For Further Information Contact:
Proxim Wireless
David Renauld
Vice President, Corporate Affairs
(413) 584-1425
ir@proxim.com
Proxim Wireless Provides Details about Recent Equity Transaction
Silicon Valley, August 18, 2009 – On August 13, 2009, Proxim Wireless Corporation (OTCQX: PRXM) completed an equity financing transaction. Proxim issued an initial press release on August 13, 2009 concerning this transaction. This current press release provides more details about that transaction.
On August 13, 2009, Proxim entered into a Preferred Stock Purchase Agreement with SRA OSS, Inc. (a wholly owned subsidiary of SRA Holdings, Inc.), Lloyd I. Miller, III, and Milfam II L.P. The primary terms of that stock purchase agreement are summarized as follows:
- Proxim issued 2.5 million shares of its new Series A Convertible Preferred Stock and 1.25 million shares of its new Series B Non-Convertible Preferred Stock in a private placement all at $2.00 per share for total consideration of $7.5 million
- SRA OSS purchased 1.25 million shares of the Series A stock and all 1.25 million shares of the Series B stock for total cash consideration of $5.0 million with the funds coming from its parent company SRA Holdings, Inc.
- Each of Mr. Miller and Milfam II purchased 625,000 shares of Series A stock for cash consideration of $625,000 and debt cancellation of $625,000 (as discussed in more detail below)
- The agreement contains various representations, warranties, covenants, indemnifications, and other terms relating to the private placement transaction, Proxim, its subsidiaries, their businesses, and the investors
- The investors agreed not to engage in a variety of short-sale transactions
- Proxim agreed to increase the size of its Board of Directors and Compensation Committee by one and to name an SRA OSS designee to the board and Compensation Committee
- Thereafter, so long as SRA OSS (with its affiliates) owns at least 51% of its original investment, Proxim agreed to nominate one SRA OSS designee for election as a member of Proxim’s Board of Directors and, if the designee is elected, to put that SRA OSS designee on Proxim’s Board of Directors Compensation Committee
- Further, so long as SRA OSS (with its affiliates) owns at least 51% of its original investment, SRA OSS has right to designate one observer to meetings of the Proxim Board of Directors (two observers if the SRA OSS Board of Directors designee is not elected as a director)
The terms of the new Series A and Series B preferred stock are set forth in a Certificate of Designation filed by Proxim with the Delaware Secretary of State on August 13, 2009. That certificate, which became effective on filing, amended Proxim’s Certificate of Incorporation, as previously amended to date. The primary terms of the Series A and Series B stock set forth in that certificate of designation are summarized as follows:
- 2.5 million shares of Series A Convertible Preferred Stock and 1.25 million shares of Series B Non-Convertible Preferred Stock were authorized from Proxim’s 4.5 million shares of undesignated preferred stock
- Dividends accrue on the Series A stock at a rate of 7% per annum compounded quarterly (but only while the market price of Proxim’s common stock is less than the $0.15 conversion price); dividends accrue on the Series B stock at a rate of 10% per annum compounded quarterly (but that dividend rate could be increased to 15% per annum in three specific situations)
- Proxim may not pay dividends on any other class or series of stock unless all Series A and Series B accrued dividends have been paid or unless the holders of a majority of the Series B shares otherwise approve
- In the case of most acquisition and liquidation situations, first the holders of the Series A stock and the Series B stock would receive their original investment plus accrued dividends and then the remaining proceeds would be distributed among the holders of the common stock (but if the proceeds remaining available for distribution after the Series A and Series B preferential return exceed $30 million, then those remaining proceeds are distributed pro rata among the holders of the common stock and the holders of the Series A stock on an as-converted basis)
- The holders of the Series A stock and Series B stock can request redemption of all of that stock after three years for an amount equal to the purchase price plus accrued dividends; Proxim can request redemption of that stock after four years also on an “all or none” basis
- Holders of the Series A stock will vote with the holders of the common stock as a single class on an as-converted basis; the Series B stock generally has no stockholder voting rights
· Each share of Series A stock is initially convertible at the option of the holder into 13 1/3 shares of Proxim’s common stock (determined by dividing the $2.00 per share Series A purchase price by the $0.15 conversion price); the Series B stock is not convertible into Proxim’s common stock
· The initial $0.15 conversion price is subject to typical adjustments for stock splits and combinations, stock dividends and distributions, and mergers and reorganizations
· The initial $0.15 conversion price is subject to anti-dilution adjustment if Proxim issues additional equity securities at a per share price less than the conversion price on or before February 13, 2010
· Proxim agreed not to take certain actions relating to primarily the Series B stock without the consent of the holders of a majority of the Series B stock (with the consent rights existing only so long as at least 51% of the originally-issued number of Series B shares remain outstanding and SRA OSS (with its affiliates) owns at least 51% of the outstanding shares of Series B stock)
In connection with these transactions, Proxim also entered into an Investors Rights Agreement, dated as of August 13, 2009, with the other parties to the Preferred Stock Purchase Agreement. The primary terms of that Investors Rights Agreement are summarized as follows:
- Proxim made various covenants to the investors and granted them various access and information rights
- Proxim agreed not to issue any more shares of Series A or Series B stock without the consent of the holders of the majority of the then-outstanding shares of the relevant class
- Proxim granted piggyback registration rights to the investors as well as Form S-3 registration rights
- Proxim granted a right of first offer on subsequent capital-raising equity financings to the investors (so long as the investor wanting to participate holds at least 51% of its original investment) for up to one year after closing (through August 13, 2010)
Proxim also entered into a Strategic Alliance Agreement, dated as of August 13, 2009, with SRA OSS. That agreement provides for each party to promote the products and services of the other party to the original party’s customers as well as commissions that each party would pay to the other on business generated from these cross-promotional activities. Proxim also agreed not to promote to its major and strategic customers services offered by entities that compete with SRA OSS’ software services.
Proxim entered into a Statement of Agreements, dated as of August 13, 2009, with Lloyd I. Miller, III and Milfam II L.P. addressing three topics:
- Mr. Miller and Milfam consented to the transactions described above (which consent was required pursuant to previous documentation in place between Proxim and those entities)
- Proxim agreed to reduce the exercise price of the two warrants previously issued to Mr. Miller and Milfam, each to purchase 625,000 shares of Proxim common stock for a total of 1,250,000 shares, from $0.53 per share to $0.15 per share
- Proxim, Mr. Miller, and Milfam agreed that half the purchase price from each of Mr. Miller and Milfam for the shares of Series A stock purchased pursuant to the Preferred Stock Purchase Agreement ($625,000 each) would be paid in cash and the remaining half would be paid by cancellation of indebtedness owed to each of Mr. Miller and Milfam pursuant to a Securities Purchase Agreement, dated as of July 28, 2008, and related notes issued pursuant thereto (which agreement is described in the Form 8-K filed by Proxim with the Securities and Exchange Commission on July 29, 2008). Thus, of the aggregate $2.5 million purchase price for the shares of Series A stock they acquired, Mr. Miller and Milfam together paid $1.25 million in cash and $1.25 million of existing debt was cancelled.
Mr. Miller, directly and through affiliated entities including Milfam II L.P., was the largest stockholder of Proxim prior to the transactions described above and still is after those transactions (based on “as-converted” voting ownership). In a Schedule 13D/A filed with the Securities and Exchange Commission on August 4, 2008, Mr. Miller disclosed that he was the beneficial owner of 3,553,940 shares of Proxim’s outstanding common stock, or approximately 15.1% of Proxim’s issued and outstanding common stock (based on the number of shares outstanding as of July 31, 2009). As mentioned above, Mr. Miller, directly and through Milfam II L.P., has warrants to purchase 1,250,000 shares of Proxim’s common stock at a price of $0.15 per share. As described in Mr. Miller’s filings with the Securities and Exchange Commission, Mr. Miller previously acquired shares of Proxim’s common stock in the open market and in a private placement that occurred in July 2007, as described in the Form 8-K filed by Proxim with the Securities and Exchange Commission on July 24, 2007. In addition, Mr. Miller previously loaned Proxim $3.0 million in July 2008, as described in the Form 8-K filed by Proxim with the Securities and Exchange Commission on July 29, 2008. Proxim believes Mr. Miller made all these investments from his own funds. As previously disclosed, Mr. Miller originally recommended at different times that each of Alan B. Howe and J. Michael Gullard become a director of Proxim. Each of these individuals has subsequently been elected as a director at an annual meeting of stockholders of Proxim. Mr. Miller holds no board or management position with Proxim.
As a result of the transactions described above, SRA OSS and Mr. Miller (including his affiliated entities) now together control approximately 65% of the “as-converted” stockholder voting power of Proxim. As of August 13, 2009, after the closing of the transactions contemplated by the Preferred Stock Purchase Agreement, Proxim had 23,519,069 shares of common stock outstanding, 2,500,000 shares of Series A Convertible Preferred Stock outstanding, and 1,250,000 shares of Series B Non-Convertible Preferred Stock outstanding. As described above, the holders of the common stock and the holders of the Series A stock generally vote together as a single class on items presented for a stockholder vote (with the holders of Series A stock having 13 1/3 votes for each share of Series A stock for a total of approximately 33,333,334 votes). As a result, on an “as converted” basis, there are generally 56,852,402 votes that may be cast on items presented for a stockholder vote, of which Mr. Miller controls approximately 36% and SRA OSS controls approximately 29%. As described above, Mr. Miller also has the ability to purchase 1,250,000 additional shares of Proxim common stock through the exercise of his warrants. Therefore, Mr. Miller and SRA OSS together can determine the outcome of most items submitted to the stockholders for approval.
This issuance of Series A and Series B stock described above was completed without registration under the Securities Act of 1933, as amended, or state securities laws, in reliance upon the exemptions contained in Section 4(2) and/or 4(6) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act for transactions not involving a public offering and in reliance on similar exemptions under applicable state laws. This reliance was based in part on representations and warranties made to Proxim by the investors in the Preferred Stock Purchase Agreement. Accordingly, the securities issued in the Private Placement have not been registered under the Securities Act and, until so registered, the securities may not be offered or sold in the United States absent registration or availability of an applicable exemption from registration. The certificates evidencing the shares of Series A and Series B stock contain a legend stating that the shares have not been registered under the Securities Act and setting forth or referring to the restrictions on transferability and sale of the shares under the Securities Act.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale, would be unlawful prior to the registration or qualification under the securities laws of any such state.
About Proxim Wireless
Proxim Wireless Corporation (OTCQX: PRXM) is a leading provider of end-to-end broadband wireless systems that deliver the quadruple play of voice, video, data and mobility to all organizations today. Our systems enable a variety of wireless applications including security and surveillance, VoIP, last mile access, enterprise LAN connectivity and Point-to-Point wireless backhaul. We have shipped more than 1.8 million wireless devices to more than 235,000 customers in over 65 countries worldwide. Proxim is ISO-9001 certified. Information about Proxim can be found at www.proxim.com. For investor relations information, e-mail ir@proxim.com or call +1 413-584-1425.
Safe Harbor Statement
Statements in this press release that are not statements of historical facts are forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from the results anticipated in these forward-looking statements. The forward-looking statements involve risks and uncertainties that could contribute to such differences including those relating to and arising from dilution, changed voting power, stock preferential rights, and other issues resulting from the stock sale described in this press release; possible stagnation and decline in the price of Proxim’s common stock as a result of these transactions; the reactions, positive or negative, of customers, investors, employees, competitors, and others to the stock sale described in this press release and its ramifications; uncertainties as to the extent of any specific equipment or service offerings; delays or changes in or cancellation of contemplated product or service developments or offerings; and difficulties or delays in supplying products with the features, performance, compliances, certifications, cost, price, and other characteristics desired by customers, investors, or other partners. Further information on these and other factors that could affect Proxim’s actual results is contained in the filings made by Proxim with the Securities and Exchange Commission (available at www.sec.gov), including without limitation in the Annual Report on Form 10-K filed by Proxim on March 31, 2009, and will be included in postings made by Proxim from time to time with the OTCQX (www.otcqx.com) and in its other public statements, which may be available on Proxim’s website (www.proxim.com).