EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED .AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: APPLIED FIBER OPTICS INC., a California corporation
Number of Shares: 20,000
Class of Stock: Series B Preferred
Initial Exercise Price: $1.25 per Share
Issue Date: December 24, 1997
Expiration Date: December 24, 2002 (subject to Section 4.1)
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, GBC VENTURE CAPITAL, INC. ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Articles 1 and 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant Section 1.3.
1.3 Fair Market Value. If the Shares are traded in a public market,
the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's Stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. If the conversion right set forth in Section 1.2
above is being exercised in connection with an Acquisition (as defined below)
the fair market value per Share shall equal the consideration per share that
would be paid to Holder by the acquiring entity
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pursuant to Section 1.6.3 hereof had this Warrant been exercised immediately
prior to such Acquisition. The foregoing notwithstanding, if Holder advises the
Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation, in which case the fair market value
for purposes of this Section 1.3 shall be that determined by such investment
banking firm. If the valuation of such investment banking firm is more than ten
percent (10%) greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
1.6.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2 Assumption of Warrant. If upon the closing of any Acquisition
the successor assumes the obligations of this Warrant, then this Warrant shall
be exercisable for the same securities, cash, and property as would be payable
for the Shares issuable upon exercise of the unexercised portion of this Warrant
as if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly.
1.6.3 Nonassumption. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of this Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits. Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater
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amount of common stock, or, if the Shares are securities other than common
stock, subdivides the Shares in a transaction that increases the amount of
common stock into which the Shares are convertible, then upon exercise of this
Warrant, for each Share acquired, Holder shall receive, without cost to Holder,
the total number and kind of securities to which Holder would have been entitled
had Holder owned the Shares of record as of the date the dividend or subdivision
occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Amended and
Restated Articles of Incorporation upon the closing of a registered public
offering of the Company's common stock. The Company or its successor shall
promptly issue to Holder a new Warrant for such new securities or other
property. The new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A hereto.
2.5 No Impairment. The Company shall not, by amendment of its
Amended and Restated Articles of Incorporation or through a reorganization,
transfer of assets, consolidation, merger, dissolution, issue, or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed under this
Warrant by the Company, but shall at all times in good faith assist in carrying
out of all the provisions of this Article 2 and in taking all such action as may
be necessary or appropriate to protect Holder's rights under this Section
against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the factional interest by the fair market value of a full Share.
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2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than the fair market value of the Shares as of the
date of this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Reservation of Shares. The Company covenants and agrees that
within thirty (30) days of the date of this Warrant it will cause to be
authorized and reserved, and at all times thereafter it will have authorized and
reserved, a sufficient number of the Shares (and the securities, including
Common Stock, issuable, directly or indirectly, upon conversion of the Shares)
to provide for the exercise of the rights represented by this Warrant.
3.3 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above: (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
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3.4 Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, generally, (b) within one hundred twenty (120) days
after the end of each fiscal year of the Company, the annual audited financial
statements of the Company certified by independent public accountants of
recognized standing and (c) within forty-five (45) days after the end of each of
the first three quarters of each fiscal year, the Company's quarterly, unaudited
financial statements.
3.5 Investor Rights. The Company agrees that the Shares or, if the
Shares are convertible into common stock of the Company, such common stock,
shall be subject to the registration rights and such other rights as are set
forth on Exhibit B hereto.
3.6 Conversion Ratio. The Company covenants and agrees that the
conversion ratio of the Series B Preferred Stock as converted to Common Stock of
the Company is currently no less than one common share for each share of Series
B Preferred Stock.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. To the extent this Warrant is not previously exercised,
and if the fair market value of one Share is greater than the Warrant Price then
in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 1.2 above (even if not surrendered) immediately before its expiration.
For purposes of such automatic exercise, the fair market value of one Share
shall be determined pursuant to Section 1.3 above. To the extent this Warrant or
any portion thereof is deemed automatically exercised pursuant to this Section
4.1, the Company agrees to promptly notify the holder hereof of the number of
Shares, if any, the holder hereof is to receive by reason of such automatic
exercise.
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the
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transfer is to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable);
provided, however, that (a) the rights under Section 3.4 (b) and (c) hereof
shall be assignable only to an affiliate of Holder being a transferee of the
entire warrant, and (b) the rights under Section 3.5 shall be assignable in
accordance with the First Amended and Restated Rights Agreement, dated as of
October 20, 1997, or to an affiliate of the original Holder or to a transferee
of the entire warrant. Unless the Company is filing financial information with
the SEC pursuant to the Securities Exchange Act of 1934, the Company shall have
the right to refuse to transfer any portion of this Warrant to any person who
directly competes with the Company.
4.5 Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
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4.8 Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
APPLIED FIBER OPTICS INC.
By: /s/ Xxxxx-Xxxxx Xxxx
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Name: Xxxxx-Xxxxx Xxxx
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(Print)
Title: Chairman of the Board, President or Vice
President
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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(Print)
Title: Chief Financial Officer, Secretary,
Assistant Treasurer and Assistant Secretary
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