Exhibit 10.3

 

SECOND AMENDED AND RESTATED WARRANT

 

THIS SECOND AMENDED AND RESTATED WARRANT ("WARRANT") WAS ORIGINALLY SOLD ON THE
ISSUE DATE IN A PRIVATE TRANSACTION AND IS AMENDED AND RESTATED AS OF THE SECOND
RESTATEMENT DATE, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED OR SOLD ONLY IF REGISTERED UNDER THE SECURITIES ACT AND SUCH LAWS OR IF
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH LAWS IS
AVAILABLE.

 

Company / Issuer:

Giga-tronics Incorporated, a California corporation

Number of Shares:

156,000 shares, subject to adjustment

Class of Shares:

Common Stock, no par value / share

Exchange Price:

See Section 1.2

Issue Date: March 13, 2014

Restatement Date:

June 16, 2014

2nd Restatement Date:

March 26, 2018

Expiration Date:

March 13, 2020

 

The term “Holder” shall initially refer to Partners for Growth IV, L.P., a
Delaware limited partnership, which is the initial holder of this Warrant and
shall further refer to any subsequent permitted holder of this Warrant from time
to time.

 

Giga-tronics Incorporated, a California corporation (the “Company”) does hereby
certify and agree that, for the sum of $2,899 paid by Holder on the Issue Date,
which the parties agree was fair consideration for this Warrant, Holder, or its
permitted successors and assigns, hereby is entitled to Exercise or Exchange
this Warrant (each as defined below) in the Company for up to One Hundred
Fifty-Six (156,000) duly authorized, validly issued, fully paid and
non-assessable shares of its Common Stock, no par value per share (the “Common
Stock”) upon the terms and subject to the provisions of this Warrant. The Common
Stock issuable upon Exercise or Exchange of this Warrant is referred to herein
as the “Warrant Stock”. Capitalized terms used but not defined in this Warrant
have their meanings as set forth in that certain Loan and Security Agreement of
even date herewith between the Company and Holder (as amended, the “Loan
Agreement”), regardless of whether the Loan Agreement is then in effect. When
the term “convert” or “conversion” in relation to the Warrant is used herein, it
includes an Exchange and an Exercise, each as defined below, as applicable.

 

Section 1

Term, Price, Exercise and Exchange of Warrant.

 

1.1     Term of Warrant. This Warrant shall be convertible from the Issue Date
until the Expiration Date.

 

 

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1.2     Exchange Price. The price per share at which the Warrant Stock is
issuable upon conversion of this Warrant shall be the lesser of (i) $0.25 per
share and (ii) the exercise price per share under those certain common stock
warrants issued to investors as part of Units on or about January 29, 2016, as
such exercise price is restated by agreement of the Company and such investors
on or about the 2nd Restatement Date of this Warrant (the “Exchange Price”).

 

1.3     Exercise of Warrant; Exchange of Warrant.

 

(a)     This Warrant may be Exercised (as defined below) in whole or in part,
upon surrender of this Warrant to the Company at its then principal offices in
the United States, together with the form of election to Exchange or Exercise
attached hereto as Exhibit A (the “Election”) duly completed and executed with
“Exercise” selected as the mode of conversion, and upon payment to the Company
of the Exchange Price for the number of shares of Warrant Stock in respect of
which this Warrant is then being converted (an “Exercise”). In lieu of an
Exercise, Holder may exchange this Warrant in whole or in part on a cashless
basis by indicating so in the Election and proceeding in accordance with the
remainder of this Section 1.3 (an “Exchange”).

 

(b)     Upon an Exchange, the Holder shall receive Warrant Stock such that,
without the payment of any funds, the Holder shall surrender this Warrant in
exchange for the number of shares of Warrant Stock equal to “X” (as defined
below), computed using the following formula:

 

  X   =

Y * (A-B)

                             

 

A

 

Where

 

  X = the number of shares of Warrant Stock to be issued to Holder   Y = the
number of shares of Warrant Stock to be converted under this Warrant   A = the
Fair Market Value of one share of Warrant Stock   B = the Exchange Price (as
adjusted to the date of such calculations)   * = multiplied by

 

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(c)     For purposes of this Warrant, the “Fair Market Value” of one share of
Warrant Stock shall be (i) if the Company’s Common Stock is becomes listed on a
national stock exchange, the volume weighted average price per share reported on
such exchange over the 30 trading-day period prior to the date Holder delivers
its Election to the Company (the “30 Day VWAP”), or (ii) if the Common Stock is
traded over-the-counter, the average of the bid and ask price for Common Stock
over the 30 trading-day period prior to the date Holder delivers its Election to
the Company. If another class or series of Company securities is listed or
traded as aforesaid, the Fair Market Value shall be adjusted based on the ratio
that the Warrant Stock converts into such other class or series or such other
class or series converts into Warrant Stock, as appropriate. If the Common Stock
is not traded as contemplated in clauses (i) or (ii), above, the Fair Market
Value of the Company’s Warrant Stock shall be the price per share of Warrant
Stock which the Company could obtain from a willing buyer of Warrant Stock sold
by the Company from its authorized but unissued shares, initially as the Board
of Directors of the Company (“Board”) shall determine in its reasonable good
faith judgment, but in no event less than the price per share at which Common
Stock (or options for Common Stock) are then issuable to Company employees based
on a valuation compliant with Section 409A of the United States Internal Revenue
Code; provided, however, if Holder disagrees the Fair Market Value of Warrant
Stock as determined by the Board, the parties shall jointly engage a valuation
expert to value the Warrant Stock based on a valuation of the Company as a going
concern using standard valuation methodologies for the Warrant Stock. If the
Warrant is to be converted in connection with an Acquisition, the Fair Market
Value of a share of Warrant Stock shall be based on the enterprise value
specified or implied in such Acquisition and shall be the greater of (A) the
value attributable to the Warrant Stock and (B) the value attributable to the
Company securities into which the Warrant Stock is (or may be) convertible (but
subject to Holder’s conversion directly into such other Company securities).

 

(d)     Upon surrender of this Warrant, and the duly completed and executed
Election, and payment of the Exchange Price (if an Exercise) or conversion of
this Warrant through Exchange, the Company shall promptly issue and deliver to
the Holder or such other person as the Holder may designate in writing a
certificate or certificates for the number of shares of Warrant Stock issuable
pursuant to the terms of this Warrant upon conversion. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Stock as of the date of the surrender of this Warrant, and the duly
completed and executed Election, and payment of the Exchange Price in the case
of an Exercise or conversion of this Warrant through Exchange; provided, that if
the date of surrender of this Warrant and payment of the Exchange Price is not a
business day, the certificates for the Warrant Stock shall be deemed to have
been issued as of the next business day (whether before or after the Expiration
Date). If this Warrant is converted in part, a new warrant of the same tenor and
for the number of shares of Warrant Stock not converted shall be executed by the
Company and delivered to Holder.

 

1.4     Fractional Interests. The Company shall not be required to issue
fractions of shares of Warrant Stock upon the conversion of this Warrant. If any
fraction of a share of Warrant Stock would be issuable upon the exchange of this
Warrant (or any portion thereof), the Company shall purchase such fraction for
an amount in cash equal to the Fair Market Value of the Warrant Stock.

 

1.5     Automatic Exchange on Expiration Date. In the event that, by the
Expiration Date, this Warrant has not been fully converted, then this Warrant
shall be deemed Exchanged pursuant to Section 1.3 as to all Warrant Stock (or
such other securities) for which it shall not previously have been converted,
and the Company shall promptly deliver a certificate representing the Warrant
Stock (or such other securities) issued upon such conversion to the Holder.

 

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1.6     Treatment of Warrant Upon Acquisition of Company.

 

(a)     “Acquisition”. For the purpose of this Warrant, “Acquisition” means any
sale or other disposition of all or substantially all of the assets of the
Company in whatever form, or any reorganization, consolidation, or merger of the
Company (whether in a single transaction or multiple related transactions) 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(s).

 

(b)     Treatment of Warrant at Acquisition. Upon the closing of any
Acquisition, at Holder’s option: (i) if the surviving entity (if applicable in
such Acquisition) is willing assume the obligations of the Company under this
Warrant, then if Holder so elects this Warrant shall be convertible into the
same securities as would be payable for the Warrant Stock issuable upon
conversion of the unconverted portion of this Warrant as if such Warrant Stock
were outstanding on the record date for the Acquisition (and the Warrant Price
and/or number of shares of Warrant Stock shall be adjusted accordingly); or (ii)
the Company or other surviving entity in such Acquisition may (in lieu of
assuming this Warrant under clause (i)) upon initial closing of such Acquisition
purchase this Warrant at its “Fair Value” (the “Purchase Price”). For purposes
hereof, “Fair Value” means that value determined by the parties using a
Black-Scholes Option-Pricing Model (the “ Black-Scholes Calculation”) with the
following assumptions: (A) a risk-free interest rate equal to the risk-free
interest rate at the time of the closing of the Acquisition (or as close thereto
as practicable), (B) a contractual life of the Warrant equal to the remaining
term of this Warrant as of the date of the announcement of the Acquisition, (C)
an annual dividend yield equal to dividends declared on the underlying Warrant
Stock (including securities into which the Warrant Stock may be convertible)
during the term of this Warrant (calculated on an annual basis), and (D) a
volatility factor of the expected market price of the Company’s Common Stock
comprised of: (1) if the Company is publicly traded on a national securities
exchange, its volatility over the one year period ending on the day prior to the
announcement of the Acquisition, (2) if the Common Stock is traded
over-the-counter, its volatility over the one year period ending on the day
prior to the announcement of the Acquisition, or (3) if the Company is a
non-public company, the volatility, over the one year period prior to the
Acquisition, of an average of publicly-traded companies in the same or similar
industry to the Company with such companies having similar revenues. The
Purchase Price determined in accordance with the above shall be paid upon the
initial closing of the Acquisition and shall not be subject to any
post-Acquisition closing contingencies or adjustments; provided, however, the
parties may take such post-Acquisition closing contingencies or adjustments into
account in determining the Purchase Price, and if the parties take any
post-Acquisition closing contingencies or adjustments into account, then upon
the partial or complete removal of those post-Acquisition closing contingencies
or adjustments, a new Black-Scholes Calculation would be made using all of the
same inputs except for the value of the Company’s Common Stock (as determined
under subclause (D)), and any increase in Fair Value (and, correspondingly,
Purchase Price), including, without limitation, as a result of any earn-out or
escrowed consideration, would be paid in full to Holder immediately after those
post-Acquisition closing contingencies or adjustments can be determined or
achieved.

 

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Section 2.

Exchange and Transfer of Warrant.

 

(a)     This Warrant may be transferred, in whole or in part, without
restriction, subject to (i) Holder’s compliance with applicable securities laws
(including, without limitation, the delivery of investment representation
letters and legal opinions in legally sufficient and customary form), and (ii)
the transferee holder of the new Warrant assuming in writing the obligations of
the Holder and making the representations and warranties set forth in this
Warrant. Notwithstanding and without the necessity of delivering an opinion of
counsel, Holder may at any time transfer this Warrant in whole or in part to any
affiliate. By its acceptance of this Warrant, each such affiliate transferee
will be deemed to have made to the Company each of the representations and
warranties set forth in Section 7 hereof and agrees to be bound by all of the
terms and conditions of this Warrant as if the original Holder hereof. A
transfer may be registered with the Company by submission to it of this Warrant,
together with the Assignment Form attached hereto as Exhibit B duly completed
and executed. After the Company’s receipt of this Warrant and the Assignment
Form so completed and executed, the Company will issue and deliver to the
transferee a new warrant (representing the portion of this Warrant so
transferred) at the same Exchange Price per share and otherwise having the same
terms and provisions as this Warrant, which the Company will register in the new
holder’s name. In the event of a partial transfer of this Warrant, the Company
shall concurrently issue and deliver to the transferring holder a new warrant
that entitles the transferring holder to purchase the balance of this Warrant
not so transferred and that otherwise is upon the same terms and conditions as
this Warrant. Upon the due delivery of this Warrant for transfer, the transferee
holder shall be deemed for all purposes to have become the holder of the new
warrant issued for the portion of this Warrant so transferred, effective
immediately prior to the close of business on the date of such delivery,
irrespective of the date of actual delivery of the new warrant representing the
portion of this Warrant so transferred. Notwithstanding any contrary provision
herein, at all times prior to the IPO, Holder may not, without the Company’s
prior written consent, transfer this Warrant or any portion hereof, or any
shares issued upon any exercise hereof to any person or entity who directly
competes with the Company, except in connection with an Acquisition of the
Company by such a direct competitor.

 

(b)     In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new warrant to the Holder in
substitution therefor upon the Company’s receipt of (i) evidence reasonably
satisfactory to the Company of such event and (ii) if requested by the Company,
an indemnity agreement reasonably satisfactory in form and substance to the
Company. In the event of the mutilation of or other damage to the Warrant, the
Company shall execute and deliver an identical new warrant to the Holder in
substitution therefor upon the Company’s receipt of the mutilated or damaged
warrant.

 

(c)     The Company shall pay all reasonable costs and expenses incurred in
connection with any conversion (by Exercise or Exchange), transfer or
replacement of this Warrant, including, without limitation, the costs of
preparation, execution and delivery of a new warrant and of share certificates
representing all Warrant Stock.

 

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Section 3.

Certain Covenants.

 

(a)     The Company shall at all times reserve for issuance and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exchange of this Warrant, such number of shares of Common
Stock as shall from time to time be sufficient therefor.

 

(b)     The Company will not, by amendment or restatement of its Certificate of
Incorporation or Bylaws or through reorganization, consolidation, merger,
amalgamation, sale of assets or otherwise, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant. Without limiting the
foregoing, the Company will not increase the par value of any Warrant Stock
receivable upon the exchange of this Warrant above the amount payable therefor
upon such exchange.

 

(c)     So long as Holder holds this Warrant, the Company shall deliver to
Holder such reports as it provides to its common stockholders generally, as and
when delivered to such stockholders. Notwithstanding the foregoing, the Company
shall provide Holder quarterly and annual financial statements upon request, if
such statements are not publicly available. The parties shall not treat the
Warrant or the Warrant Stock as being granted or issued as property transferred
in connection with the performance of services or otherwise as compensation for
services rendered.

 

Section 4.

Adjustments to Exchange Price and Number of Shares of Warrant Stock.

 

4.1     Adjustments. The Exchange Price shall be subject to adjustment from time
to time in accordance with this Section 4. Upon each adjustment of the Exchange
Price pursuant to this Section 4, the Holder shall thereafter be entitled to
acquire upon conversion, at the Exchange Price resulting from such adjustment,
the number of shares of Warrant Stock obtainable by multiplying the Exchange
Price in effect immediately prior to such adjustment by the number of shares of
Warrant Stock acquirable immediately prior to such adjustment and dividing the
product thereof by the new Exchange Price resulting from such adjustment.

 

4.2     Subdivisions, Combinations and Stock Dividends. If the Company shall at
any time subdivide by split-up or otherwise, its outstanding Common Stock into a
greater number of shares, or issue additional Common Stock as a dividend or
otherwise with respect to any Common Stock, the Exchange Price in effect
immediately prior to such subdivision or share dividend shall be proportionately
reduced and the number of shares acquirable upon Exercise or Exchange hereunder
shall be proportionately increased. Conversely, in case the outstanding Common
Stock of the Company shall be combined into a smaller number of shares, the
Exchange Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares acquirable upon Exercise or
Exchange hereunder shall be proportionately reduced.

 

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4.3     Reclassification, Exchange, Substitutions, Etc. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon conversion of
this Warrant, Holder shall be entitled to receive and the Company shall promptly
issue an amended warrant for the number and kind of securities and property that
Holder would have received for the Warrant Stock if this Warrant had been
converted immediately before such reclassification, exchange, substitution, or
other event. The amendment to this Warrant shall provide for adjustments (as
determined in good faith by the Board) which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4.3, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon conversion of the new Warrant. The provisions of this
Section 4.3 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other similar events.

 

4.4.     Notices of Record Date, Etc. In the event that the Company shall:

 

(1) declare any dividend upon its Common Stock, whether payable in cash,
property, stock or other securities and whether or not a regular cash dividend,
or

 

(2) offer for sale to (but not necessarily exclusively to) its existing
securityholders any additional shares of any class or series of the Company’s
stock or securities exchangeable for or convertible into such stock in any
transaction that would give rise (regardless of waivers thereof) to pre-emptive
rights of any class or series of stockholders, or

 

(3) effect or approve (by stockholder vote or otherwise) any reclassification,
exchange, substitution or recapitalization of the capital stock of the Company,
including any subdivision or combination of its outstanding capital stock, or
consolidation or merger of the Company with, or sale of all or substantially all
of its assets to, another corporation, or to liquidate, dissolve or wind up
(including an assignment for the benefit of creditors), or

 

(4) offer holders of registration rights the opportunity to participate in any
public offering of the Company’s securities,

 

then, in connection with such event, the Company shall give to Holder:

 

(i) at least ten (10) days prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such a dividend or
offer in respect of the matters referred to in (1) or (2) above;

 

(ii) in the case of the matters referred to in (3) above, at least ten (10) days
prior written notice of the date when the same shall take place; and

 

(iii) in the case of the matter referred to in (4) above, the same notice as is
given or required to be given to the holders of such registration rights.

 

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Such notice in accordance with the foregoing clause (1) shall also specify, in
the case of any such dividend, the date on which the holders of capital stock
shall be entitled thereto and the terms of such dividend, and such notice in
accordance with clause (2) shall also specify the date on which the holders of
capital stock shall be entitled to exchange their capital stock for securities
or other property deliverable upon such reorganization, reclassification,
exchange, substitution, consolidation, merger or sale, as the case may be, and
the terms of such exchange. Each such written notice shall be given by first
class mail, postage prepaid, addressed to the holder of this Warrant at the
address of Holder.

 

4.5     Adjustment by Board. If any event occurs as to which, in the opinion of
the Board, the provisions of this Section 4 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the Holder in
accordance with the essential intent and principles of such provisions, then the
Board shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights, but in no event shall any adjustment have the effect of increasing the
Exchange Price as otherwise determined pursuant to any of the provisions of this
Section 4, except in the case of a combination of shares of a type contemplated
in Section 4.2 and then in no event to an amount larger than the Exchange Price
as adjusted pursuant to Section 4.2.

 

4.6     Officers’ Statement as to Adjustments. Whenever the Exchange Price
and/or number of shares of Warrant Stock subject to the Warrant is required to
be adjusted as provided in this Section 4, the Company shall forthwith file at
its principal office with a copy to the Holder notice parties set forth in
Section 9 hereof a statement, signed by the Chief Executive Officer or Chief
Financial Officer of the Company, showing in reasonable detail the facts
requiring such adjustment, the Exchange Price and number of issuable shares that
will be effective after such adjustment; provided, however, such statement shall
not be required to the extent the information otherwise required by this Section
4.7 is available through the Company’s current reports filed with the Securities
and Exchange Commission.

 

4.7     Issue of Securities other than Common Stock. In the event that at any
time, as a result of any adjustment made pursuant to this Section 4, Holder
thereafter shall become entitled to receive any securities of the Company, other
than Common Stock, the number of such other shares so receivable upon Exercise
or Exchange of this Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section 4.

 

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Section 5.

Rights and Obligations of the Warrant Holder.

 

Except as otherwise specified in this Warrant, this Warrant shall not entitle
the Holder to any rights of a holder of Common Stock in the Company until such
time as this Warrant is exchanged or exercised.

 

Section 6.

Representations, Warranties and Covenants of the Company. The Company represents
and warrants to, and covenants with, Holder that:

 

6.1      Corporate Power; Authorization. The Company has all requisite corporate
power and has taken all requisite corporate action to execute and deliver this
Warrant, to sell and issue the Warrant and Warrant Stock and to carry out and
perform all of its obligations hereunder. This Warrant has been duly authorized,
executed and delivered on behalf of the Company by the person executing this
Warrant and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) as limited by equitable
principles generally.

 

6.2     Validity of Securities. The issuance and delivery of the Warrant is not
subject to preemptive or any similar rights of the stockholders of the Company
(which have not been duly waived) or any liens or encumbrances except for
restrictions on transfer provided for herein or under applicable federal and
state securities laws; and when the Warrant Stock is issued upon conversion by
Exercise or Exchange in accordance with the terms hereof, and this Warrant is
converted into Warrant Stock, such securities will be, at each such issuance,
validly issued, fully paid and nonassessable, in compliance with all applicable
securities laws and free of any liens or encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws.

 

6.3     Capitalization. The authorized capital of the Company consists of
40,000,000 common shares, of which 10,182,153 (as of 2/2/18) are issued and
outstanding, 1,000,000 Preferred Shares, no par value per share, of which
18,533.51 are issued and outstanding, of which (i) 250,000 are designated as
Series A Preferred Shares and none are issued and outstanding, (ii) 10,000 are
designated as Series B Preferred Shares and 9,997 are issued and outstanding,
(iii) 3,500 are designated as Series C Preferred Shares and 3424.65 are issued
and outstanding (iv) 6,000 are designated as Series D Preferred Shares and
5,111.86 are issued and outstanding. Each share of preferred stock can convert
into 100 shares of common. Common stock warrants totaling 3,736,702 have been
granted in association with the Preferred Share purchases, Common share
purchases (including placement agent commissions) and PFG debt issuance. As of
the date hereof, the Company has reserved a total of 2,850,000 shares of its
Common Stock for issuance under its 2005 Plan, of which 1,177,667 shares
(including 450,450 shares of restricted stock) are outstanding and 1,672,333 are
reserved for future grants. A true, correct and current copy of the Company’s
current Restated Articles of Incorporation is appended as Exhibit C hereto.
Except as specified in this Agreement or as disclosed in Exhibit D hereto,
including with respect to a pending Series E Preferred Share financing, there
are no other options, warrants, conversion privileges or other contractual
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities.  Exhibit D
hereto sets forth a capitalization table of the Company which is true, correct
accurate, complete and materially consistent with this Section 6.3 as of the
date hereof.

 

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6.4     No Conflict. The execution and delivery of this Warrant do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit, under, any provision of
the Certificate of Incorporation or Bylaws of the Company or any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets, in each case,
the effect of which would have a material adverse effect on the Company or
materially impair or restrict its power to perform its obligations as
contemplated hereby.

 

6.5     Governmental and other Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority or other person or entity is required on
the part of the Company in connection with the issuance, sale and delivery of
the Warrant and the Warrant Stock, except such filings pursuant to the United
States Securities Act of 1933, as amended (the “Securities Act”) and applicable
state securities laws, which have been made or will be made in a timely manner.
All stockholder consents required in connection with issuance of the Warrant and
Warrant Stock have either been obtained by Company or no such consents are
required.

 

6.6     Exempt from Registration. Assuming the accuracy of the representations
and warranties of Holder in Section 7 hereof, the offer, sale and issuance of
the Warrant and the Warrant Stock will be exempt from the registration
requirements of the Securities Act pursuant to 506 of Regulation D under the
Securities Act and from the registration and qualification requirements of
applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of such securities to any person or
persons so as to bring the offer, sale and issuance of the Warrant or the
Warrant Stock by the Company within the registration provisions of the
Securities Act.

 

6.7     Delivery of Information; Accuracy. The Company acknowledges its delivery
of certain Representations and Warranties dated as of the date hereof (the
“Representations Letter”) to Holder, which Representations and Warranties form
the basis for Holder purchasing the Warrant. The information contained therein
and in all documents, instruments and other information delivered to Holder in
connection therewith are true, correct, accurate and complete in all material
respects as of the Issue Date.

 

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6.11     Legends. The Company shall remove any restrictive securities legends on
Warrant Stock resulting from conversion of this Warrant as soon as permitted by
applicable law.

 

Section 7.          Representations and Warranties of Holder. Holder hereby
represents and warrants to the Company as of the Closing Date as follows:

 

7.1     Investment Experience. Holder is an “accredited investor” within the
meaning of Rule 501 under the Securities Act, and was not organized for the
specific purpose of acquiring the Securities. Holder is aware of the Company’s
business affairs and financial condition and has received or has had full access
to all the information it considers necessary or appropriate to make an informed
investment decision with respect to the acquisition of this Warrant and its
underlying securities. Holder further has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of this Warrant and its underlying securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Holder or to which Holder has access. Holder has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Securities.

 

7.2     Investment Intent. Holder is purchasing the Warrant for investment for
its own account only and not with a view to, or for resale in connection with,
any “distribution” thereof within the meaning of the Securities Act. Holder
understands that the Warrant has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Holder's investment intent as expressed herein.

 

7.3     Authorization. Holder has all requisite power and has taken all
requisite action required of it to carry out and perform all of its obligations
hereunder. The execution and delivery of this Warrant has been duly authorized,
executed and delivered on behalf of Holder and constitutes the valid and binding
agreement of Holder, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and (ii)
as limited by equitable principles generally. The consummation of the
transactions contemplated herein and the fulfillment of the terms herein will
not result in a breach of any of the terms or provisions of Holder's
constitutional documents or instruments.

 

7.4     The Act. Holder understands that this Warrant and the Warrant Stock
issuable upon exercise hereof have not been registered under the Act in reliance
upon a specific exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the Holder’s investment intent as expressed
herein. Holder understands that this Warrant and the Warrant Stock issued upon
any exercise hereof must be held indefinitely unless subsequently registered
under the Act and qualified under applicable state securities laws, or unless
exemption from such registration and qualification are otherwise available.
Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

11

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7.5      No Voting Rights. Holder, as a Holder of this Warrant, will not have
any voting rights until the conversion in whole or in part of this Warrant.

 

Section 8.

Restricted Stock Legend.

 

This Warrant and the Warrant Stock have not been registered under any securities
laws. Accordingly, any share certificates issued pursuant to the conversion of
this Warrant shall (until receipt of an opinion of counsel in customary form
that such legend is no longer necessary) bear the following legend:

 

THIS WARRANT AND THE WARRANT STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE OFFER, SALE,
PLEDGE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN CUSTOMARY FORM THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.

 

Section 9.

Notices.

 

Any notice or other communication required or permitted to be given here shall
be in writing and shall be effective (a) upon hand delivery or delivery by
e-mail or facsimile at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received)
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received),
or (b) on the third business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communication shall be:

 

if to Holder, at

 

Partners for Growth IV, L.P.

1660 Tiburon Blvd., Suite D

Tiburon, California 94920

Attention: Chief Financial Officer

Fax: (415) 781-0510

Email: notices@pfgrowth.com

 

12

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with a copy (not constituting notice) to

 

Greenspan Law Office

Attn: Benjamin Greenspan, Esq.

620 Laguna Road

Mill Valley, CA 94941

Fax: (415) 738-5371

Email: ben@greenspan-law.com

 

with the original of this Warrant and any replacement, restatement or reissue of
this Warrant to be delivered to:

 

Robert W. Baird & Co., Inc.

555 California Street, Suite 4900

San Francisco, CA 94104

ATTN: John Fitzgibbons

Phone # 415-627-3225

Email: JFitzgibbons@rwbaird.com

 

or

 

if to the Company, at

 

Giga-tronics Incorporated

5990 Gleason Drive

Dublin CA, 94568

Title: CEO

Name: John Regazzi

Email: jregazzi@gigatronics.com

Fax: 925-328-4789

 

with a copy (not constituting notice) to:

 

Sheppard Mullin Richter & Hampton LLP

Four Embarcadero Center, 17th Floor

San Francisco, CA 94111

Fax: 415-403-6050

Attn: Thomas Reddy

Email: TReddy@sheppardmullin.com

 

Each party hereto may from time to time change its address for notices under
this Section 9 by giving at least 10 calendar days’ notice of such changes
address to the other party hereto.

 

13

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Section 10.

Amendments and Waivers.

 

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. This
Warrant may only be amended by an instrument in writing signed by both parties.

 

Section 11.

Applicable Law; Severability.

 

This Warrant shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware. If any one or more of the provisions
contained in this Warrant, or any application of any provision thereof, shall be
invalid, illegal, or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and all other
applications of any provision thereof shall not in any way be affected or
impaired thereby.

 

Section 12.

Construction; Headings.

 

The terms “Exercise” and “Exchange” may be used interchangeably from time to
time in this Warrant, the only substantive difference being that the exercise of
rights under this Warrant by Exercise will require payment of cash consideration
per share equal to the Exchange Price. The headings used in this Warrant are for
the convenience of the parties only and shall not be used in construing the
provisions hereof.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

14

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IN WITNESS WHEREOF, the Company has caused this SECOND Amended and Restated
Warrant to be duly executed on the day and year first above written.

 

COMPANY:

 

Giga-tronics Incorporated

 

 

 

 

By: ____________________________

 

Name: _________________________

 

Title: __________________________

ACKNOWLEDGED AND AGREED:

 

HOLDER:

 

Partners for Growth IV, L.P.

 

 

By: _______________________

      ___________________, Manager of

      Partners for Growth IV, LLC,

      Its General Partner

 

 

Warrant (2nd A&R) Signature Page

 

--------------------------------------------------------------------------------

 

 

Exhibit A

 

To:   

 

                              ELECTION TO EXCHANGE OR EXERCISE

 

1.     The undersigned hereby exercises its right to Exchange its Warrant for
_________________ fully paid, validly issued and nonassessable shares of Warrant
Stock in accordance with the terms thereof.

 

1.     The undersigned hereby elects to Exercise the attached Warrant for fully
paid, validly issued and nonassessable shares of Warrant Stock by payment of
$__________ as specified in the attached Warrant. This right is exercised with
respect to ___________ of shares.

 

         [Strike the paragraph above that does not apply.]

 

The undersigned requests that certificates for such shares be issued in the name
of, and delivered to:

 

                       ______________________

                       ______________________

                       ______________________

 

2.     By its execution below and for the benefit of the Company, the
undersigned hereby restates each of the representations and warranties in
Section 7 of the Warrant as of the date hereof.

 

 

Date: _____________________

 

 [Holder]

 

 

By _________________________

Name:

Title:

 

 

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Exhibit B

 

ASSIGNMENT FORM

 

To:  

 

        The undersigned hereby assigns and transfers this Warrant to

 

                                                                              
                     

(Insert assignee’s social security or tax identification number)

 

                                                                              
                                                               

(Print or type assignee’s name, address and postal code)

                                                                              
                                                               

 

                                                                              
                                                               

 

 

and irrevocably appoints                                                        
                            to transfer this Warrant on the books of the
Company.

 

Date:                                           

 

Partners for Growth IV, L.P.

 

 

By                                                       

Name:                                 , Manager of

Partners for Growth IV, LLC, Its General Partner

 

 

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Exhibit C

 

Articles of Incorporation

 

 

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Exhibit D

Capitalization Table

 

 

   

Fully Diluted

     

Shares

   

Ownership%

                   

Common - Issued and Outstanding

    8,584,169       38.2 %

PFG Shares

    360,000       1.6 %

Common - Alara Warrants Exercised at $1.43

    1,010,034       4.5 %

Common Shares issued to EGE for E-series

    220,000       1.0 %

Total common outstanding

    10,174,203       45.3 %                  

Alara Series B Preferred - As converted, liquidation preference of $2.30

    999,700       4.5 %

Alara Series C Preferred - As converted, liquidation preference of $1.46

    342,465       1.5 %

Alara Series D Preferred - As converted, liquidation preference of $1.43

    511,186       2.3 %

Series E-As converted, assumes $1.1M investment

    4,400,000       19.6 %

Total converted preferred outstanding

    6,253,351       27.9 %                  

Common Warrants - PFG at $1.42 will be repriced to 25 cents

    260,000       1.2 %

Common Warrants - Alara at $1.78

    898,634       4.0 %

Common Warrants - Alara at $1.76

    194,437       0.9 %

Common Warrants - EGE Investors at $1.15, will be repriced to 25 cents

    2,090,904       9.3 %

Common Warrants - EGE Commission at $1.15, will be repriced to 25 cents

    292,727       1.3 %

Total common warrants outstanding

    3,736,702       16.6 %                  

Option Pool

    1,231,777       5.5 %

Common Stock Options Outstanding - Average price $1.44

    679,100       3.0 %

Restricted Stock Awards Outstanding

    375,450       1.7 %

Total Options outstanding

    2,286,327                            

Fully Diluted

    22,450,583       100.0 %