Exhibit 10.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE OR THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AIRNET
COMMUNICATIONS CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED REVOLVING
NOTE
FOR VALUE RECEIVED, each of AIRNET
COMMUNICATIONS CORPORATION, a Delaware corporation (the “
Parent ”), and the other companies listed on
Exhibit A attached hereto (such other companies together
with the Parent, each a “ Company ” and
collectively, the “ Companies ”), jointly and
severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands, Fax:
345-949-8080 or its registered assigns or successors in interest
(collectively, the “ Holder ”), the sum of up to
Seven Million Dollars ($7,000,000) or the aggregate amount of
outstanding Loans (as defined in the Security Agreement referred to
below), in each case without duplication of amounts owing by the
Companies to the Holder under the Minimum Borrowing Notes (as
defined in the Security Agreement referred to below), together with
any accrued and unpaid interest hereon, on November 8, 2008
(the “ Maturity Date ”) if not sooner
indefeasibly paid in full (or converted) hereunder.
Capitalized terms used herein
without definition shall have the meanings ascribed to such terms
in the Security Agreement among the Companies and the Holder dated
as of the date hereof (as amended, modified and/or supplemented
from time to time, the “ Security Agreement
”).
The following terms shall apply to
this Secured Revolving Note (this “ Note
”):
ARTICLE I
CONTRACT RATE AND MINIMUM
BORROWING NOTE
1.1 Contract Rate . Subject
to Sections 3.2 and 4.10, interest payable on the outstanding
principal amount of this Note (the “ Principal Amount
”) shall accrue at a rate per annum equal to the “prime
rate” published in The Wall Street Journal from time
to time (the “ Prime Rate ”), plus two percent
(2%) per annum (the “ Contract Rate ”). The
Contract Rate shall be increased or decreased as the case may be
for each increase or decrease in the Prime Rate in an amount equal
to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in the Prime Rate. Subject to
Section 1.2, the Contract Rate shall not at any time be less
than six percent (6%). Interest shall be (i) calculated on the
basis of
a 360 day year, and (ii) payable monthly,
in arrears, commencing on December 1 , 2005 on the
first business day of each consecutive calendar month thereafter
through and including the Maturity Date (or any date of prepayment
permitted hereunder or under the Security Agreement), and on the
Maturity Date (or any date of prepayment permitted hereunder or
under the Security Agreement), whether by acceleration or
otherwise.
1.2 Contract Rate Adjustments and
Payments . The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for
increases or decreases in the Prime Rate which shall be calculated
and become effective in accordance with the terms of
Section 1.1) until the Maturity Date (each a “
Determination Date ”) and shall be subject to
adjustment as set forth herein. If (i) the Parent shall have
registered the shares of the Common Stock underlying the conversion
of the Minimum Borrowing Note and each Warrant on a registration
statement declared effective by the Securities and Exchange
Commission (the “ SEC ”), and (ii) the
closing price of the Common Stock on the Principal Market, as
reported by Bloomberg, L.P., for the five (5) trading days
immediately preceding a Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty-five percent
(25%), the Contract Rate for the succeeding calendar month shall
automatically be reduced by 200 basis points (200 b.p.)
(2%) for each incremental twenty-five percent
(25%) increase in such closing price of the Common Stock above
the then applicable Fixed Conversion Price. Notwithstanding the
foregoing (and anything to the contrary contained herein), in no
event shall the Contract Rate at any time be less than zero percent
(0%).
1.3 [Intentionally
Deleted]
1.4 Repayment of Note . The
Principal Amount of this Note shall be increased or decreased from
time to time to reflect loans advanced and repaid in accordance
with the Security Agreement.
ARTICLE II
CONVERSION RIGHTS AND FIXED
CONVERSION PRICE
2.1 Optional Conversion .
Subject to the terms of this Article II, the Holder shall have the
right, but not the obligation, at any time until the Maturity Date
or during an Event of Default (as defined in Article III), and,
subject to the limitations set forth in Section 2.2, 2.3 and
2.10 hereof, to convert all or any portion of the outstanding
Principal Amount and/or accrued interest and fees due and payable
under this Note into fully paid and nonassessable shares of the
Common Stock at the Fixed Conversion Price. For purposes hereof,
subject to Section 2.6 hereof, the initial “ Fixed
Conversion Price ” means $3.79 which has been determined
on the date of this Note as an amount equal to 300% of the volume
weighted average closing price of the Common Stock on the Principal
Market for the five (5) trading days immediately prior to the
date of this Note. The shares of Common Stock to be issued upon
such conversion are herein referred to as the “ Conversion
Shares. ”
2.2 Conversion Limitation .
Notwithstanding anything contained herein to the contrary, the
Holder shall not be entitled to convert pursuant to the terms of
this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between
(i) 4.99% of the issued and outstanding shares of Common Stock
and (ii) the
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number of shares of Common Stock beneficially
owned by the Holder. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. The Conversion Shares limitation described in this
Section 2.2 shall automatically become null and void following
notice to any Company upon the occurrence and during the
continuance of an Event of Default, or upon 75 days prior notice to
the Parent, except that at no time shall the number of shares of
Common Stock beneficially owned by the Holder exceed 19.99% of the
outstanding shares of Common Stock. Notwithstanding anything
contained herein to the contrary, the number of shares of Common
Stock issuable by the Parent and acquirable by the Holder at an
average price below $1.295 per share pursuant to the terms of this
Note, the Security Agreement or any other Ancillary Agreement,
shall not exceed an aggregate of 2,520,966 shares of Common Stock
(subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common
Stock) (the “ Maximum Common Stock Issuance ”),
unless the issuance of Common Stock hereunder in excess of the
Maximum Common Stock Issuance shall first be approved by the
Parent’s shareholders. If at any point in time and from time
to time the number of shares of Common Stock issued pursuant to the
terms of this Note, the Security Agreement or any other Ancillary
Agreement, together with the number of shares of Common Stock that
would then be issuable by the Parent to the Holder in the event of
a conversion or exercise pursuant to the terms of this Note, the
Security Agreement or any other Ancillary Agreement, would be
limited by the preceding sentence, the Parent shall promptly call a
shareholders meeting to solicit shareholder approval for the
issuance of the shares of Common Stock hereunder in excess of the
Maximum Common Stock Issuance. Notwithstanding anything contained
herein to the contrary, the provisions of this Section 2.2 are
irrevocable and may not be waived by the Holder or any
Company.
2.3 Mechanics of Holder’s
Conversion . (a) In the event that the Holder elects to
convert this Note into Common Stock, the Holder shall give notice
of such election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit B hereto
(appropriately completed) (“ Notice of Conversion
”) to the Parent and such Notice of Conversion shall provide
a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees under this Note that are being converted. On each
Conversion Date (as hereinafter defined) and in accordance with its
Notice of Conversion, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees under
this Note as entered in its records and shall provide written
notice thereof to the Parent within two (2) Business Days
after the Conversion Date. Each date on which a Notice of
Conversion is delivered or telecopied to the Parent in accordance
with the provisions hereof (including Section 4.4) shall be
deemed a Conversion Date (the “ Conversion Date
”). Pursuant to the terms of the Notice of Conversion, the
Parent will issue instructions to the transfer agent accompanied by
an opinion of counsel (if requested by the Transfer Agent) within
three (3) Business Days of the date of the delivery to the
Parent of the Notice of Conversion and shall cause (to the extent
it has the ability to cause) the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by
crediting the account of the Holder’s designated broker with
the Depository Trust Corporation (“ DTC ”)
through its Deposit Withdrawal Agent Commission (“
DWAC ”) system within three (3) Business Days
after receipt by the Parent of the Notice of Conversion in
accordance with Section 4.4 (the “ Delivery Date
”). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion
shall be deemed to have
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been issued upon the date of receipt by the
Parent of the Notice of Conversion. The Holder shall be treated for
all purposes as the record holder of the Conversion Shares, unless
the Holder provides the Parent written instructions to the
contrary. Any obligations of the Parent under this Section 2.4
are subject to the restrictions on conversions contained in
Section 2.2, 2.3 and 2.10 of the Note.
2.4 Late Payments . Each
Company understands that a delay in the delivery of the Conversion
Shares in the form required pursuant to this Article beyond the
Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to all other
rights and remedies which the Holder may have under this Note,
applicable law or otherwise, the Companies shall, jointly and
severally, pay late payments to the Holder for any late issuance of
Conversion Shares in the form required pursuant to this Article II
upon conversion of this Note, in the amount equal to $250 per
Business Day after the Delivery Date. The
