Exhibit 10.23
TERMS SHEET
Dated: January 24, 2003
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Issuer: AirNet Communications Corporation, a
Delaware corporation (the "Company")
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Investors: SCP Private Equity Partners II, LP ("SCP
II") TECORE, Inc. ("Tecore")
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Proposed Investment: $16,000,000 principal amount of Senior
Secured Convertible Notes (the "Notes"),
with $8,000,000 principal amount to be
purchased by each of SCP II and Tecore
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Purchase Price of Notes: Par (i.e., $16,000,000)
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Payment of Purchase Price $8,000,000 at Closing
of Notes: $1,000,000 on or prior to 6/30/03
$2,000,000 on or prior to 9/30/03
$1,000,000 on or prior to 12/31/03
$1,000,000 on or prior to 3/31/04
$1,000,000 on or prior to 6/30/04
$1,000,000 on or prior to 12/31/04
$1,000,000 on or prior to 6/30/05
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Terms of Notes: Interest: Interest shall accrue on
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the outstanding principal amount of each
Note at the rate of 12% per annum. (Either
Investor may cause the interest payable to
both Investors to be payable in Common Stock
(valued at market value) if necessary to
comply with NASDAQ National Market
requirements.)
Term: The principal and all
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accrued interest shall be due and payable
under each Note four years from the Closing
Date ("Maturity Date").
Collateral: The Notes shall be
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secured by a first perfected security
interest in all of the assets of the
Company, including, without limitation, all
intellectual property of the Company.
Conversion: All or any portion of
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the principal and interest under the Notes
(the "Conversion Amount") may be converted
at any time at the election of the holders
of a majority of the outstanding Notes
("Majority Holders"), into a number of
shares of Common Stock at a conversion price
per share equal to the Conversion Amount
divided by the Applicable Conversion Price,
as here-
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inafter defined. At the closing, the
Applicable Conversion Price will be equal
to the Purchase Price, as hereinafter
defined. The Applicable Conversion Price
will be subject to future adjustment upon
certain dilutive issuances of equity (see
"Antidilution Protection" below).The
Purchase Price shall equal $0.11558 (the
"Purchase Price").
In addition, the Notes will
automatically convert into Common Stock
upon: (i) the closing of a secondary public
offering of Common Stock at a public
offering price per share (prior to
underwriter commissions and expenses) that
is not less than three times the Applicable
Conversion Price in an offering where the
gross proceeds to the Company would be not
less than $70,000,000 (a "Qualified Public
Offering"); or (ii) the sale of the Company
at a minimum price per share in cash or
stock, of at least three times the
Applicable Conversion Price (a "Qualified
Sale"); provided, however, that in the
event of a sale of the Company to a
privately-held company or to a public
company in which disposition of stock would
be significantly restricted (by low trading
volume or other restrictions), automatic
conversion shall occur only in the event of
a cash sale.
Antidilution Protection: If the
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Company at any time issues Common Stock or
equity securities convertible or
exercisable into Common Stock at a price
per share that is less than the Applicable
Conversion Price in effect immediately
preceding such issuance, the Applicable
Conversion Price will be immediately
reduced to that price per share at which
such securities were issued. The Applicable
Conversion Price shall be similarly reduced
for successive issuances of equity
securities at prices per share that are
less than the Applicable Conversion Price
in effect immediately preceding such
issuances. Notwithstanding the foregoing,
no adjustment shall be made to the
Applicable Conversion Price with respect
to: (i) the issuance of capital stock upon
the conversion of any of the Company's
convertible securities outstanding as of
the Closing; or (ii) the issuance of
employee options for up to 22,240,000
shares of Common Stock (and shares of
Common Stock upon the exercise thereof),
subject to adjustment to up to 29,948,866
shares in the event and to the extent that
the Sales Generation Warrants granted to
Tecore shall become vested. (The Company's
management bonus program and acquisition
bonus program shall be cancelled.)
Covenants; The Company shall be
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party to covenants, both affirmative and
negative, customary with issuances of debt.
Without limitation thereon, the Company
shall not be permitted to incur additional
indebtedness, grant or permit liens or
encumbrances upon its assets, issue
guarantees, pay dividends, increase
salaries or
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add additional employees, merge or
consolidate or sell all or substantially all
of its assets, enter into any transaction
which results in, or suffer, a change in
control, or issue additional securities or
options or warrants therefore without the
prior written consent of the Majority
Holders; provided that the Company shall be
permitted to incur purchase money
indebtedness secured by purchase money liens
on the assets purchased in an aggregate
amount up to $50,000.
Voting: The holders of the Notes
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will have the right to that number of votes
equal to the number of shares of Common
Stock issuable upon conversion of the
Notes; provided that solely for purposes of
determining such number of votes, the
Applicable Conversion Price shall be deemed
to be the closing bid price of the
Company's Common Stock on the date that the
definitive purchase agreement is signed.
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Capitalization: Upon conversion of the Notes obtained by
virtue of this investment, the resulting
share ownership of Common Stock is shown in
Appendix A.
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Issuance of Common Stock and Common Stock: From and after the
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Warrants to Tecore: date of this Terms Sheet and at or prior
to the Closing, Tecore or an affiliate of
Tecore shall execute firm purchase orders
for Company equipment, services or licenses
accepted by the Company in the amount of
$5,000,000 (the "Initial Purchase Orders")
and shall be issued at the Closing
14,133,059 shares of Common Stock for a
purchase price of $0.001 per share.
Warrants: At the Closing, Tecore
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shall be issued, for a purchase price of
$.001 per warrant, warrants (the "Sales
Generation Warrants") to purchase
69,347,700 shares of Common Stock, at an
exercise price per share equal to the
Purchase Price (i.e., $0.11558 per share).
The Sales Generation Warrants shall be
exercisable within two years after the
Closing, and shall vest based on sales
generated by Tecore or an affiliate of
Tecore (other than the Company) as a
customer of the Company before December 31,
2004, in accordance with the following
formula: (a) for each $1,000,000 of gross
margin generated by Tecore sales during
calendar year 2003 (calculated in
accordance with GAAP and including the
Initial Purchase Orders), one-tenth of the
Sales Generation Warrants shall vest, and
(b) for each $2,000,000 of gross margin
generated by Tecore sales during calendar
year 2004 (calculated in accordance with
GAAP), one-tenth of the Sales Generation
Warrants shall vest. For this purpose
"Tecore sales" shall include direct
purchases by Tecore and sales to companies
identified by Tecore. Tecore shall have the
option to substitute royalties on
technology licenses entered into by
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the Company for gross margin. To the extent
more than 300,000 of the Company's stock
options currently issued and outstanding
under its Stock Option Plan are exercised in
the future, the Company will increase the
amount of performance based warrants
available to Tecore as necessary to give
Tecore an opportunity to acquire such number
of shares of the Company's capital stock as
shall constitute 51% of such captital stock
on a fully diluted basis, calculated as of
the Closing Date as contemplated on Appendix
A.
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Board of Directors: Following the Closing, the Board of
Directors of the Company will consist of a
total of ten directors, three of whom shall
be designated by SCP II, three of whom shall
be designated by Tecore, three of whom shall
be independent directors, satisfactory to
SCP II and Tecore, who shall be elected by
the shareholders of the Company, and one of
whom shall be the Company's CEO. Upon
Tecore's ownership (by virtue of its
ownership of (a) the Notes/and or the Common
Stock underlying the Notes after conversion
of the Notes into Common Stock, and (b) its
ownership of Common Stock underlying the
Sales Generation Warrants upon exercise of
the Sales Generation Warrants) on a fully
diluted basis, of in excess of 50% of the
Common Stock, the Board of Directors of the
Company will consist of a total of eleven
directors, one of whom shall be designated
by SCP II, six of whom shall be designated
by Tecore, three of whom shall be
independent directors, satisfactory to SCP
II and Tecore, who shall be elected by the
shareholders of the Company, and one of whom
shall be the Company's CEO. The director
elected by SCP II shall be entitled to be a
member of all significant committees of the
Board of Directors, including without
limitation the Executive Committee, the
Audit Committee, the Compensation Committee,
and the Nominating Committee.
Prior to Closing the Board of Directors of
the Company (directly or through a
committee) shall have designated the slate
of directors to stand for election at the
next meeting of stockholders, and such slate
shall be acceptable to both of the
Investors.
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Registration Rights: The Company shall file a shelf registration
statement with respect to any shares of
Common Stock into which the Notes may
convert. Such registration statement will be
filed not later than 30 days following the
Closing. The Company shall use its best
efforts to cause the effectiveness of such
registration statement as soon as
practicable (and in no event later than 120
days after the Closing) and shall maintain
the effectiveness of the registration
statement for a period ending two years
following the Closing.
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Purchase Agreement: The definitive purchase agreement will be
drafted by counsel to the Investors and will
contain representations, warranties,
covenants (including information and
inspection rights) and indemnification
provisions customary in such transactions
and satisfactory to the Investors.
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Covenants: The Board of Directors of the Company and
the Investors shall consider in good faith
and commence due diligence with respect to
the advisability of merging Tecore and the
Company (with the Company as the surviving
corporation).
The Board of Directors of the Company and
the Investors shall consider alternative
structures to the proposed financing which
would enhance the preservation of the
Company's net operating loss carryforward.
The Company shall defer the payment of
bonuses until such time as shall be approved
by the Investors.
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Conditions to Closing: In addition to customary closing conditions,
the Company shall satisfy the following
conditions:
1. The Company shall have obtained
shareholder approval of the transaction, if
required by the applicable rules of NASDAQ,
and shall have otherwise complied with all
applicable NASDAQ requirements.
2. The holders of the Company's Series B
Preferred Stock shall have converted their
Series B Preferred Stock into Common Stock.
3. The Company shall have made reasonably
satisfactory progress in the development of
the following products: (1) Adaptive Array;
(2) Wildfire II; and (3) AirSite 5b.
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Expenses: The Company will, promptly after any request
therefore, reimburse the Investors for all
reasonable legal fees and expenses related
to the transaction incurred after December
1, 2002, and up to $25,000 per Investor for
financial consulting fees related to the
transaction. At the Investors' option, such
expenses may be deducted from the amount to
be paid to the Company at the Closing.
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Closing Date: Closing of the purchase and sale of the
Notes must occur on or be-
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fore March 24, 2003, unless extended by the
Investors.
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The parties hereby confirm that the Terms Sheet correctly sets forth
the terms and conditions of a proposed financing in the Company. The Terms Sheet
is not legally binding and is subject to negotiation and execution and delivery
of a definitive purchase agreement and related documents.
AIRNET COMMUNICATIONS CORPORATION
By: /s/ Xxxx X. Xxxxx (SEAL)
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TECORE, INC.
By: /s/ Xxx Xxxxxxx (SEAL)
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SCP PRIVATE EQUITY PARTNERS II, L.P.
By: SCP PRIVATE EQUITY II GENERAL PARTNER, L.P., its
General Partner
By: SCP PRIVATE EQUITY II, LLC
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: a Manager
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1/27/03 11:40 AM
Proposed Transaction - Worksheet for Appendix A
Assumptions
Ttl Current Shares o/s (m) 33.71
See below*. Outstanding options largely excluded from the cap table.
Pre-Money Valuation (m) $ 5.0
See below. Does not include $1.5m paid to Series B investors.
Series B Cash Premium $ 0.50
Paid in cash to each holder except to SCP - paid in stock, all from
the post-money value
Series B Stock Premium 100.0%
Additional Shares Implied 9.55
Implied Share Price $0.11558
Re-allocation to mgmt 10.0%
Management will be re-upped to 10% ownership upon vesting of Tecore
Performance warrants
New Financing Cap Table Summary
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New Money With Premniums Paid With Tecore Perf. Warrants
Shares % ownership Shares % ownership
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SCP (New) $ 8.00 69.22 31.1% 69.216127 23.1%
SCP Premium (for $500k) 4.33 1.9% 4.326008 1.4%
Tecore $ 8.00 69.22 31.1% 69.216127 23.1%
Tecore Premium (for orders on closing) 14.13 6.4% 14.133122 4.7%
Tecore Performance Warrants 69.391299 23.2%
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Total $ 16.0 156.89 70.5% 226.282683 75.6%
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Current Shareholders 43.26 19.5% 43.259457 14.4%
New Management Shares 22.24 10.0% 29.949127 10.0%
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Total Capitalization 222.39 100.0% 299.491267 100.0%
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Tecore's Performance Warrants may be increased if more than 300,000 of the
current options o/s are exercised.
Cap Table
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Stockholders Current o/s Pre Money Post Money at Closing Post Money with Tecore
Shares Ownership (With Premiums Paid) Performance Warrants
Options & % of CSEs Issued
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New Financing (as
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Converted)
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Tecore 83,349,249 37.5% 152,740,548 51.0%
SCP II 73,542,135 33.1% 73,542,135 24.6%
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Total Series C 156,891,384 70.5% 226,282,683 75.6%
Series B Preferred Stock
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SCP II 3,184,713 9.4% 6,369,427 2.9% 6,369,427 2.1%
Mellon Ventures 3,184,713 9.4% 6,369,427 2.9% 6,369,427 2.1%
Tandem PCS 3,184,713 9.4% 6,369,427 2.9% 6,369,427 2.1%
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Total Series B 9,554,140 28.3% 19,108,281 8.6% 19,108,281 6.4%
Comon Stock
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SCP II -
SCP I 3,437,687 10.2% 3,437,687 1.5% 3,437,687 1.1%
CIP Capital 169,799 0.5% 169,799 0.1% 169,799 0.1%
Mellon Ventures 478,315 1.4% 478,315 0.2% 478,315 0.2%
Tandem PCS 2,145,465 6.4% 2,145,465 1.0% 2,145,465 0.7%
VFC Capital (Xxxxxx) 3,401,828 10.1% 3,401,828 1.5% 3,401,828 1.1%
Others 14,218,083 42.2% 14,218,083 6.4% 14,218,083 4.7%
Options* 300,000 0.9% 300,000 0.1% 300,000 0.1%
New Management Shares 22,238,982 10.0% 29,949,127 10.0%
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Totals 33,705,317 100% 222,389,824 100.0% 299,491,268 100.0%
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Total Mellon & Tandem 8,993,207 26.7% 15,362,634 6.9% 15,362,634 5.1%
Total SCP I & II 6,622,400 19.6% 83,349,249 37.5% 83,349,249 27.8%
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* All options o/s have strike above $0.42. 300,000 options included as an
approximate stock equivalent of those options. It is assumed that all warrants
with anti-dilution rights will waive such rights.
