AIRN Airspan Networks (MM)

TO BE HELD ON DECEMBER 16, 2008

 

To the Shareholders of

Airspan Networks Inc.:

 

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the “Special Meeting”) of Airspan Networks Inc., a Washington corporation (the “Company”), will be held at our headquarters, 777 Yamato Road - Suite 310, Boca Raton, Florida 33431, on Tuesday, December 16, 2008, at 11:00 a.m., Eastern time, for the following purposes:

 

1.

To approve an amendment to the Company’s Second Amended and Restated Articles of Incorporation, as amended, effecting a reverse stock split of the Company’s Common Stock at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares to decrease the number of issued and outstanding shares of Common Stock.

 

2.

To approve an amendment and restatement of the Company’s 2000 Employee Stock Purchase Plan (the “ESPP”) to increase the number of shares of Common Stock reserved for issuance thereunder and to allow for nine additional separate offering periods, the final offering period to commence on August 16, 2017 and terminate on August 15, 2018.

 

3.

To approve a stock option exchange program under which eligible Company employees (including executive officers but excluding non-employee members of the Board of Directors) will be offered the opportunity to exchange their eligible options to purchase shares of Common Stock outstanding under the Company’s existing equity compensation plans for a smaller number of new options at a lower exercise price.

 

4.

To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof.

 

The proposals to effect a reverse stock split, to amend and restate the ESPP and to approve the stock option exchange program are discussed in more detail in the attached proxy statement. The presence of the holders of a majority of the shares entitled to vote at the Special Meeting, present in person or represented by proxy, is necessary to constitute a quorum. To ensure representation at the Special Meeting, you are urged to complete, sign and date the enclosed proxy card and return it promptly in the enclosed postage-prepaid envelope.

 

The record date for determining shareholders entitled to notice of, and to vote at, the Special Meeting is the close of business on October 28, 2008.

 

		By Order of the Board of Directors
		David Brant
		Corporate Secretary

November __, 2008

Boca Raton, Florida

 

YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.

 

This proxy statement is furnished in connection with the solicitation by the Board of Directors of the Company of proxies in the accompanying form for use at the Special Meeting to be held on Tuesday, December 16, 2008 and any adjournments or postponements thereof. The Special Meeting will be held at 11:00 a.m., Eastern time, at 777 Yamato Road - Suite 310, Boca Raton, Florida 33431.

 

Our principal executive office is located at 777 Yamato Road - Suite 310, Boca Raton, Florida 33431. The approximate date this proxy statement and the accompanying proxy card are being first mailed to shareholders is November __, 2008.

 

 

Only holders of shares of our Common Stock and Series B Preferred Stock outstanding at the close of business on October 28, 2008, the record date for the Special Meeting, are entitled to vote at the Special Meeting. On the record date, there were _______ shares of Common Stock and 200,690 shares of Series B Preferred Stock outstanding.

 

Pursuant to the Company’s Second Amended and Restated Articles of Incorporation, as amended (the “Articles of Incorporation”), you are entitled to one vote for each share of Common Stock and 81 votes for each share of Series B Preferred Stock. The enclosed proxy card shows the number of shares you are entitled to vote.

 

The holders of the Common Stock and the Series B Preferred Stock will vote together with respect to the amendment of the Company’s Articles of Incorporation to effect a reverse stock split (at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares) (“Proposal No. 1”), the approval of an amendment and restatement of the Company’s 2000 Employee Stock Purchase Plan (the “ESPP”) to increase the number of shares of Common Stock reserved for issuance thereunder and to allow for nine additional separate offering periods, the final offering period to commence on August 16, 2017 and terminate on August 15, 2018 (“Proposal No. 2”), and the approval of the stock option exchange program (“Proposal No. 3”), as though they were a single class.

 

The Series B Preferred Stock will also vote separately on Proposal No. 2 and Proposal No. 3. Oak Investment Partners, the holder of all 200,690 shares of our Series B Preferred Stock, which has 16,255,890 votes in the aggregate, has agreed to vote its shares of Series B Preferred Stock in favor of Proposal No. 2 and Proposal No. 3.

 

 

Under Washington law and our Articles of Incorporation, a quorum consisting of a majority of the shares entitled to vote must be represented in person or by proxy for the transaction of business at the Special Meeting. Shares entitled to vote as a separate voting group may take action on a matter at the meeting only if a quorum of those shares is present with respect to that matter. Abstentions are counted as present and entitled to vote for purposes of determining a quorum. Broker non-votes, which occur when a broker has not received customer instructions and indicates that the broker does not have discretionary authority to vote a particular matter on the proxy card, also will be deemed present for purposes of determining whether a quorum is achieved.

 

 

The proposal to amend our Articles of Incorporation to effect a reverse stock split (at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares) will be adopted if approved by the affirmative vote of a majority of the votes entitled to be cast by the holders of Common Stock and Series B Preferred Stock, taken together. The proposal to amend and restate the ESPP will be adopted if the number of votes cast by the shares of Common Stock and Series B Preferred Stock, taken together, in favor of the proposal exceed the number of votes cast by the shares of Common Stock and Series B Preferred Stock, taken together, against the proposal. The proposal to approve the stock option exchange program will be adopted if the number of votes cast by the shares of Common Stock and Series B Preferred Stock, taken together, in favor of the proposal exceed the number of votes cast by the shares of Common Stock and Series B Preferred Stock, taken together, against the proposal. Abstentions from voting and broker non-votes will have the effect of a vote “against” the reverse stock split, the amendment and restatement of the ESPP and the authorization of the stock option exchange program.

 

Section 4.13(4)(f) of our Articles of Incorporation provides that the holders of our Series B Preferred Stock are entitled to an anti-dilution adjustment when the Company issues additional shares of Common Stock at a price below the conversion price of the Series B Preferred Stock. However, no anti-dilution adjustment will occur for the issuance of up to 5,000,000 shares of Common Stock or options to employees, officers, directors and certain other persons. The aggregate number of shares issuable pursuant to Proposal No. 2 and Proposal No. 3 could exceed 5,000,000 shares of Common Stock. However, if a majority of the Series B Preferred Stock approves such issuance, no anti-dilution adjustment will occur. In order for the Company to obtain such approval, the Series B Preferred Stock will vote separately on Proposal No. 2 and Proposal No. 3. Oak Investment Partners, the holder of all 200,690 outstanding shares of our Series B Preferred Stock, which has 16,255,890 votes in the aggregate, has agreed to vote its shares of Series B Preferred Stock in favor of Proposal No. 2 and Proposal No. 3. As a result of such approval, the adoption and implementation of Proposal No. 2 and Proposal No. 3 and any issuance of Common Stock as a result thereof will not result in an anti-dilution adjustment to the conversion price of the Series B Preferred Stock pursuant to the terms of the Series B Preferred Stock.

 

Proxies solicited by the Board of Directors will be voted in favor of all three proposals, unless shareholders direct otherwise in their proxies. The proxy cards also confer discretionary authority to vote the shares authorized to be voted thereby on any matter that was not known on the date of this proxy statement, but that properly may be presented for action at the Special Meeting.

 

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE OR, IF YOUR PROXY CARD OR VOTING INSTRUCTION FORM SO INDICATES, TO VOTE ELECTRONICALLY VIA THE INTERNET OR TELEPHONE.

 

 

A shareholder may revoke a proxy at any time before its exercise by written notice to our corporate secretary, by timely delivery of a valid later-dated proxy or by voting in person at the Special Meeting. However, your attendance at the Special Meeting will not, by itself, revoke your proxy.

 

 

We may retain a proxy solicitor to help solicit proxies. We will pay the cost of their services, which is estimated at approximately $7,500, plus reasonable expenses. Proxies will be solicited by personal interview, mail and telephone. In addition, we may reimburse brokerage firms and other persons who represent beneficial owners of stock for their reasonable expenses in forwarding solicitation materials to beneficial owners. Our directors, officers and regular employees also may solicit proxies, personally or by telephone or facsimile, without additional compensation.

 

 

How are votes counted?

 

The Company will hold the Special Meeting if holders of a majority of the votes entitled to be cast either sign and return their proxy cards or attend the Special Meeting. If you sign and return your proxy card, your shares will be counted to determine whether the Company has a quorum, even if you abstain or fail to vote on any of the proposals listed on the proxy card.

 

If your shares are held in the name of a nominee, and you do not tell the nominee by December __, 2008 how to vote your shares (“broker non-votes”), the nominee can vote them as it sees fit only on matters that are determined to be routine. Broker non-votes will be counted as present to determine if a quorum exists, but will not be counted as present and entitled to vote on any non-routine proposal. Proposal No. 1, Proposal No. 2 and Proposal No. 3 are each considered “non-routine matters.” Thus, if your shares are held in street name and you do not provide instructions as to how your shares are to be voted with respect to Proposal No. 1, Proposal No. 2, or Proposal No. 3, your broker or other nominee will not be able to vote your shares with regard to those proposals. The Company urges you to provide instructions to your broker or nominee so that your votes may be counted on these important matters.

 

(PROPOSAL 1)

 

 

Our Board of Directors has recommended approval of an amendment to our Articles of Incorporation which would effect a reverse stock split of all outstanding shares of our Common Stock at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares. If approved, the reverse stock split would reduce our issued and outstanding Common Stock from approximately 59.6 million shares to between approximately 4.0 million shares and 11.9 million shares, depending on the reverse stock split ratio determined by the Board of Directors.

 

If our shareholders approve the reverse stock split, we intend to thereafter file articles of amendment to our Articles of Incorporation with the Secretary of State of the State of Washington at a time as determined by the Board of Directors, but no later than the one-year anniversary of the Special Meeting. The articles of amendment would effect a reverse split of the shares of our issued and outstanding Common Stock (at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares), but would not change the number of authorized shares of Common Stock or preferred stock, or the par value of our Common Stock or preferred stock. The reverse stock split will become effective at the time specified in the articles of amendment, which will most likely be 5:00 p.m. on the business day on which we file the articles of amendment, and which we refer to as the “effective time.”

 

The Board of Directors will have the sole discretion to elect, as it determines to be in our best interests and those of our shareholders, whether or not to effect a reverse stock split, and if so, the specific number of shares of our Common Stock between and including five and fifteen which will be combined into one share of our Common Stock, at any time before the one-year anniversary of the Special Meeting. The Board of Directors believes that shareholder approval of an amendment granting it the discretion to approve the specific reverse stock split ratio to be effected, rather than approval of only one specific exchange ratio at this time, provides the Board of Directors with maximum flexibility to react to then current market conditions and, therefore, is in our best interests and those of our shareholders.

 

Even if Proposal No. 1 is approved, the Board of Directors in its discretion may decide not to file the amendment to our Articles of Incorporation with the Secretary of State of the State of Washington to effect the reverse stock split.

 

 

We believe that we should implement a reverse stock split to help facilitate the continued listing of our Common Stock on the NASDAQ Global Market, which requires issuers to maintain a closing bid price of at least $1.00 per share . We also believe that a reverse stock split may enhance the desirability and marketability of our Common Stock to the financial community and the investing public.

 

Our Common Stock is listed on the NASDAQ Global Market. As mentioned above, to be listed on the NASDAQ Global Market, among other things, a company’s Common Stock must maintain a minimum bid price of $1.00 per share. On April 25, 2008, we received a letter from the NASDAQ Stock Market (the “Notice”) notifying the Company that for the 30 consecutive trading days preceding the date of the Notice, the bid price of the Company’s Common Stock had closed below the $1.00 per share minimum required for continued listing on the NASDAQ Global Market pursuant to NASDAQ Marketplace Rule 4450(a)(5). The Notice also stated that pursuant to NASDAQ Marketplace Rule 4450(e)(2), the Company had been provided 180 calendar days, or until October 22, 2008, to regain compliance. On October 16, 2008, however, NASDAQ announced that it had suspended, for a three month period, the enforcement of the rules requiring a minimum $1.00 closing bid price or a minimum market value of publicly held shares. NASDAQ has stated that it will not take any action to delist any security for these concerns during the suspension. NASDAQ has also stated that the suspension will remain in effect through Friday, January 16, 2009 and that the rules will be reinstated on Monday, January 19, 2009. As a result of this suspension, we now have until January 26, 2009 to regain compliance with the minimum bid requirement. To do so, the bid price of the Company’s Common Stock must close at or above $1.00 per share for a minimum of ten consecutive trading days prior to that date. If compliance with the minimum bid requirement cannot be demonstrated by January 26, 2008, the Company may apply to transfer its securities to the NASDAQ Capital Market provided the Company meets the initial listing criteria as set forth in NASDAQ Marketplace Rule 4310(c). If the Company meets the other initial listing criteria and the Company’s application is approved, it will be notified that it has been granted an additional 180 calendar day compliance period. If the Company is not eligible for an additional compliance period, the NASDAQ Capital Market will provide written notification that the Company’s securities will be delisted. The closing bid price of our Common Stock on the NASDAQ Global Market on October 20, 2008 was $0.23.

 

 

The reverse stock split may not result in the benefits described above under the heading “Reasons for the Reverse Stock Split.” Specifically, the market price of our Common Stock immediately after the effective date of the proposed reverse stock split may not be maintained for any period of time or may not increase in proportion to the reduction in the number of shares of our Common Stock outstanding before the reverse stock split. Accordingly, the total market capitalization of our Common Stock after the proposed reverse stock split may be lower than the total market capitalization before the proposed reverse stock split and, in the future, the market price of our Common Stock following the reverse stock split may not exceed or remain higher than the current market price. In many cases, the total market capitalization of a company following a reverse stock split is lower than the total market capitalization before the reverse stock split. As a result, the reverse stock split could further adversely affect the market price of our Common Stock. Furthermore, although we believe that a higher stock price, if achieved, may help generate investor interest and enhance our ability to attract and retain employees and other service providers, we cannot guarantee this will be the case.

 

 

If our shareholders approve the proposal to amend the Articles of Incorporation and we implement the reverse stock split by filing the articles of amendment, the reverse stock split would have the following effects:

 

·

depending on the reverse stock split ratio determined by the Board of Directors (which will be between one-for-five shares and one-for-fifteen shares), between every five and fifteen shares of our Common Stock owned by a shareholder would automatically be changed into and become one new share of our Common Stock;

 

·

the number of shares of our Common Stock issued and outstanding would be reduced proportionately;

 

·

proportionate adjustments would be made to the per share conversion price and the number of shares of Common Stock issuable upon conversion of our outstanding Series B Preferred Stock, which will result in approximately the same aggregate price being required to be paid for common shares upon conversion of such preferred shares immediately preceding the reverse stock split;

 

·

proportionate adjustments would be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options entitling the holders thereof to purchase shares of our Common Stock, which will result in approximately the same aggregate price being required to be paid for the common shares upon exercise of such options immediately preceding the reverse stock split; and

 

·

the number of shares reserved for issuance under our existing stock option and incentive stock plans and in connection with conversion of our outstanding Series B Preferred Stock would be reduced proportionately based on the reverse stock split ratio determined by the Board of Directors.

 

The reverse stock split will be effected simultaneously for all of our Common Stock and the exchange ratio will be the same for all of our Common Stock. The reverse stock split will affect all of our shareholders uniformly and will not affect any shareholder’s percentage ownership interest in the Company, except to the extent that the reverse stock split results in any of our shareholders owning a fractional share. As described below, shareholders holding fractional shares will be entitled to cash payments in lieu of such fractional shares. Such cash payments will reduce the number of post-split shareholders to the extent there are shareholders presently holding fewer than the number of shares of Common Stock that will be changed into one share of Common Stock pursuant to the reverse stock split. However, this is not the purpose of the reverse stock split. The reverse stock split is not intended as, and will not have the effect of, a “going private” transaction under Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We expect to continue to be listed on NASDAQ and we will continue to be subject to the periodic reporting requirements of the Exchange Act following the reverse stock split.

 

No scrip or fractional share certificates will be issued in connection with the reverse stock split. Shareholders who otherwise would be entitled to receive fractional shares will be entitled, upon surrender of certificate(s) representing such shares, to a cash payment in lieu thereof. The cash payment will equal the product obtained by multiplying (a) the fraction to which the shareholder would otherwise be entitled by (b) the per share closing sales price of our Common Stock on the trading day immediately preceding the effective date of the reverse stock split, as reported on the NASDAQ Global Market. Any shareholder who would be entitled to receive only a fractional share in the reverse stock split may be entitled to a judicial appraisal of the fair value of his or her fractional share, as described in the section below entitled “Dissenters’ Rights.” The ownership of a fractional interest will not give the holder thereof any voting, dividend or other rights except to receive payment therefor or as described herein.

 

Shareholders who are entitled to receive cash in lieu of fractional shares as a result of the reverse stock split should note that we may be required, under applicable escheat laws, to pay sums due for fractional interests that are not claimed within a reasonable time after the effective time to the designated agent for certain jurisdictions. This may be required by the laws of the State of Washington (under which the Company is incorporated), the jurisdiction in which we have our principal executive offices, the jurisdiction in which the shareholder resides or the jurisdiction where the funds will be deposited. Thereafter, shareholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.

 

 

The reverse stock split would not change the number of authorized shares of our Common Stock designated in our Articles of Incorporation (presently 100 million shares). Therefore, because the number of issued and outstanding shares of our Common Stock would decrease, the number of shares available for issuance under our authorized pool of Common Stock would increase from approximately 41.3 million shares to between approximately 88.3 million shares and 96.1 million shares (depending upon the reverse stock split ratio determined by the Board of Directors). The reverse stock split would also not affect the number of authorized or outstanding shares of preferred stock.

 

These additional shares would be available for issuance from time to time for corporate purposes such as raising additional capital, making strategic acquisitions, entering into collaborative and licensing arrangements and employee recruitment and retention. We believe that the availability of the additional shares of Common Stock will provide us with the flexibility to meet business needs as they arise, to take advantage of favorable opportunities and to respond to a changing corporate environment. Our future revenue may be insufficient to support the expenses of our operations and the planned expansion of our business. We therefore may need additional equity capital to finance our operations. We may seek to obtain such equity capital through the issuance of Common Stock or securities convertible into Common Stock. We have no present plan, commitment, arrangement, understanding or agreement regarding issuance of these additional shares of Common Stock. The issuance of a substantial number of additional shares of Common Stock may result in dilution of your ownership interest in the Company.

 

 

The proposed reverse stock split is not part of any plan to adopt a series of amendments having an anti-takeover effect. As a result of the additional shares of Common Stock that would become available for issuance if the reverse stock split is approved, subject to the limitations of Washington law and the NASDAQ listing rules, it could be possible to use such additional available shares to oppose a hostile takeover attempt or delay or prevent changes of control of the Company or changes in or removal of our management, including transactions that are favored by a majority of the independent shareholders or in which the shareholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner. For example, our Board of Directors could, without further shareholder approval, strategically sell shares of our Common Stock in a private transaction to purchasers who would oppose a takeover or favor our current Board of Directors. The reverse stock split is not being proposed in response to any effort, nor are we aware of any effort, to accumulate shares of our Common Stock or obtain control of the Company.

 

 

If a reverse stock split is implemented, the rights and preferences of the outstanding shares of our Common Stock would remain the same after the reverse stock split. Each share of Common Stock issued pursuant to the reverse stock split would be fully paid and nonassessable.

 

In addition, the reverse stock split would result in some shareholders owning “odd-lots” of fewer than 100 shares of our Common Stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of even multiples of 100 shares.

 

 

Following the effective time of the reverse stock split, the par value of our Common Stock will remain at $0.0003 per share. The number of outstanding shares of Common Stock will be reduced in proportion to the reverse stock split ratio determined by the Board of Directors, not taking into account the additional decrease resulting from our repurchase of fractional shares that otherwise would result from the reverse stock split. Accordingly, the aggregate par value of the issued and outstanding shares of our Common Stock, and therefore the stated capital associated with our Common Stock, will be reduced, and the additional paid-in capital (capital paid in excess of the par value) will be increased in a corresponding amount for statutory and accounting purposes. If the reverse stock split is effected, all share and per share information in our financial statements will be restated to reflect the reverse stock split for all periods presented in our future filings, after the effective time of the reverse stock split, with the Securities and Exchange Commission (the “SEC”) and NASDAQ, as applicable. Shareholders’ equity will remain unchanged.

 

 

If our shareholders approve the reverse stock split proposal, we intend to thereafter implement the reverse stock split at a time and in a ratio between one-for-five shares and one-for-fifteen shares as determined by the Board of Directors by filing articles of amendment to our Articles of Incorporation with the Secretary of State of the State of Washington. However, if the Board of Directors fails to implement a reverse stock split prior to the one-year anniversary of the Special Meeting, shareholder approval again would be required prior to implementing any reverse stock split. In determining the reverse stock split ratio and timing, the Board of Directors will consider, among other things, the then current status of the Company’s Common Stock under the NASDAQ continuing listing requirements. The reverse stock split will become effective at the time specified in the articles of amendment, which will most likely be 5:00 p.m. on the business day on which we file the articles of amendment. Beginning at the effective time, each certificate representing shares of our Common Stock before the reverse stock split will automatically be deemed for all corporate purposes to evidence ownership of the number of full shares of Common Stock resulting from the reverse stock split. All shares issuable upon conversion of outstanding shares of Series B Preferred Stock and exercise of outstanding options, warrants or other securities will automatically be adjusted. The form of the proposed articles of amendment to effect the reverse stock split is attached to this proxy statement as Annex A ; however, the text of the articles of amendment is subject to modification to include such changes as may be required by the office of the Secretary of State of the State of Washington and as our Board of Directors deems necessary and advisable to effect the reverse stock split (including to insert the applicable reverse stock split ratio as determined by the Board of Directors).

 

Chapter 23B.13 of the Washington Business Corporation Act provides for dissenters’ rights for any amendment to the Articles of Incorporation that materially reduces the number of shares owned by the shareholder to a fraction of a share, if the fractional share created by the amendment is to be acquired by the Company for cash. As a result, any shareholder who would be entitled to receive only a fractional share in the reverse stock split may be entitled to a judicial appraisal of the fair value of his or her fractional share. In order to be entitled to appraisal rights under Chapter 23B.13, a shareholder must:

 

·

be within the class of shareholders who may be entitled to appraisal rights ( i.e. , those shareholders who would be entitled to receive only a fractional share);

 

·

deliver to the Company, before the vote on the reverse stock split is taken, notice of the shareholder’s intention to demand appraisal of his or her fractional share if the reverse stock split is effected; and

 

·

not vote in favor of the reverse stock split.

 

A shareholder’s failure to vote in favor the proposed reverse stock split will not be sufficient to satisfy the notice requirements of the statute; the shareholder must also deliver the required notice before the vote occurs. The foregoing summary of Chapter 23B.13 of the Washington Business Corporation Act does not purport to be complete and is qualified in its entirety by reference to the full text of Chapter 23B.13, which is set forth as Annex B attached to this proxy statement. Shareholders who wish to exercise their statutory right of appraisal are urged to consult legal counsel for assistance in exercising their rights. Shareholders entitled to appraisal rights who fail to comply completely and on a timely basis with all requirements of Chapter 23B.13 for perfecting appraisal rights will lose their rights.

 

The following is a summary of the material anticipated US federal income tax consequences of a reverse stock split of our issued and outstanding shares of Common Stock. This summary is based upon the US Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed regulations thereunder, judicial decisions and current administrative rulings, authorities and practices, all as amended and in effect on the date of this proxy statement. Any of these authorities could be repealed, overruled or modified at any time. Any such change could be retroactive and, accordingly, could cause the tax consequences to vary substantially from the consequences described below. No ruling from the US Internal Revenue Service (“IRS”) with respect to the matters discussed herein has been requested or will be requested, and there is no assurance that the IRS would agree with the conclusions set forth in this summary. This summary is provided for general information only and does not purport to address all aspects of the possible US federal income tax consequences of the reverse stock split and is not intended as tax advice to any person. In particular, and without limiting the foregoing, this summary does not consider the US federal income tax consequences to our shareholders in light of their individual investment circumstances or to holders who may be subject to special treatment under US federal income tax laws (such as dealers in securities, insurance companies, foreign individuals and entities, financial institutions, tax exempt entities and persons who acquired Common Stock through the exercise of employee stock options or otherwise as compensation). In addition, this summary does not address any consequences of the reverse stock split under any state, local or foreign tax laws. As a result, it is the responsibility of each shareholder to obtain and rely on advice from the shareholder’s tax advisor as to, but not limited to, the following (i) the effect on the shareholder’s tax situation of the reverse stock split, including, but not limited to, the application and effect of state, local and foreign income and other tax laws; (ii) the effect of possible future legislation or regulations; and (iii) the reporting of information required in connection with the reverse stock split on the shareholder’s tax returns. It will be the responsibility of each shareholder to prepare and file all appropriate federal, state and local tax returns.

 

We believe that the reverse stock split will constitute a tax-free recapitalization under the Code and that we should not recognize any gain or loss as a result of the reverse stock split. In addition, our shareholders should not recognize any gain or loss if they receive only Common Stock upon the reverse stock split. If a shareholder receives cash in lieu of a fractional share of Common Stock that otherwise would be held as a capital asset, the shareholder generally will recognize capital gain or loss equal to the difference, if any, between the cash received and the shareholder’s basis in the fractional share. The shareholder will receive long-term capital gain or loss treatment if the shareholder’s holding period in such fractional share exceeds one year. For this purpose, a shareholder’s basis in the fractional share of Common Stock will be determined in the manner described below as if the shareholder actually received the fractional share. However, under unusual circumstances, cash received in lieu of a fractional share might possibly be deemed a dividend. The shareholder should consult a tax advisor to determine which of these treatments will apply upon the receipt of cash in lieu of a fractional share of Common Stock.

 

We further believe that a shareholder’s aggregate basis in his or her post-reverse split shares of Common Stock will equal his or her aggregate basis in the pre-reverse split shares of Common Stock owned by that shareholder that are exchanged for the post-reverse split shares of Common Stock. Generally, the aggregate basis will be allocated among the post-reverse split shares on a pro rata basis. However, if a shareholder has used the specific identification method to identify the shareholder’s basis in pre-reverse split shares of Common Stock surrendered in the reverse stock split, the shareholder should consult a tax advisor to determine the shareholder’s basis in the post-reverse split shares. The holding period of the post-reverse split shares of Common Stock received by a shareholder will generally include the shareholder’s holding period for the pre-reverse split shares of Common Stock with respect to which post-reverse split shares of Common Stock are issued, provided that the pre-reverse split shares of Common Stock were held as a capital asset on the date of the exchange.

 

 

The proposal to amend our Articles of Incorporation to effect a reverse stock split (at a ratio to be determined by the Board of Directors within a range of one-for-five shares to one-for-fifteen shares) will be adopted if approved by the affirmative vote of a majority of the votes entitled to be cast by the holders of Common Stock and Series B Preferred Stock, taken together. Abstentions from voting and broker non-votes will have the effect of a vote “against” the reverse stock split.

 

OUR BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED AMENDMENT TO THE

ARTICLES OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT IS ADVISABLE AND

IN THE BEST INTERESTS OF THE COMPANY AND OUR SHAREHOLDERS AND RECOMMENDS

THAT SHAREHOLDERS VOTE “ FOR ” THE APPROVAL OF THE REVERSE STOCK SPLIT.

 

The Committee determined that in 2007 the Eligible Participants were the Chief Executive Officer, the executive level team and any non-commissioned employees serving as vice presidents, senior directors or directors. All of the Company’s Named Executive Officers, other than one who is a commissioned employee, were to be Eligible Participants. Eligibility was determined primarily by the fact that this group of employees would most directly affect the Company’s ability to meet its sales, earnings and product introduction targets.

 

As in previous years, the Committee determined to link the award incentives directly to the Company’s overall performance goals for 2007. For 2007, the Committee determined that the Company would pay bonuses to Eligible Participants based on a formula that would take into account the Company’s attainment of certain performance goals established by the Committee and the Eligible Participant’s position within the Company. The performance goals would be based upon targets established for the Company’s revenue, gross profit and the Company’s successful achievement of certain targets related to bookings of WiMAX products, product cost reductions on WiMAX products and business process improvements (including, among other things, timing of the closing of the books at quarter and year end and the introduction of ERP improvements) during 2007.

 

The Committee determined that in 2007, gross margin targets were to have the highest relative weighting of the components comprising the 2007 bonus due to the need in 2007 to improve overall profitability. Accordingly, the gross margin element would comprise 40 percent of the bonus plan. Achievement of revenue targets was set at 30 percent of the plan, to promote growth in the Company’s top line and the remaining 30 percent was allocated evenly to specific incentive targets to incentivize management to focus on WiMAX bookings, cost reductions and business process improvements. For 2008, the Committee has determined to use performance goals related to revenue, gross profit, scalability measured as improvements in the monetization of Accounts Receivable and inventory and enterprise value and share price performance compared to a selected peer group of companies (comprised of Alvarion Limited (NASDAQ: ALVR); Ceragon Networks Limited (NASDAQ: CRNT); Dragonwave Inc. (Toronto: DWI.TO); Harris Stratex Networks, Inc. (NASDAQ: HSTX); and Redline Communications Group Inc. (Toronto: RDL.TO)), with each factor constituting 25 percent of the amount of each participant’s bonus award that is based on corporate performance. In addition, included in the bonus for fiscal 2008 will be personal performance targets for individual executive officers to be determined by management and reviewed by the Committee which would constitute 10 percent of each participant’s bonus award.

 

For 2007, the Committee reviewed the appropriate composition of each part of the bonus plan, and established the following detailed parameters for each of the specific incentives.

 

 

Gross Margin Element

 

The gross margin element accounted for 40 percent of the annual incentive plan for 2007.

 

The Committee’s review of the gross margin element considered how the improvement of the Company’s gross margins was important to the future of the Company. The Committee determined that shareholders continued expectation of margin improvements during 2007 relating to the expected shift of product mix towards WiMAX and away from legacy products could be furthered by making the gross profit element the largest portion of management’s incentive program for 2007. With the assistance of Mr. Stonestrom and Mr. Brant, the Committee reviewed the required gross margin levels for a break-even quarter in 2007, including the margin assumptions for each product and the expected mix of revenues in 2007. On this basis, the Committee established that:

 

·

the gross margin element would be payable quarterly, on a non-returnable basis, if quarterly milestones were achieved;

 

·

the quarterly milestones would be set in both gross dollars and as a percentage of revenues, to ensure that management maintained acceptable percentage levels throughout the year. The quarterly payment would be made at 20 percent of the total gross margin bonus if the Company met or exceeded the quarterly milestones;

 

 

All Other Compensation

 

Benefits

 

The Company offers to each of its Named Executive Officers benefits, which include insurance covering medical, hospitalization, dental, life and disability.

 

 

 

 

Salary and Bonus

 

 

 

ARTICLES OF AMENDMENT

TO

SECOND AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

AIRSPAN NETWORKS INC.

 

Pursuant to RCW 23B.10.060, the undersigned corporation adopts the following Articles of Amendment to its Second Amended and Restated Articles of Incorporation, as amended to date:

 

FIRST: The name of the corporation is Airspan Networks Inc. (the “Corporation”).

 

SECOND: The Second Amended and Restated Articles of Incorporation, as amended to date, are hereby amended as follows:

 

Article 4.1 of the Second Amended and Restated Articles of Incorporation, as amended to date, shall be amended in its entirety to read as follows:

 

“4.1   REVERSE STOCK SPLIT. On the date the Articles of Amendment effecting this provision are filed with the Secretary of State of the State of Washington (the “Effective Date”), a one-for- ______ (1:__) reverse stock split of the Corporation’s Common Stock shall become effective, pursuant to which each share of Common Stock issued and outstanding immediately prior to the Effective Date shall, upon the Effective Date, automatically and without any further action by the Corporation or the holder of any issued shares of Common Stock, be reclassified and combined into one-______ (1/__) of the share of Common Stock (the “Reverse Stock Split”). All outstanding rights and obligations (including option plans, stock options and the exercise price thereof, stock purchase warrants and the exercise prices thereof and the conversion terms of the Corporations’ Convertible Preferred Stock) relating to the Corporation’s Common Stock shall be mathematically adjusted to reflect the Reverse Stock Split so that the proportionate ratio of such rights and obligations to the reclassified shares will be equal to the proportionate ratio of such rights and obligations to the shares outstanding immediately prior to such reclassification. No fractional shares shall be issued in connection with the Reverse Stock Split. Any fractional shares resulting from the conversion of Common Stock upon the Reverse Stock Split shall be converted into the right to receive a cash payment from the Corporation for such fractional shares. The cash payment from the Corporation will be determined by multiplying the fractional amount of the share of Common Stock by $_____.

 

4.1(A)   POST-REVERSE STOCK SPLIT CLASSES AND SERIES OF STOCK. There shall be no adjustment to the par value or the number of authorized shares of Common Stock or Convertible Preferred Stock, and there shall be no adjustment to the par value or the number of authorized or outstanding shares of Series A Preferred Stock or Series B Preferred Stock. Accordingly, the post-Reverse Stock Split number of authorized shares are One Hundred Five Million (105,000,000) shares. One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.0003 per share, and Five Million (5,000,000) shares shall be Convertible Preferred Stock, par value $0.0001 per share. Seventy-Four Thousand Two Hundred (74,200) shares of the Convertible Preferred Stock, par value $0.0001 per share, shall be designated and known as the “Series A Preferred Stock.” Two Hundred Fifty Thousand (250,000) shares of the Convertible Preferred Stock, par value $0.0001 per share, shall be designated and known as the “Series B Preferred Stock.”

 

 

CHAPTER 23B.13 RCW

DISSENTERS’ RIGHTS

RCW Sections
	23B.13.010		Definitions.
	23B.13.020		Right to dissent.
	23B.13.030		Dissent by nominees and beneficial owners.
	23B.13.200		Notice of dissenters’ rights.
	23B.13.210		Notice of intent to demand payment.
	23B.13.220		Dissenters’ rights - Notice.
	23B.13.230		Duty to demand payment.
	23B.13.240		Share restrictions.
	23B.13.250		Payment.
	23B.13.260		Failure to take action.
	23B.13.270		After-acquired shares.
	23B.13.280		Procedure if shareholder dissatisfied with payment or offer.
	23B.13.300		Court action.
	23B.13.310		Court costs and counsel fees.

 

23B.13.010 Definitions.

 

As used in this chapter:

 

(1) “Corporation” means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.

 

(2) “Dissenter” means a shareholder who is entitled to dissent from corporate action under RCW 23B.13.020 and who exercises that right when and in the manner required by RCW 23B.13.200 through 23B.13.280 .

 

(3) “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effective date of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.

 

(4) “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.

 

(5) “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.

 

(6) “Beneficial shareholder” means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder.

 

(7) “Shareholder” means the record shareholder or the beneficial shareholder.

[1989 c 165 § 140.]

 

23B.13.020 Right to dissent.

 

(1) A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder’s shares in the event of, any of the following corporate actions:

 

(a) Consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by RCW 23B.11.030 , 23B.11.080 , or the articles of incorporation, and the shareholder is entitled to vote on the merger, or (ii) if the corporation is a subsidiary that is merged with its parent under RCW 23B.11.040 ;