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Micronet Enertec Technologies, Inc. (“Micronet”)

Delaware, United States

MICT

Nasdaq Capital Market ("NCM")

9,144,465 shares of common stock outstanding as of May 14, 2018

25,000,000 shares of $0.001 par value

5,000,000 shares of $0.001 par value

972,000 options outstanding (out of with 436,000 are in the process to be terminated)

1,187,500

$4,125,000

11,303,965 shares of common stock (excluding convertible)

Prior to the Reverse Merger Closing, BNN shall make a third party cash tender offer of at least $1.65 per share for up to an additional approximately 35.2% of the Micronet’s outstanding shares of common stock as of the date hereof (the “Tender Offer”) so that following the Tender Offer BNN would, assuming the tender is fully subscribed, own in the aggregate at least 50.1% of the outstanding shares of common stock of Micronet.

Upon the Reverse Merger Closing, the pre-Reverse Merger stockholders of Micronet, but post-Tender Offer stockholders (the "Micronet Stockholders") shall retain such number of shares (the "Micronet Shares") of common stock of the post-transaction Parent Public Company equal to, subject to due diligence and discussion of outstanding exercisable or convertible securities, warrants and options, an equity valuation of approximately $15.1 million on a post-Reverse Merger basis of the Parent Public Company (the "Public Company Stock") upon the Closing Date (referred herein). This calculation assumes that at the Closing of the Reverse Merger there is no outstanding debt of any kind of Micronet.

BNN Consideration

The consideration to be paid at Closing to BNN will be comprised of shares of Public Company Stock with a value based on the aggregate enterprise value of the BNN business being sold, calculated, subject to diligence, as ~$118.4 million, minus the assumption of ~$8.4 million of expected convertible debt plus ~$20.0 million of expected cash and cash equivalents, resulting in an aggregate equity value of the Public Company Stock to be issued to BNN of approximately $130.0 million (the “BNN Equity Value”). BNN shall be issued Public Company Stock (the “BNN Shares”) in connection with the Reverse Merger in the amount of the BNN Equity Value.

The BNN Shares shall consist of shares of the Parent Public Company that are duly authorized, validly issued, non-assessable, unrestricted and without legends, free from all liens, taxes and charges. The number of BNN Shares to be issued shall be derived by dividing (i) the BNN Equity Value by (ii) the negotiated value per share of common stock of Micronet (the “Micronet Valuation”).

Third Party Consideration

The consideration to be paid to the Third Party will be based on a total enterprise value of the Third Party business being sold, subject to diligence, of $162.0 million.

Upon the execution of the Definitive Agreements, Micronet (in conjunction with BNN and its Representatives (as defined below)) will raise approximately $26.0M - $36.0M (to be held in escrow) from both existing BNN investors and new investors in a private placement, with attached registration rights, if necessary (the “PIPE”).  The PIPE will take the form of equity, equity-linked and/or convertible promissory notes with customary terms to be negotiated (the “PIPE Securities”). The closing of the PIPE and the release of the PIPE proceeds will be subject to stockholder approval and the meeting of all of the closing conditions of the Definitive Agreements. At the closing of the PIPE, the proceeds from the issuance of the PIPE Securities will be used (a) to pay the Additional Third Party Cash (As defined below), (b) to pay fees and expenses related to the PIPE Securities and (c) for working capital purposes of the post-Reverse Merger company.  The holders of the PIPE Securities will not participate in the spin-off. The securities issued in the PIPE will dilute the stockholders of the Company, the Third Party and Micronet pro rata based on their respective valuations.

Upon Closing, the consideration to be paid to the Third Party will include (a) approximately $28.0 million from the proceeds of the PIPE (the “Initial Third Party Cash”), (b) an additional cash payment of up to $22.0 million from the balance sheet of BNN (the “Additional Third Party Cash”), (c) the issuance of either a convertible note or convertible preferred stock to the Third Party in an amount equal to approximately $22.0 million (the “Third Party Convertible Security”) and (d) shares of Public Company Stock with a value based on the net enterprise value of the Third Party business being sold, calculated, subject to diligence, as $162.0 million (the total enterprise value), minus the value of the Initial Third Party Cash, minus the Additional Third Party Cash, minus the value of the Third Party Convertible Security and plus $0.0 million of expected cash on hand, resulting in an aggregate equity value of the Public Company Stock to be issued to the Third Party of approximately $90.0 million (the “Third Party Equity Value”).  The Third Party will be delivered with a zero debt balance. The Third Party shall be issued Public Company Stock (the “Third Party Shares”) in connection with the Reverse Merger in the amount of the Third Party Equity Value. 

The Third Party Shares shall consist of shares of the Parent Public Company that are duly authorized, validly issued, non-assessable, unrestricted and without legends, free from all liens, taxes and charges.  The number of Third Party Shares to be issued shall be derived by dividing (i) the Third Party Equity Value by (ii) the Micronet Valuation.

In conjunction with the signing of the Definitive Agreements, Micronet and certain Micronet Stockholders (the “Micronet Insiders”) will enter into a stockholder voting agreement with BNN committing to deliver a certain number of shares of Micronet to approve the Reverse Merger and the related transactions.

As a condition to the Reverse Merger Closing, the Parent Public Company will need to be approved for trading on the Nasdaq market system or equivalent Nationally Listed US Exchange (i.e. NYSE or NYSE American).

The signing of the Definitive Documents and the closing of the transactions contemplated thereby will be subject to customary conditions appropriate for an acquisition of this size and complexity, including:

(i) Discussions of both parties’ financial structure and performance with each other’s respective management;

(ii) OPCOs’ review of Micronet’s operations prior to the signing of the Definitive Agreements and its financial statements that have not been publicly filed; 

(iii) Immediately prior to the Reverse Merger Closing, Micronet shall have zero debt which shall be reflected on Micronet's balance sheet and other publicly-filed financial statements at the Reverse Merger Closing;

(iv) A discussion between the parties with respect to the treatment of outstanding exercisable or convertible securities, warrants and options;

(v) Approval and filing by Micronet and the other parties, as appropriate, of all corporate actions and documents that support the transactions, including approval of new Board directors, a revised charter, and completion of any stock splits, bylaw changes or other amendments that may be reasonably requested by OPCOs, including without limitation as applicable, an information or proxy statement concerning actions related to the Reverse Merger and a prospectus for the registration of Parent Public Company Stock issued to affiliates of OPCOs;

(vi) Completion by each party and its advisors of all business, tax, accounting, legal and other due diligence reviews of the other party (in parallel with the negotiation of the Definitive Agreements), with results satisfactory to both parties in all respects;

(vii) The negotiation and execution of the Definitive Agreements;

(viii) No material adverse change in the either party’s business, operations, prospects or financial condition;

(ix) The representations and warranties of both parties being true and correct at signing and closing;

(x) Receipt of all equity holder, governmental, regulatory and third party requisite approvals and consents, including the completion of the SEC process and the required approval of each party’s stockholders, in a form satisfactory to the other party;

(xi) The terms and conditions of the Reverse Merger and their related transactions must be acceptable to both Micronet and OPCOs and approved by each of their respective Board of Directors;

(xii) Each party will procure audited financial statements related to its companies and business suitable for inclusion in an information or proxy statement, prospectus and/or current report on From 8-K in connection with the approvals and closings related to the Reverse Merger;

(xiii) Receipt of a fairness opinion by the Board of Directors of Micronet;

(xiv) Provisions with respect to the spin-off; and

(xv) Subject to such customary additional terms as are consistent with the above, including, without limitation, fiduciary outs, break-up fees and reverse break-up fees, as will be agreed between the parties.