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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.
QUICKSTART
WARRANT TO PURCHASE STOCK
Corporation: Turnstone Systems, Inc., a Delaware corporation
Number of Shares: 45,000
Class of Stock: Series A Preferred:
Initial Exercise Price: $0.50 per share
Issue Date: June 1, 1998
Expiration Date: June 1, 2003
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("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 Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in 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 to Section 1.4.
1.3 Intentionally Omitted
1.4 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
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Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment.
1.5 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.
1.6 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, on 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.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1 "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.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition
the successor entity may, at its option, assume the obligations of this Warrant,
and 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. If the successor entity does not assume the obligations
of the Company under this Warrant, then this Warrant shall be deemed to have
been automatically converted pursuant to Section 1.2 and thereafter Holder shall
participate in the Acquisition as a holder of the Shares (or other securities
issuable upon exercise of this Warrant) on the same terms as other holders of
the same class of securities of the 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 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.
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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 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 in the Company's Articles of Incorporation, as amended from time to time.
2.5 No Impairment. The Company shall not, by amendment of its 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 Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
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 fractional interest by the fair market value of a full Share.
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
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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 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 10 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 10 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.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder promptly upon
Holder's reasonable request, copies of all notices or other written
communications provided generally to the shareholders of the Company, the annual
audited financial statements of the Company certified by independent public
accountants of recognized standing and the Company's quarterly, unaudited
financial statements.
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.
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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 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 and
4.6, 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 Holder may transfer all or part of this Warrant to
Silicon Valley Bancshares, The Silicon Valley Bank Foundation, and any other
affiliate of Holder at any time without notice to the Company. The terms and
conditions of this Warrant shall inure to the benefit of, and be binding upon,
the Company and the holders hereof and their respective permitted successors and
assigns. 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 party who
directly competes with the Company.
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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 the Holder from time to
time. The Company shall sent all notices to Holder to the following address:
TREASURY DEPARTMENT
SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4.6 Company's Right of First Refusal. Before this Warrant or any Shares
issued or issuable upon exercise of this Warrant (collectively, the
"Securities") held by the Warrant Holder or any transferee (either being
sometimes referred to herein as the "Holder") may be sold or otherwise
transferred (including transfers by gift or operation of law, however subject to
Section (f) hereof), the Company or its assignee(s) shall have a right of first
refusal to purchase the Securities on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Securities
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Securities; (ii)
the name of each proposed purchaser or other transferee (the "Proposed
Transferee"); (iii) the number of Securities to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Securities (the "Offered Price"), and the
Holder shall offer the Securities at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time within ten
(10) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Securities proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Securities purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Securities proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Securities to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other
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transfer is consummated within 90 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Securities in the
hands of such Proposed Transferee. If the Securities described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Securities held by the Holder
may be sold or otherwise transferred.
(f) Exception for Certain Transfers. Notwithstanding anything to
the contrary contained in this Section, the transfer of any or all of the
Securities to any parent, subsidiary, or other affiliate (as defined in Rule 144
under the Securities Act of 1933, as amended (the "Securities Act")) including,
without limitation, Silicon Valley Bancshares, The Silicon Valley Foundation or
other affiliate of Holder, of the Warrant Holder shall be exempt from the
provisions of this Section. In such case, the transferee or other recipient
shall receive and hold the Securities so transferred subject to the provisions
of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Securities upon the first sale of Common Stock
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act.
4.7 Lock-Up Agreement.
(a) Agreement. Holder, if requested by the Company and the lead
underwriter of any public offering of the Common Stock or other securities of
the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
Common Stock (except Common Stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act of 1933 (the "Securities Act"), or such shorter period of time as
the Lead Underwriter shall specify, provided that each officer and director of
the Company is similarly bound. Holder further agrees to sign such documents as
may be requested by the Lead Underwriter to effect the foregoing and agrees that
the Company may impose stop-transfer instructions with respect to such Common
Stock until the end of such period. The Company and Holder acknowledge that each
Lead Underwriter of a public offering of the Company's stock, during the period
of such offering and for the 180-day period thereafter, is an intended
beneficiary of this Section.
4.8 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.
4.9 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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4.10 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.
"COMPANY"
TURNSTONE SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ Kingston Duffie
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: Kingston Duffie
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(Print)
Title: Chairman of the Board, President or Vice President
"HOLDER"
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common/Series Preferred [strike one] Stock of pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
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(Name)
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(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
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(Signature)
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(Date)