant or the Common
Stock issued or issuable upon exercise hereof, and registration or qualification
under applicable state securities laws, such Holder will not sell, transfer,
pledge, or hypothecate any or all such Warrants or Common Stock, as the case may
be, unless either (i) the Company has received an opinion of counsel, in form
and substance reasonably satisfactory to the Company, to the effect that such
registration is not required in connection with such disposition or (ii) the
sale of such securities is made pursuant to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of Common Stock
purchased upon exercise of this Warrant or acquired upon conversion thereof
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof; that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the Holder to evaluate
7
<PAGE> 8
the merits and risks of its investment in the company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired pursuant to
the exercise of this Warrant for an indefinite period; that the Holder
understands that the shares of Common Stock acquired pursuant to the exercise of
this Warrant will not be registered under the 1933 Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the 1933 Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the SEC
for exercise of this Warrant pursuant to Section 2.2, and even then will not be
available unless a public market then exists for the Common Stock, adequate
information concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and that all stock
certificates representing shares of Common Stock issued to the Holder upon
exercise of this Warrant may have affixed thereto a legend substantially in the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a stockholder of the Company. In
the absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a stockholder of the Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise of
this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to the Investor Rights
Agreement, dated as of the date hereof, between the Company and the Holder, and
are entitled, subject to the terms and conditions of that agreement, to all
registration rights granted to holders of Registrable Securities thereunder.
8
<PAGE> 9
13. NOTICES. All notices and other communications from the Company to the Holder
shall be given in accordance with the Agreement.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of Delaware.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such stock or
securities as at the time are receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable
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<PAGE> 10
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
twenty (20) days prior to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and each such executed
counterpart shall be, and shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holder of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to holders of the Company's securities under any other agreements, except rights
that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a Saturday,
Sunday or legal holiday, the Expiration Date shall automatically be extended
until 5:00 p.m. the next business day.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
MOTOROLA, INC. PROXIM, INC.
By: /s/ Bruce M. Stone By: /s/ Keith E. Glover
------------------------------- -------------------------------------
Bruce M. Stone
- ---------------------------------- Keith E. Glover
Printed Name -----------------------------------------
Printed Name
S.V.P. & GM Motorola
- ----------------------------------- Chief Financial Officer
Title -----------------------------------------
Title
SIGNATURE PAGE TO WARRANT
<PAGE> 12
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
PROXIM, INC. WARRANT NO. 2
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Proxim, Inc., as provided for therein, and (check the
applicable box):
[ ] Tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ shares of such securities.
[ ] Elects the Net Issue Exercise option pursuant to Section 2.2 of the Warrant,
and accordingly requests delivery of a net of ______________ shares of such
securities, according to the following calculation:
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- ---------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date of
such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Warrant on the date the
net issue election is made pursuant to Section 2.2.
[ ] Elects the Easy Sale Exercise option pursuant to Section 2.3 of the Warrant,
and accordingly requests delivery of a net of ______________ shares of such
securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
taxpayer identification number):
Name:
---------------------------------------
Address:
------------------------------------
Taxpayer Identification Number:
-------------
Signature:
----------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
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<PAGE> 13
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
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<PAGE> 14
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate) WARRANT NO. 2
For value received, the undersigned hereby sells, assigns and transfers unto
________________ the within Warrant Certificate, together with all right, title
and interest therein, and does hereby authorize [transfer agent], to transfer
said Warrant Certificate on the books of Proxim, Inc. with respect to the number
of shares set forth below, with full power of substitution in the premises:
- --------------------------------------------------------------------------------
Name(s) of Assignee(s) Address # of Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If said number of shares shall not be all the shares represented by the Warrant
Certificate, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares covered by said Warrant
Certificate.
Dated:
-----------------------------------
Signature:
-------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE> 1
PROXIM, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into as of June 2, 1999, by and between Proxim, Inc., a Delaware corporation
(the "Company"), and Motorola, Inc., a Delaware corporation (the "Investor").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares (the "Purchased Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock") and a
Warrant (the "Warrant") to purchase additional shares (the "Warrant Shares") of
the Company's Common Stock on the terms and conditions set forth in that certain
Common Stock and Warrant Purchase Agreement, dated of even date herewith by and
between the Company and the Investor (the "Purchase Agreement") and unless
otherwise provided herein, all capitalized terms shall have the meanings set
forth in the Purchase Agreement.
WHEREAS, the Purchase Agreement provides that the Investor shall be
granted certain information rights, registration rights and other rights, all as
more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. INFORMATION RIGHTS.
(a) Financial Information. The Company covenants and
agrees that, commencing on the date of this Agreement and continuing for so long
as the Investor holds at least 40,000 Purchased Shares or shares of Common Stock
issued or issuable pursuant to exercise of the Warrant, the Company shall:
(i) Annual Reports. Furnish to the Investor
promptly following the filing of such report with the SEC a copy of the
Company's Annual Report on Form 10-K for each fiscal year, which shall
include a consolidated balance sheet as of the end of such fiscal year,
a consolidated statement of income and a consolidated statement of cash
flows of the Company and its subsidiaries for such year, setting forth
in each case in comparative form the figures from the Company's previous
fiscal year, all prepared in accordance with generally accepted
accounting principles and practices and audited by nationally recognized
independent certified public accountants. In the event the Company shall
no longer be required to file Annual Reports on Form 10-K, the Company
shall, within ninety (90) days following the end of each respective
fiscal year, deliver to the Investor a copy of such balance sheets,
statements of income and statements of cash flows.
<PAGE> 2
(ii) Quarterly Reports. Furnish to the Investor
promptly following the filing of such report with the SEC, a copy of
each of the Company's Quarterly Reports on Form 10-Q, which shall
include a consolidated balance sheet as of the end of the respective
fiscal quarter, consolidated statements of income and consolidated
statements of cash flows of the Company and its subsidiaries for the
respective fiscal quarter and for the year to-date, setting forth in
each case in comparative form the figures from the comparable periods in
the Company's immediately preceding fiscal year, all prepared in
accordance with generally accepted accounting principles and practices
(except, in the case of any Form 10-Q, as may otherwise be permitted by
Form 10-Q), but all of which may be unaudited. In the event the Company
shall no longer be required to file Quarterly Reports on Form 10-Q, the
Company shall, within forty-five (45) days following the end of each of
the first three (3) fiscal quarters of each fiscal year, deliver to the
Investor a copy of such balance sheets, statements of income and
statements of cash flows.
(b) SEC Filings. The Company shall deliver to the Investor
copies of each other document filed with the SEC on a non-confidential basis
promptly following the filing of such document with the SEC.
2. REGISTRATION RIGHTS.
(a) Definitions. For purposes of this Section 2:
(i) Registration. The terms "register,"
"registered," and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act of 1933, as amended, (the "Securities Act"), and the
declaration or ordering of effectiveness of such registration statement
(ii) Registrable Securities. The term "Registrable
Securities" means: (x) the Purchased Shares, and any shares of Common
Stock of the Company issued or issuable upon exercise of the Warrant;
(y) any other shares of Common Stock of the Company acquired by the
Investor from the Company or from another Investor having similar
registration rights after the date hereof; and (z) any shares of Common
Stock of the Company or other securities of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, any of the
securities described in the immediately preceding Clauses (x) or (y).
Notwithstanding the foregoing, "Registrable Securities" shall exclude
any Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this
Agreement or any Registrable Securities sold in a public offering,
whether sold pursuant to Rule 144 promulgated under the Securities Act,
or in a registered offering, or otherwise.
(iii) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding" shall mean
the number of shares of
2
<PAGE> 3
Purchased Shares, shares of Common Stock and other securities that are
Registrable Securities and are then issued and outstanding.
(iv) Holder. For purposes of this Section 2, the
term "Holder" means Investor or any subsidiary or affiliate of Investor
owning of record Registrable Securities that have not been sold to the
public or pursuant to Rule 144 promulgated under the Securities Act or
any permitted assignee of record of such Registrable Securities to whom
rights under this Section 2 have been duly assigned in accordance with
Section 4 of this Agreement.
(v) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently
adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the
Company with the SEC.
(b) Demand Registration.
(i) Request by Holders. If, at any time following
the first anniversary of the Closing, as defined in the Purchase
Agreement, during which the Company is not eligible to file a
registration statement on Form S-3, the Company receives a written
request from the Holders of twenty-five percent (25%) of the Purchased
Shares issued as of the Closing that the Company file a registration
statement under the Securities Act on Form S-1 or such other form as
such Holders may request covering the registration of Registrable
Securities, then the Company shall, within ten (10) business days of the
receipt of such written request, give written notice of such request
("Request Notice") to all Holders, and use commercially reasonable
efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that Holders request to be
registered and included in such registration by written notice given by
such Holders to the Company within twenty (20) days after receipt of the
Request Notice; provided that the Company shall not be obligated to
effect any such registration if the Company has, within the six (6)
month period preceding the date of such request, already effected a
registration under the Securities Act pursuant to this Section 2(b) or
Section 2(c) or (d), other than a registration from which the
Registrable Securities of Holders have been excluded with respect to all
or any portion of the Registrable Securities the Holders requested be
included in such registration; provided, further, that the Company shall
have no obligation to file any registration statement contemplated by
this Section 2(b) if the expected gross proceeds of the sale of
Registrable Securities under such registration statement, based on the
market price of the Common Stock as of the date of the initial request
for such registration delivered by the Holders, does not exceed Three
Million Dollars ($3,000,000). If requested by such Holders, the Company
shall register such Registrable Securities on Form S-1 or any successor
registration form.
(ii) Underwriting. If the Holders initiating the
registration request under this Section 2(b) ("Initiating Holders")
intend to distribute the Registrable
3
<PAGE> 4
Securities covered by their request by means of an underwriting, then
they shall so advise the Company as a part of their request, and the
Company shall include such information in the written notice referred to
in Section 2(b)(i). In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion
of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the initiating
Holders and such Holder determined based on the number of Registrable
Securities held by such Holders being registered). All Holders proposing
to distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the
Holders of a majority of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market stand-off
agreement of up to 180 days if required by such underwriters).
Notwithstanding any other provision of this Section 2(b), if the
underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then
the Company shall so advise all Holders of Registrable Securities that
would otherwise be registered and underwritten pursuant hereto, and the
number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and
allocated among the Holders of Registrable Securities on a pro rata
basis according to the number of Registrable Securities then outstanding
held by each Holder requesting registration (including the initiating
Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall
not be reduced unless all other securities of the Company and any
selling securityholder other than the Holders are first entirely
excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be
withdrawn from the registration.
(iii) Maximum Number of Demand Registrations. The
Company shall be obligated to effect only three (3) such registrations
pursuant to this Section 2(b).
(iv) Deferral. Notwithstanding the foregoing, if
the Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 2(b), a certificate
signed by the Chief Executive Officer of the Company stating that in the
good faith judgment of the Board, it would be materially detrimental to
the Company and its stockholders for such registration statement to be
filed, then the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of
the initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve (12) month period.
(v) Expenses. All expenses incurred in connection
with any registration pursuant to this Section 2(b), including all
federal and "blue sky" registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of counsel for
the Company (but excluding underwriters' discounts and commissions
relating to shares sold by the Holders and any fees and disbursements of
counsel to the
4
<PAGE> 5
Holders), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2(b) shall bear such Holder's
proportionate share (based on the total number of shares sold in such
registration other than for the account of the Company) of all
discounts, commissions or other amounts payable to underwriters or
brokers in connection with such offering by the Holders. Notwithstanding
the foregoing, the Company shall not be required to pay for any expenses
of any registration proceeding begun pursuant to this Section 2(b) if
the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered,
unless the Holders of such majority agree that such registration
constitutes the use by the Holders of one (1) demand registration
pursuant to this Section 2(b) (in which case such registration shall
also constitute the use by all Holders of Registrable Securities of one
(l) such demand registration); provided further, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse
change relating to the business or operations of the Company not known
to the Holders at the time of their request for such registration and
have withdrawn their request for registration after learning of such
material adverse change, then the Holders shall not be required to pay
any of such expenses and such registration shall not constitute the use
of a demand registration pursuant to this Section 2(b).
(c) Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least twenty (20) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any employee benefit plan or any
merger or other corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(i) Underwriting. If a registration statement under
which the Company gives notice under this Section 2(c) is for an
underwritten offering, then the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in such a registration pursuant
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing
to distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting
(including a market
5
<PAGE> 6
stand-off agreement of up to 180 days if required by such underwriters);
provided, however, that it shall not be considered customary to require
any of the Holders to provide representations and warranties regarding
the Company or indemnification of the underwriters for material
misstatements or omissions in the registration statement or prospectus
for such offering. Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares from
the registration and the underwriting; provided; however, that the
securities to be included in the registration and the underwriting shall
be allocated, (A) first to the Company (provided, however, that a
minimum of fifteen percent (15%) of the number of Registrable Securities
that each Holder (where any Registrable Securities that are not shares
of Common Stock but are exercisable or exchangeable for, or convertible
into, shares of Common Stock, shall be deemed to have been so exercised,
exchanged or converted for such purpose) must also in any event be
included), (B) second, to the extent the managing underwriter determines
additional securities can be included after compliance with Clause (A),
to each of the Holders (to the extent not included pursuant to Clause
(A)) requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities and other securities entitled to registration
then held by each such Holder, and (C) third, to the extent the managing
underwriter determines additional securities can be included after
compliance with Clauses (A) and (B), any other shares of Common Stock or
other securities of the Company. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from
the registration. For any Holder that is a partnership, the Holder and
the partners and retired partners of such Holder, or the estates and
family members of any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons, and for any Holder that
is a corporation, the Holder and all corporations that are affiliates of
such Holder, shall be deemed to be a single "Holder," and any pro rata
reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "Holder," as defined in this
sentence.
(ii) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2(c) (excluding
underwriters' and brokers' discounts and commissions relating to shares
sold by the Holders and any fees and disbursements of counsel to the
Holders), including all federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
(iii) Not Demand Registration. Registration
pursuant to this Section 2(c) shall not be deemed to be a demand
registration as described in Section 2(b) above. Except as otherwise
provided herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities under this
Section 2(c).
6
<PAGE> 7
(d) Form S-3 Registration. If, at any time after the first
anniversary of the Closing, as defined in the Purchase Agreement, the Company is
so requested by any Holder, the Company shall use all reasonable commercial
efforts to cause to be filed and become effective with the SEC a registration
statement on Form S-3, if available, relating to all of the Registrable
Securities; provided, however, that the Company shall have no obligation to file
any registration statement contemplated by this Section 2(d) if the expected
gross proceeds of the sale of Registrable Securities under such registration
statement, based on the market price of the Common Stock as of the date of such
request, does not exceed Three Million Dollars ($3,000,000). The Company shall
use commercially reasonable efforts to cause any such registration statement to
become effective as promptly as practicable after such filing and shall also use
commercially reasonable efforts to obtain any related qualifications,
registrations or other compliances that may be necessary under any applicable
"blue sky" laws. In connection with such registration, the Company will:
(i) Notice. Promptly give written notice to the
Holders of the proposed registration and any related qualification or
compliance; and
(ii) Registration. Effect such registration and all
such qualifications and compliances and as would permit or facilitate
the sale and distribution of all or such portion of such Holders or
Holders' Registrable Securities; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 2(d) in any particular jurisdiction
in which the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such
registration, qualification or compliance.
(iii) Number of Form S-3 Registrations. The Company
shall be obligated to effect only three (3) registrations upon the
request of the Holders under this Section 2(d).
(iv) Expenses. The Company shall pay all expenses
incurred in connection with each registration requested pursuant to this
Section 2(d), excluding underwriters' or brokers' discounts and
commissions relating to shares sold by the Holders and any fees and
disbursements of counsel to the Holders, but including federal and "blue
sky" registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel.
(v) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2(d), a certificate signed by the
Chief Executive Officer of the Company stating that in the good faith
judgment of the Board, it would be materially detrimental to the Company
and its stockholders for such registration statement to be filed, then
the Company shall have the right to defer such filing for a period of
not more than ninety (90) days after receipt of the request of the
initiating Holders; provided, however, that the Company may not utilize
this right more than once in any twelve (12) month period, and the
period of time that the Company is obligated to maintain the
effectiveness of any
7
<PAGE> 8
registration statement under Clause (vii) below shall be extended for
the length of any such period of deferral.
(vi) Not Demand Registration. Form S-3
registrations shall not be deemed to be demand registrations as
described in Section 2(b) above.
(vii) Maintenance. The Company shall use all
reasonable commercial efforts to maintain the effectiveness of any Form
S-3 registration statement filed under this Section 2(d) until the
earlier of: (a) the date on which all of the Registrable Securities have
been sold; and (b) sixty (60) days after the effective date of such
registration statement; provided, however, that unless all of the
Registrable Securities held by the Investor as of such anniversary date
could then be sold in a single transaction in accordance with Rule 144
under the Securities Act without exceeding the volume limitations
thereof, if the Company receives written notice from the Investor that
the Investor may be deemed to be an "affiliate" of the Company for
purposes of the Securities Act, the date in this Clause (b) shall be
extended until the Investor advises the Company that it no longer
believes it may be deemed such an "affiliate."
(e) Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities under this Agreement the
Company shall, as expeditiously as reasonably possible:
(i) Registration Statement. Prepare and file with
the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such
registration statement to become effective; provided, however, that,
except as otherwise required in this Section 2, the Company shall not be
required to keep any such registration statement effective for more than
sixty (60) days.
(ii) Amendments and Supplements. Prepare and file
with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement.
(iii) Prospectuses. Furnish to the Holders such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are
included in such registration.
(iv) Blue Sky. Use commercially reasonable efforts
to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
8
<PAGE> 9
(v) Underwriting. In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), with the managing
underwriter(s) of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under
such an agreement; provided, however, that it shall not be considered
customary to require any of the Holders to provide representations and
warranties regarding the Company or indemnification of the underwriters
for material misstatements or omissions in the registration statement or
prospectus for such offering.
(vi) Notification. Notify each Holder of
Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
(f) Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Sections 2(b), (c) or (d) that the selling Holders shall furnish to the Company
such information regarding themselves, the Registrable Securities held by them,
and the intended method of disposition of such securities as shall be required
to timely effect the registration of their Registrable Securities.
(g) Indemnification. In the event any Registrable
Securities are included in a registration statement under Sections 2(b), (c) or
(d):
(i) By the Company. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, the partners,
officers, shareholders, employees, representatives and directors of each
Holder, any underwriter (as determined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended, against any losses, claims, damages, or Liabilities
(joint or several) to which they may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
(A) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(B) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
9
<PAGE> 10
(C) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any
federal or state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling person of such Holder.
(ii) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or any of
such other Holder's partners, officers, shareholders, employees,
representatives and directors and any person who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities (joint or several) to which
the Company or any such officer or director, controlling person,
underwriter or other such Holder, partner, officer, shareholder,
employee, representative, director or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company or any
such officer or director, controlling person, underwriter or other
Holder, partner, officer, shareholder, employee, representative,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or
action: provided, however, that the indemnity agreement contained in
this subsection shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld; and provided, further, that the total amounts
payable in indemnity by a Holder under this subsection or otherwise in
respect of any and all Violations shall not exceed in the aggregate the
net proceeds received by such Holder in the registered offering out of
which such Violations arise.
10
<PAGE> 11
(iii) Notice. Promptly after receipt by an
indemnified party under of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this section, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such
indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential conflict of interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of liability under
this Section 2(g) except to the extent the indemnifying party is
prejudiced as a result thereof.
(iv) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are subject to
the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement
in question becomes effective or the amended prospectus filed with the
SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the
Final Prospectus was timely furnished to the indemnified party and was
not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities
Act.
(v) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in
any case in which either (A) any Holder exercising rights under this
Agreement, or any controlling person of any such Holder, makes a claim
for indemnification pursuant to this section, but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section
provides for indemnification in such case, or (B) contribution under the
Securities Act may be required on the part of any such selling Holder or
any such controlling person in circumstances for which indemnification
is provided under this section; then, and in each such case, the Company
and such Holder will contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering price of
its Registrable Securities offered by and sold under the registration
statement bears to the public offering price of all securities offered
by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided,
11
<PAGE> 12
however, that, in any such case: (X) no such Holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (Y) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation.
(vi) Survival. The obligations of the Company and
Holders under this Section 2(g) shall survive until the third
anniversary of the completion of any offering of Registrable Securities
in a registration statement, regardless of the expiration of any
statutes of limitation or extensions of such statutes.
(h) Termination of the Company's Obligations. The Company
shall have no obligations pursuant to this Section 2 with respect to any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 2(b), (c) or (d) more than five (5) years after the date of
this Agreement or if, in the opinion of counsel to the Company, all such
Registrable Securities to be sold by any Holder may then be sold under Rule 144
in a single transaction without exceeding the volume limits thereunder.
(i) No Superior Registration Rights to Third Parties.
Without the prior written consent of Investor, the Company covenants and agrees
that it shall not grant, or cause or permit to be created, for the benefit of
any person or entity any registration rights of any kind (whether similar to the
demand, "piggyback" or Form S-3 registration rights described in this Section 2,
or otherwise) relating to shares of the Company's Common Stock or any other
securities of the Company that are superior to the rights granted under this
Section 2. The Company reserves the right to grant registration rights relating
to the Company's Common Stock or any other securities of the Company that are
pari passu with the rights granted to Investor under this Section 2.
(j) Suspension Provisions. Notwithstanding the foregoing
subsections of this Section 2, the Company shall not be required to take any
action with respect to the registration or the declaration of effectiveness of
the registration statement following written notice to the Holders from the
Company (a "Suspension Notice") of the existence of any state of facts or the
happening of any event (including pending negotiations relating to, or the
consummation of, a transaction, or the occurrence of any event that the Company
believes, in good faith, requires additional disclosure of material, non-public
information by the Company in the registration statement that the Company
believes it has a bona fide business purpose for preserving confidentiality or
that renders the Company unable to comply with the published rules and
regulations of the SEC promulgated under the Securities Act or the Securities
Exchange Act, as in effect at any relevant time (the "Rules and Regulations"))
that would result in (i) the registration statement, any amendment or
post-effective amendment thereto, or any document incorporated therein by
reference containing an untrue statement of a material fact or omitting to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the prospectus issued under the
registration statement, any prospectus supplement, or any document incorporated
therein by reference including an untrue statement of
12
<PAGE> 13
material fact or omitting to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, provided that the Company (X) shall not issue a Suspension
Notice more than once in any 12 month period, (Y) shall use its best efforts to
remedy, as promptly as practicable, but in any event within 90 days of the date
on which the Suspension Notice was delivered, the circumstances that gave rise
to the Suspension Notice and deliver to the Holders notification that the
Suspension Notice is no longer in effect and (Z) shall not issue a Suspension
Notice for any period during which the Company's executive officers are not
similarly restrained from disposing of shares of the Company's Common Stock.
Upon receipt of a Suspension Notice from the Company, all time limits applicable
to the Holders under this Section 2 shall automatically be extended by an amount
of time equal to the amount of time the Suspension Notice is in effect, the
Holders will forthwith discontinue disposition of all such shares pursuant to
the registration statement until receipt from the Company of copies of
prospectus supplements or amendments prepared by or on behalf of the Company
(which the Company shall prepare promptly), together with a notification that
the Suspension Notice is no longer in effect, and if so directed by the Company,
the Holders will deliver to the Company all copies in their possession of the
prospectus covering such shares current at the time of receipt of any Suspension
Notice.
3. ASSIGNMENT. The rights of the Investor under Sections 1 and 2
are transferable to any purchaser or transferee of the Purchased Shares, the
Warrant or the Warrant Shares; provided, however, that Investor shall only be
permitted to assign its rights under Section 1 and 2 appurtenant to the Warrant
and/or the Warrant Shares to any person or entity that is a permitted transferee
of the Warrant under Section 8 of the Warrant; and provided, further, that any
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement.
4. EXCHANGE ACT REPORTS. The Company agrees to:
(a) Use commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of the Company
under the Securities Act and the Securities Exchange Act of 1934 (the "Exchange
Act").
(b) Furnish to each Holder forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, or that it qualifies as
a registrant whose securities may be resold pursuant to Form S-3.
(c) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act.
(d) So long as Investor owns the Purchased Shares or the
Warrant Shares, furnish to the Investor upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act and such other reports and documents so
filed with the SEC as an Investor may reasonably request in availing itself of
any rule or regulation of the SEC allowing an Investor to sell any such
securities without registration.
13
<PAGE> 14
5. MISCELLANEOUS.
(a) Successors and Assigns. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
(b) Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of Delaware, without reference to
principles of conflict of laws or choice of laws.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs, exhibits and schedules will, unless otherwise provided,
refer to sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as Federal Express for next business day delivery under circumstances in
which such service guarantees next business day delivery, or one (1) business
day after facsimile with copy delivered by registered or certified mail, in any
case, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof or at such other address
as the Investor or the Company may designate by giving at least ten (10) days
advance written notice pursuant to this Section 5(e).
(f) Amendments and Waivers. This Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of Purchased Shares and
Warrant Shares representing at least a majority of the total aggregate number of
Purchased Shares and Warrant Shares then outstanding (excluding any of such
shares that have been sold in a transaction in which rights under Section 2 are
not assigned in accordance with this Agreement or sold to the public pursuant to
SEC Rule 144 or otherwise). Any amendment or waiver effected in accordance with
this Section 5(f) will be binding upon the Investor, the Company and their
respective successors and assigns. Notwithstanding the foregoing, the provisions
of Sections 2 and 3 may not be amended without the written consent of the
Company and the Investor, which may be withheld in either of their sole and
absolute discretions.
14
<PAGE> 15
(g) Severability. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision will be excluded
from this Agreement and the balance of the Agreement will be interpreted as if
such provision were so excluded and will be enforceable in accordance with its
terms.
(h) Entire Agreement. This Agreement, together with the
Purchase Agreement and all exhibits and schedules hereto and thereto constitutes
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof.
(i) Further Assurances. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(j) Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(k) Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of this Agreement and
the Purchase Agreement and the consummation of the transactions contemplated
hereby and thereby (including the costs associated with any filings with, or
compliance with any of the requirements of, any governmental authorities), shall
be the sole and exclusive responsibility of such party.
(l) Competition. Nothing set forth herein shall be deemed
to preclude, limit or restrict the Company's or the Investor's ability to
compete with the other.
(m) Stock Splits, Dividends and other Similar Events. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PROXIM, INC. MOTOROLA, INC.
By: /s/ Keith E. Glover By: /s/ Bruce M. Stone
------------------------------- --------------------------------------
Name: Keith E. Glover Name: Bruce M. Stone
---------------------------- ------------------------------------
Title: Chief Financial Officer Title: S.V.P. & GM Motorola
-------------------------- ----------------------------------
Date Signed: June 2, 1999 Date Signed: June 2, 1999
--------------------- ----------------------------
Address: 295 North Bernardo Avenue Address: Multimedia Group
Mountain View, CA 94043 Building M4-40
20 Cabot Boulevard
Telephone No: (650) 960-1630 Mansfield, MA 02048
Facsimile No: (650) 965-4690 Attention: Senior VP
and General Manager
with copies to:
Proxim, Inc.
Attention: Keith E. Glover Facsimile No.: (508) 261-4675
Chief Financial Officer
295 North Bernardo Avenue with copies to:
Mountain View, CA 94043
Motorola, Inc.
and Law Department
Attention: General Counsel
Wilson, Sonsini, Goodrich & Rosati 1303 East Algonquin Road
Attention: Jeffrey D. Saper Schaumburg, IL 60196
650 Page Mill Road Facsimile No.: (847)576-3628
Palo Alto, California 94304-1050
Telephone No.: (650) 320-4626 and
Facsimile No.: (650) 493-6811
Motorola, Inc.
Corporate Business
Development
1303 East Algonquin Road
Schaumburg, IL 60196
Facsimile No.: (847)576-8890
{Signature page to Investor Rights Agreement between
Motorola, Inc. and Proxim, Inc.}
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 42,060
<SECURITIES> 45,988
<RECEIVABLES> 9,106
<ALLOWANCES> 0
<INVENTORY> 12,544
<CURRENT-ASSETS> 111,588
<PP&E> 13,674
<DEPRECIATION> 7,375
<TOTAL-ASSETS> 121,160
<CURRENT-LIABILITIES> 11,637
<BONDS> 0
0
0
<COMMON> 105,281
<OTHER-SE> 4,242
<TOTAL-LIABILITY-AND-EQUITY> 121,160
<SALES> 16,002
<TOTAL-REVENUES> 16,002
<CGS> 8,403
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<OTHER-EXPENSES> 6,221
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<INCOME-PRETAX> 2,347
<INCOME-TAX> 1,136
<INCOME-CONTINUING> 1,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,261
<EPS-BASIC> .11
<EPS-DILUTED> .10
</TABLE>
