Exhibit 10.31
TERMS SHEET
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Dated: March 25, 2003
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Issuer: AirNet Communications Corporation, a Delaware
corporation (the "Company")
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Investors: TECORE, Inc. ("Tecore")
SCP Private Equity Partners II, LP ("SCP II")
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Proposed Investment: $16,000,000 principal amount of Senior Secured
Convertible Notes (the "Notes"), with $12,000,000
principal amount to be purchased by TECORE and
$4,000,000 by SCPII. (Note: these figures assume
aggregate fundings of $1,600,000 by both Tecore and
SCP prior to March 21, 2003, and with additional
fundings by both SCP and Tecore of $800,000 prior
to April 24, 2003 and $600,000 on or after that
date.
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Purchase Price of Notes: Par (i.e., $16,000,000)
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Payment of Purchase Price
of Notes: $4,000,000 at Closing by TECORE (including rollover
of $3.0 million from the Bridge)
$4,000,000 at Closing by SCPII (including rollover
of $3.0 million from the Bridge)
$1,000,000 on or prior to 6/30/03 by TECORE
$1,000,000 on or prior to 9/30/03 by TECORE
$1,000,000 on or prior to 12/31/03 by TECORE
$1,000,000 on or prior to 3/31/04 by TECORE
$1,000,000 on or prior to 6/30/04 by TECORE
$1,000,000 on or prior to 9/30/04 by TECORE
$1,000,000 on or prior to 12/31/04 by TECORE
$1,000,000 on or prior to 3/30/05 by TECORE
The obligations of the Investors hereunder
shall be evidenced by notes or other
enforceable evidence thereof satisfactory
to all parties.
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Terms of Notes: Interest: Interest shall accrue on 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 accrued
interest shall be due and payable under each Note
four years from the Closing Date ("Maturity Date").
Collateral: The Notes shall be
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
the unrepaid principal and accrued interest then
outstanding under the Note of either Investor (the
"Conversion Amount") may be converted at any time at
the election of such Investor, 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 hereinafter 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 $0.10810 (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. Should either Investor
fail to pay an installment of the purchase price
under any Note in accordance with the schedule set
forth above, the other Investor will have the right
but not the obligation to assume the balance of the
funding commitment of the defaulting Investor (i.e.,
the amount not yet advanced by that Investor to the
Company under its Note, either prior to or after the
Closing), and in the absence of a cure of such
payment default within twenty calendar days of the
said due date, the Conversion Amount under the Notes
held by such Investor (i.e. the aggregate amount
advanced by that Investor under its Note prior to
default, both before and after the Closing) shall
automatically convert into Common Stock, and the
defaulting Investor shall lose all benefits under
the Security Agreement, Collateral Assignment
Agreement and other related agreements
collateralizing the Notes
Antidilution Protection: If the
Company at any time issues
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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
21,766,212 shares of Common Stock (and shares of
Common Stock upon the exercise thereof). The
Company's management bonus program and acquisition
bonus program shall be cancelled.
Covenants; The Company shall be
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 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 both Investors; 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
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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Board of Directors: Following the Closing, the Board of Directors of the
Company will consist of a total of ten directors two
of whom shall be designated by SCPII, four of whom
shall be designated by Tecore, three independent
directors, satisfactory to SCP II and Tecore, who
shall be elected by the shareholders of the Company,
and the Company's
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CEO. A director elected by SCP II, and a director
elected by Tecore, each 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. Upon Tecore's ownership (by virtue of its
ownership of the Common Stock underlying its Note
after conversion of its Note into Common Stock) of
more than a majority of the outstanding shares of
Common Stock, the Board of Directors of the Company
will consist of a total of eleven directors, one of
whom shall be designated by SCPII, 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.
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 both of 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
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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, up to a maximum of
$200,000 split between the Investors proportionately
to the amount of investment in this transaction by
each of the Investors. 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 before April 24, 2003, unless extended
by both of 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 which are mutually
satisfactory to the undersigned.
AIRNET COMMUNICATIONS CORPORATION
By: /s/ Xxxxx Xxxxx (SEAL)
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Name: Xxxxx Xxxxx, President & CEO
as President & CEO
as directed by
AirNet's Board.
TECORE, INC.
By: /s/ Xxx Xxxxxxx (SEAL)
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Name: Xxx Xxxxxxx, President & CEO
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, Manager
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APPENDIX A
Proposed Transaction - March 25th Proposal
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Assumptions
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Ttl Current Shares o/s (m) 33.71
See below*. Outstanding options largely excluded from the cap table.
Pre-Money Valuation (m) $ 4.6762
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 $ 0.10810
Re-allocation to mgmt 10.0%
New Financing Cap Table Summary
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New Money Voting Stock as converted** Partially Diluted*
Shares % ownership Shares % ownership
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SCP (New) $ 4.00 37.002775 18.9% 37.002775 17.0%
SCP Premium (for $500k) 4.625347 2.4% 4.625347 2.1%
Tecore $ 12.00 111.008326 56.8% 111.008326 51.0%
Total $ 16.0 152.636448 78.0% 152.636448 70.1%
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Current Shareholders 42.959457 22.0% 43.259457 19.9%
New Management Shares 21.766212 10.0%
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Total Capitalization 195.595905 100.0% 217.662116 100.0%
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Cap Table
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Stockholders Current o/s Pre Money Post Money Shares o/s - As Post Money Partially Diluted*
Shares Ownership converted** (With Mgmt Options)
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New Financing (as Converted)
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Tecore 111,008,326 56.8% 111,008,326 51.0%
SCP II 41,628,122 21.3% 41,628,122 19.1%
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Total Series C 152,636,448 78.0% 152,636,448 70.1%
Series B Preferred Stock
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SCP II 3,184,713 9.4% 6,369,427 3.3% 6,369,427 2.9%
Mellon Ventures 3,184,713 9.4% 6,369,427 3.3% 6,369,427 2.9%
Tandem PCS 3,184,713 9.4% 6,369,427 3.3% 6,369,427 2.9%
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Total Series B 9,554,140 28.3% 19,108,281 9.8% 19,108,281 8.8%
Comon Stock
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SCP II --
SCP I 3,437,687 10.2% 3,437,687 1.8% 3,437,687 1.6%
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 1.1% 2,145,465 1.0%
VFC Capital (Xxxxxx) 3,401,828 10.1% 3,401,828 1.7% 3,401,828 1.6%
Others 14,218,083 42.2% 14,218,083 7.3% 14,218,083 6.5%
Options* 300,000 0.9% 0.0% 300,000 0.1%
New Management Shares 0.0% 21,766,212 10.0%
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Totals 33,705,317 100% 195,595,906 100.0% 217,662,118 100.0%
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Total Mellon & Tandem 8,993,207 26.7% 15,362,634 7.9% 15,362,634 7.1%
Total SCP I & II 6,622,400 19.6% 51,435,236 26.3% 51,435,236 23.6%
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* All options o/s have strike prices above $0.42. 300,000 options included as
an approximate stock equivalent of those options.
It is assumed that all warrants and options are otherwise above $1 and are
NOT included in the Partially Diluted Cap Table.
All New Management Options are included in the "Partially Diluted" Cap Table.
** Actual Voting Rights before conversion of the Notes into stock may differ
