-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SkM8Cc5mw5btQjqVNV+fruPip5yv6qQIOjHGSaZlScp7pA/79yzqUTcOuvCfK5cC vFQBQq09/c/tfE6vK5ykzw== 0000950148-96-001051.txt : 19960530 0000950148-96-001051.hdr.sgml : 19960530 ACCESSION NUMBER: 0000950148-96-001051 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19960529 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRV COMMUNICATIONS INC CENTRAL INDEX KEY: 0000887969 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 061340090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-00210 FILM NUMBER: 96573844 BUSINESS ADDRESS: STREET 1: 8917 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187739044 MAIL ADDRESS: STREET 1: 8943 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 S-1/A 1 AMENDMENT NO. 3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY _, 1996 REGISTRATION NO. 333-00210 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 3 TO FORM S-1 MRV COMMUNICATIONS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3674 06-1340090 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
8917 FULLBRIGHT AVENUE CHATSWORTH, CALIFORNIA 91311 (818) 773-9044/(818) 773-0906 (FAX) (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) NOAM LOTAN PRESIDENT AND CHIEF EXECUTIVE OFFICER MRV COMMUNICATIONS, INC. 8917 FULLBRIGHT AVENUE CHATSWORTH, CALIFORNIA 91311 (818) 773-9044/(818) 773-0906 (FAX) (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) COPIES TO: LEIB ORLANSKI, ESQ. KEN KOCH, ESQ. ASHER S. LEVITSKY, ESQ. FRESHMAN, MARANTZ, ORLANSKI SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP ESANU KATSKY KORINS & SIGER COOPER & KLEIN 551 5TH AVENUE 605 THIRD AVENUE 9100 WILSHIRE BOULEVARD, 8-EAST NEW YORK, NY 10176 NEW YORK, NEW YORK 10153 BEVERLY HILLS, CALIFORNIA 90212-3480 TELEPHONE: (212) 661-6500 TELEPHONE: (212) 953-6000 TELEPHONE: (310) 273-1870 FAX: (212) 697-6686 FAX: (212) 953-6899 FAX: (310) 274-8293
------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. If any of the securities on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ X ] CALCULATION OF REGISTRATION FEE
================================================================================================================================= PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2) - --------------------------------------------------------------------------------------------------------------------------------- Common Stock, $0.0067 par value......... 1,666,391 $50.75 $84,569,343.25 $4,172.52 - --------------------------------------------------------------------------------------------------------------------------------- Total................................................................................................. $4,172.52 =================================================================================================================================
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c). (2) Includes only the additional 238,430 shares underlying the Selling Stockholder Warrants to be registered hereunder and does not include the increase in the number of shares resulting from a 3:2 stock split paid April 2, 1996. ------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 MRV COMMUNICATIONS, INC. CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
FORM S-1 REGISTRATION LOCATION IN PROSPECTUS --------------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus.......................... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus......................... Inside Front and Outside Back Cover Pages of the Prospectus. 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges..................................... 4. Use of Proceeds............................. The Company; The Offering; Use of Proceeds 5. Determination of Offering Price............ Outside Front Cover Page; Plan of Distribution 6. Dilution.................................... Not Applicable 7. Selling Security Holders.................... Principal and Selling Stockholders and Selling Warrant Holders 8. Plan of Distribution........................ Outside Front Cover Page; Plan of Distribution 9. Description of Securities to be Registered.................................. Dividend Policy; Price Range of Common Stock; Description of Securities and Warrants 10. Interests with Respect to the Registrant.................................. Outside Front Cover Page; The Company; Risk Factors; Dividend Policy; Price Range of Common Stock; Capitalization; Selected Financial Data; Management's Discussion of Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal and Selling Stockholders and Selling Warrant Holders; Description of Securities and Warrants; Shares Eligible for Future Sale; Experts; Financial Statements 11. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................. Not Applicable
3 PROSPECTUS SUBJECT TO COMPLETION DATED MAY 29, 1996 MRV COMMUNICATIONS, INC. 1,666,391 SHARES OF COMMON STOCK Of the 1,666,391 shares (the "Shares") of common stock, $0.0067 par value (the "Common Stock"), offered hereby, 427,464 shares are being offered by certain stockholders of the Company named herein (the "Selling Stockholders") and 1,238,927 Shares are being offered by certain Warrant Holders (the "Selling Warrant Holders") upon the exercise of the Warrants (the "Warrants") held by the Selling Warrant Holders. Included in the 1,238,927 Shares being offered by the Selling Warrant Holders are 150,000 Shares (the "Warrant Shares") being offered by Hampshire Securities Corporation ("Hampshire Securities") and certain of its principals. Hampshire Securities was the representative of the underwriters in the Company's public offering in January 1995 and the Company issued Hampshire Securities warrants (the "Representative's Warrants") to purchase the Warrant Shares at $11.20 per share, 140% of the initial public offering price. Hampshire Securities subsequently made an assignment of a portion of the Representative's Warrants covering 126,693 Warrant Shares among eight persons who are principals of Hampshire Securities. The Company will not receive any proceeds from the sale of Common Stock offered by the Selling Stockholders, but will realize $13,409,383.25 from the exercise of the Warrants by Selling Warrant Holders, if all the Warrants are exercised. The Selling Stockholders and the Selling Warrant Holders upon exercise of the Warrants may from time to time sell all or a portion of the Common Stock which may be offered by them hereby upon exercise of the Warrants in routine brokerage transactions in the over-the-counter market, at prices and terms prevailing at the time of the Sale. The Selling Stockholders and the Selling Warrant Holders may also make private sales directly or through brokers or may make sales pursuant to Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"). The Selling Stockholders and the Selling Warrant Holders may pay customary brokerage fees, commissions and expenses. The Company will pay all other expenses of this Offering. The brokers executing selling orders on behalf of the Selling Stockholders and the Selling Warrant Holders may be deemed to be "underwriters" within the meaning of the Securities Act, in which event commissions received by such brokers may be deemed underwriting commissions under the Securities Act. Hampshire Securities may be acting as a broker for Selling Stockholders Selling Warrant Holders. See "Plan of Distribution. The Common Stock is traded on the NASDAQ National Market (the "NASDAQ/NM") under the symbol "MRVC." On May 15, 1996, the closing sale price for the Common Stock was $50-3/4 per share. See "Price Range of Common Stock." AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Expenses of this offering are estimated to be $75,000 which the Company is paying. ----------------- The date of this Prospectus is May __, 1996 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, the Information In this Prospectus does not give effect to the exercise of (i) warrants outstanding as of March 31, 1996 to purchase up to 1,313,430 Shares, and (ii) up to 678,900 options granted and unexercised under the Company's 1992 Stock Option Plan. See "Management -Stock Option Plan," "Description of Securities--Warrants." Each prospective investor is urged to read this Prospectus in its entirety. As used in this Prospectus, the term "Company" means, unless the context requires otherwise, MRV Communications, Inc., its subsidiaries and its predecessors. This prospectus gives effect to a 3 for 2 stock split approved by stockholders on March 5, 1996 for shareholders of record on March 20, 1996 and which was paid on April 2, 1996. All share prices, warrant exercise prices, numbers of shares and numbers of warrants both current and historical have been adjusted to reflect the split. THE COMPANY The Company designs, manufactures, and markets semiconductor laser diodes, light emitting diodes ("LEDs"), and fiber optic transmitting and receiving modules for the transmission of large amounts of information at high speeds over long distances and local area network ("LAN") switching products for the computer networking industry. The Company assembles and integrates these devices into components that are sold primarily to original equipment manufacturers ("OEMs") in the fiber optic market. Products incorporating these devices are used primarily in computer local and wide area networks, voice communications, cable television, and fiber optic test instruments. The Company markets and sells products directly to OEMs in the United States and Canada and indirectly through independent manufacturers' representatives, value added resellers ("VARs"), and systems integrators. Internationally, the Company markets and sells its products primarily through approximately 80 independent distributors in Europe, the Middle East, and the Far East. Domestic manufacturers of fiber optic systems and instruments using the Company's products include: General Instruments, Reliance Electric, Synoptics, Optical Data System, Cisco Systems, Laser Precision Corp., ADC/Fibermux, 3M/Photodyne, and Network Systems Corporation. International customers include: Exfo Engineering, Inc., Photon Technology (China), and Kingfisher International PTY, Ltd. Based upon its proprietary opto-electronic chip technology, the Company has developed and markets three product lines: laser diodes and LED-based components; integrated transmitting and receiving modules; and stand-alone devices. The Company's LED and laser diode product line consists of semiconductor components intended primarily for the fiber optic communications market. Laser diodes and LEDs are solid state semiconductor light sources that convert electrical power to light for transmission over fiber optic cable. The Company's laser diode and LED technology is integrated with electronics in the Company's second product line, transmitting and receiving modules that provide data links for the data communications market. The Company's third product line consists of stand-alone products for bandwidth and distance enhancement in LANS. The Company's stand-alone products Include Ethernet switches and fiber optic LAN extenders for campus and metropolitan area networks. Ethernet switches subdivide a LAN into smaller segments with fewer devices to improve total network availability while providing temporary, but instant, interconnections between the smaller network segments. The Company markets these and other related products under the brand names NBase Communications, NBase Switch Communications and West Hills LAN Systems. The worldwide fiber optics market, including cables, connectors, and transceivers, was estimated by an industry source to be approximately $6.1 billion in 1995 and is estimated to grow to $14.5 billion by 2000. The Company believes that there are significant business opportunities for emerging fiber optic product and component manufacturing companies as a result of (1) the need of telecommunications companies, including the regional Bell operating companies (the "RBOCs") and the alternative local transport companies ("ALTs") competitive therewith, either to replace existing copper cabling in order to increase capacity or to expand existing networks and (11) the use of fiber optic technology as the communications medium of choice in the data communications market. The Company believes that its extensive experience with basic semiconductor opto-electronic technology, its knowledge and understanding of the telecommunications and data communications markets, and its customer base afford it a competitive advantage in such industry. 1 5 The Company's operating strategy is to capitalize on the commercial popularity of existing products and to develop and produce an increasing range of fiber optic communications products, including transmitters, receivers, and stand-alone products, which enhance distance and bandwidth in telecommunications networks and LANS. The Company has implemented its operating strategy by developing and manufacturing highly functional and powerful proprietary laser diodes and LEDs and by applying its technology to produce stand-alone products incorporating multiple fiber optic data link modules for use in data communications. The Company's predecessor, MRV Technologies, Inc., was incorporated under the laws of the State of California on July 26,1988. The Company was incorporated in Delaware on March 9, 1992 under the name MRV Technologies, Inc. In April 1992, the Company's California predecessor merged into the Company and the Company's name was changed to MRV Communications, Inc. The Company's executive offices are located at 8917 Fullbright Avenue, Chatsworth, California 91311 and its telephone number is (818) 773-9044. THE OFFERING Common Stock Offered by the Selling Warrant 1,238,927 Holders Common Stock Offered by the Selling Stockholders.......................................... 427,464 Common Stock Outstanding Prior to This Offering.............................................. 9,588,437 Common Stock Outstanding Following This Offering............................................ 10,827,364 shares assuming the exercise of the Warrants in full Risk Factors............................................ The purchase of the Shares is speculative and involves substantial risk. Prospective investors should carefully review and consider the information set forth under "Risk Factors." Use of Proceeds from Exercise of Warrants............... Research and development of new products and new generations of existing products; capital expenditures, consisting primarily of manufacturing and research and development test equipment; domestic and International marketing activities; and working capital and general corporate purposes. See "Use of Proceeds." NASDAQ/NM Trading Symbol................................ MRVC
2 6 SUMMARY FINANCIAL INFORMATION STATEMENT OF OPERATIONS DATA:
---------------------------------------------------------------------------------------------- Year Ended ---------------------------------------------------------------------------------------------- December 31, December 31, December 31, December 31, December 31, 1991 1992 1993 1994 1995 ------------ ---------------- ---------------- ----------------- ---------------- Revenues, net ............... $2,401,000 $4,422,000 $7,426,000 $17,526,000 $39,202,000 Cost of goods sold .......... 1,434,000 2,280,000 3,936,000 10,328,000 22,608,000 Non Recurring items(3) ...... -- -- -- -- (7,676,000)(3) Income (loss) before income taxes and extraordinary items .................... 209,000 800,000 1,326,000 2,601,000 (1,271,000) Extraordinary items ......... -- 42,000 -- -- -- Net income (loss): Pro forma(1) ............. 189,000 Historical(1) 560,000 839,000 1,618,000 (1,273,000) Net earnings (loss) per share: Pro forma(1) ............. $ 0.06 Historical(1) $ 0.15 $ 0.14 $ 0.26(4) ($ 0.14) Weighted average common and common equivalent shares outstanding(2) ........... 3,627,627 3,818,029 6,025,084 6,284,001(4) 9,188,737 Unaudited 3 months ended --------------------------------- March 31, March 31, 1995 1996 ------------ ----------- Revenues, net .................... $6,737,000 $15,529,000 Cost of goods sold ............... 4,260,000 8,989,000 Non Recurring items(3) ........... -- -- Income (loss) before income taxes and extraordinary items ......................... 1,085,000 2,800,000 Extraordinary items .............. -- -- Net income (loss): Pro forma(1) Historical(1) ................. 705,000 1,879,000 Net earnings (loss) per share: Pro forma(1) Historical(1) ................. $ 0.08 $0.18 Weighted average common and common equivalent shares outstanding(2) ................ 8,834,375 10,706,357 BALANCE SHEET DATA: AT DECEMBER 31, ------------------------------------------------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- Working capital (deficit) .......... $ (160,000) $3,773,000 $3,514,000 $11,303,000 22,019,000 Total assets .......... 946,000 6,389,000 7,328,000 16,667,000 33,307,000 Total liabilities ..... 1,125,000 1,437,000 1,537,000 3,761,000 8,049,000 Long-term debt, net of current portion ............ 161,000 34,000 -- -- 271,000 Stockholders' equity (deficit).... (179,000) 4,952,000 5,791,000 12,906,000 25,258,000 At March 31 ------------- 1996 ---- Working capital (deficit).............. 23,825,000 Total assets.............. 36,687,000 Total liabilities........ 9,413,000 Long-term debt, net of current portion................ 319,000 Stockholders' equity (deficit)....... 27,274,000
3 7 - ---------------------- (1) The pro forma income statement income tax effects of the Company's change from a nontaxable entity (S corporation) to a taxable entity (C corporation) are presented only for the year ended December 31, 1991. All other periods are presented on a historical basis. (2) See Note 1 of Notes to Financial Statements. (3) The non-recurring items consist of purchased technology in progress and restructuring charges. Purchased technology in progress for the year ended December 31, 1995 was $6,211,000. The purchased technology is for R&D projects in progress at the time of acquisition of assets from Galcom and Ace 400 Communications, Ltd. No such purchases were made in the comparable periods for 1994. Restructuring costs during the year ended December 31, 1995 were $1,465,000. The restructuring is associated with a plan adopted by the Company in 1995 calling for the merger of the newly acquired subsidiaries and the Company's LAN product division. The plan also calls for the closure of some facilities, termination of redundant employees and cancellation of representation agreements. (4) Fully diluted earnings per share information differs from primary earnings per share information for the year ended December 31, 1994. See the Statements of Operations included in the Financial Statements. 4 8 Pro Forma Financial Information Reflecting Galcom and Ace Acquisitions The following unaudited pro forma financial statements reflect adjustments to allocate the purchase price of assets acquired and liabilities assumed from Galcom on May 2, 1995 and ACE Communications on June 29, 1995. These adjustments are based upon the estimated fair value of the assets acquired and the obligations assumed. The unaudited pro forma statement of operations for the years ended December 31, 1995 and 1994 were prepared as if all transactions had occurred as of January 1, 1995 and 1994. The objective of these pro forma presentations are to give the reader a view of what the results of operations may have looked like if these transactions had taken place as of the earlier dates indicated. Since these transactions took place prior to December 31, 1995, they are already included in the most recent balance sheet in the registration statement. See "Business Recent Acquisitions" for further information regarding the transactions reflected in the pro-forma financial statements. 5 9 UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS For the Year Ended December 31, 1995 (in thousands except per share amounts)
For the period For the Year For the Four January 1, 1995 to ended months June 29, 1995, December 31, 1995, ended Ace 400 MRV April 30, 1995, Communications Communications, Inc. Galcom Ltd.(b) Adjustment(c) (a) Networking, Ltd.(b) REVENUES, net $ 39,202 $ 2,076 $ 5,727 -- COSTS AND EXPENSES Cost of goods sold 22,608 1,285 3,607 -- Research and development 4,044 28 529 -- expenses Selling, general and administrative expense 6,799 964 1,894 -- Purchased technology in 6,211 -- -- 6,211 progress Restructuring costs 1,465 -- -- -- -------- ------- ------- ----- 41,127 2,277 6,030 6,211 -------- ------- ------- ----- Operating income (loss) (1,925) (201) (303) 6,211 Other income (expense) 654 (222) (517) -- Provision for income taxes 2 -- -- -- Net income (loss) (1,273) (423) (820) 6,211 Pro Forma Balances(d) REVENUES, net $ 47,005 COSTS AND EXPENSES Cost of goods sold 27,500 Research and development 4,601 expenses Selling, general and administrative expense 9,657 Purchased technology in -- progress Restructuring costs 1,465 -------- 43,223 -------- Operating income (loss) 3,782 Other income (expense) (85) Provision for income taxes 2 Net income (loss) 3,695
Note a Includes results of operations associated with assets acquired from Galcom Networking Ltd for the period May 2, 1995 to December 31, 1995 and also includes results of operations associated with assets acquired from Ace 400 Communications Ltd for the period June 30, 1995 to December 31, 1995. b The pro forma information above shows the combined statements of operation of MRV Communications, Inc. and operations associated with assets acquired from Ace 400 Communications Ltd and Galcom Networking Ltd as if the purchase of those assets had taken place as of January 1, 1995. c Adjustment to eliminate nonrecurring purchased technology in process. d Adjustments to amortize goodwill recorded and fair value adjustments to property, plant and equipment are not material. 6 10 UNAUDITED ACE 400 COMMUNICATIONS, LTD. STATEMENT OF OPERATIONS For the Period January 1, 1995 to June 29, 1995 (In thousands US$) REVENUES, net . . . . . . . . . . . . . . . . . . . . . . . . $ 5,727 COSTS AND EXPENSES Cost of good sold . . . . . . . . . . . . . . . . . . . . 3,607 Research and development expenses . . . . . . . . . . . . 529 Selling, general and administrative expense . . . . . . . 1,894 -------- 6,030 -------- Operating loss. . . . . . . . . . . . . . . . . . . . . . (303) Other expense . . . . . . . . . . . . . . . . . . . . . . (517) Provision for income tax. . . . . . . . . . . . . . . . . -- -------- Net loss . . . . . . . . . . . . . . . . . . . . . . . . $ (820) 7 11 ACE 400 COMMUNICATIONS, LTD. For the period January 1, 1995 to June 29, 1995 Unaudited CONSOLIDATED STATEMENT OF CASH FLOWS (1,000$) Net loss . . . . . . . . . . . . . . . . . . . . . . $ (820) Adjustment to reconcile net loss to net cash used in operations . . . . . . . . . . . . . . . . 211 -------- Net cash used in operating activities . . . . . . . (609) CASH FLOWS FROM INVESTING Purchases of property . . . . . . . . . . . . . . . (30) CASH FLOWS FROM FINANCING Net proceeds from borrowing . . . . . . . . . . . . 632 NET DECREASE IN CASH . . . . . . . . . . . . . . . . . . (7) CASH, beginning of period . . . . . . . . . . . . . . . 337 -------- CASH, end of period . . . . . . . . . . . . . . . . . . 330 ======== 8 12 ACE 400 COMMUNICATIONS, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION -- The accompanying unaudited condensed financial statement have been prepared in accordance with the requirements of Regulation S-X and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the audited financial statements presented in the Company's Annual Report for the year ended December 31, 1995. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the period presented. The results of operations and cash flows for such period is not necessarily indicative of results to be expected for the full year. 2. SUBSEQUENT EVENT -- On June 29, 1995 the Ace Inc., North Hills Inc. and North Hills Israel (hereafter "the Seller") signed agreement with N.N.H. Computer Communications Ltd. and affiliates (hereafter "the Buyers"), including MRV Communications, Inc. (hereafter "MRV"). The execution of the agreement was based on meeting several pre-conditions which were substantially fulfilled. The main aspects of the agreement are as follows: The sellers will sell to the buyers goodwill, know-how, fixed assets (not including North Hills Israel's building), production files, research and development files, agreements with customers (including backlog) and suppliers and other agreements and contract, the right to use software and the right to use North Hill's Israel's building up to January 31, 1996 (including right of first refusal to continue to rent or buy the building). The total consideration for the above is expected to be $4,316,667, as follows: MRV will issue shares to the Company and North Hills Israel at a minimum guaranteed value of $3,000,000 (according to the share price as defined in the agreement) and shares at a minimum guaranteed value of $750,000 to Porta Systems. The buyers will also pay $100,000 in cash and will pay to suppliers of the sellers $466,667. 9 13 UNAUDITED GALCOM NETWORKING, LTD. STATEMENT OF OPERATIONS For the Four months ended April 30, 1995 (In thousands US$) REVENUES, net . . . . . . . . . . . . . . . . . . . . . . . . $ 2,076 COSTS AND EXPENSES Cost of goods sold. . . . . . . . . . . . . . . . . . . . 1,285 Research and development expenses . . . . . . . . . . . . 28 Selling, general and administrative expense . . . . . . . 964 -------- 2,277 -------- Operating loss . . . . . . . . . . . . . . . . . . . . . (201) Othe expense . . . . . . . . . . . . . . . . . . . . . . (222) Provision for income tax . . . . . . . . . . . . . . . . -- -------- Net loss . . . . . . . . . . . . . . . . . . . . . . . . $ (423) ======== 10 14 * * * GALCOM NETWORKING LTD. = = = CONSOLIDATED STATEMENT OF CASH FLOWS Four months ended April 30, 1995 ----------------- US$ (In thousands) ------------------ Unaudited Cash flows from operations activities Net loss .................................................. $ (489) Adjustments to reconcile net loss to cash used in operating activities ................................. (2,914) (See Appendix A) Net cash used in operating activities ..................... (3,403) --------- Cash flows from investing activities Proceeds from sale of marketable securities ............... 255 Investment in subsidiary, net of cash acquired (Appendix B) ............................................ (172) Purchase of fixed assets .................................. (129) Redemption of short term loans ............................ 2,025 --------- Net cash provided by investing activities ................. 1,979 --------- Cash flows from financing activities Increase in short-term bank credits, net .................. 1,392 Repayment of long-term loans .............................. (125) Net cash provided by financing activities ................. 1,267 --------- Decrease in cash and cash equivalents ..................... (157) Balance of cash and cash equivalents at the beginning of the period ................................. 477 --------- Balance of cash and cash equivalents at the end of the period ....................................... 320 ========= Appendix A Adjustments to reconcile net loss to cash flows used in operating activities Items not involving cash flows: Gain from marketable securities ........................... (131) Depreciation of fixed assets and amortization of other assets ......................................... 136 Increase in provision for severance pay, net .............. 67 Minority interest in net loss ............................. (61) Changes in assets and liabilities: Decrease in trade receivables ............................. 143 Increase in other receivables ............................. (2,410) Increase in inventories ................................... (207) Decrease in trade payables ................................ (251) Decrease in other payables ................................ (200) --------- (2,914) ========= Appendix B Investment in subsidiary, net of cash acquired Working capital - excluding cash .......................... (375) Fixed assets .............................................. 18 Goodwill .................................................. 529 --------- 172 --------- 11 15 GALCOM NETWORKING, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION -- The accompanying unaudited condensed financial statements have been prepared in accordance with the requirements of Regulation S-X and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted audited financial statements presented in the Company's Annual Report for the year ended December 31, 1995. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the period presented. The results of operations and cash flows for such period is not necessarily indicative of results to be expected for the full year. 2. SUBSEQUENT EVENT -- On May 2, 1995 the Company sold, to a third party, its business and rights (including the manufacturing rights, know-how, technology, fixed assets, inventory, etc.) and its holdings in subsidiaries in the United States and the United Kingdom for consideration of US$900 thousand in cash and the assignment of its obligations up to an amount of US$1.8 million. In addition, the purchaser will act so that its parent company in the United States will issue to the Company an option (available for 5 years) to purchase 60,000 shares of the parent company, traded on a foreign stock exchange, at the price per share at the date of closing of the contract ("the closing price") and a further option (available for five years) to purchase an additional 15,000 shares at 150% of the closing price. 12 16 THE COMPANY The Company designs, manufactures, and markets semiconductor laser diodes, LEDs, and fiber optic transmitting and receiving modules for the transmission of large amounts of information at high speeds over long distances and LAN switching products for the computer networking Industry. The Company assembles and integrates these devices into components that are sold primarily to OEMs in the fiber optic market. Products incorporating these devices are used primarily In computer local and wide area networks, voice communications, cable television, and fiber optic test Instruments. The Company markets and sells products directly to OEMs in the United States and Canada and indirectly through independent manufacturers' representatives, VARS, and systems integrators. Internationally, the Company markets and sells its products primarily through approximately 80 independent distributors in Europe, the Middle East, and the Far East. Based upon its proprietary opto-electronic chip technology, the Company has developed and markets three product lines: laser diodes and LED-based components; integrated transmitting and receiving modules; and stand-alone devices. The Company's LED and laser diode product line consists of semiconductor components intended primarily for the fiber optic communications market. Laser diodes and LEDs are solid state semiconductor light sources that convert electrical power to light for transmission over fiber optic cable. The Company's laser diode and LED technology is integrated with electronics in the Company's second product line, transmitting and receiving modules that provide data links for the data communications market. The Company's third product line consists of stand-alone products for bandwidth and distance enhancement in LANS. The Company's stand-alone products include Ethernet switches and fiber optic LAN extenders for campus and metropolitan area networks. Ethernet switches subdivide a LAN into smaller segments with fewer devices to improve total network availability while providing temporary, but instant, interconnections between the smaller network segments. The Company markets these and other related products under the brand names NBase Communications and West Hills LAN Systems. RISK FACTORS An investment in the Shares is highly speculative, involves a high degree of risk, and should only be made by investors who can afford a loss of their entire investment. Prospective investors, prior to making an investment decision, should carefully consider, together with the other matters referred to herein, including the financial statements and notes thereto, the following risk factors. 1. UNCERTAIN MARKET ACCEPTANCE. Since inception, the Company has been engaged in the design and development of semiconductor laser diodes, LEDs, and transmitting and receiving modules for fiber optic applications. As with any new technology, there is a substantial risk that the marketplace may not accept the potential benefits of the technology utilized in the Company's products. Market acceptance of the Company's products will depend, in large part, upon the ability of the Company to demonstrate the performance advantages and cost-effectiveness of its products over competing products. There can be no assurance that the Company will be able to market its technology successfully or that any of the Company's current or future products will be accepted in the marketplace. 2. PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The fiber optic communication, computer networking, and telecommunications industries are characterized by rapidly changing technology, evolving industry standards, and frequent new product introductions. The Company's success will depend upon its ability to enhance existing products and to introduce new products to meet changing customer requirements. The Company will be required to devote continued efforts and financial resources to develop and enhance its existing products and conduct research to develop new products. There can be no assurance that the Company will be successful in identifying, developing, and marketing new products or enhancing its existing products. Moreover, there can be no assurance that the development by others of new or improved products, processes, or technologies will not render the Company's products or proposed products obsolete or be more efficient or cost-effective than those of the Company. 3. COMPETITION. The fiber optic instrumentation and component industries are highly competi- tive. The Company competes and will compete with numerous types of competitors, including companies which have been established for many years and have considerably greater financial, marketing, technical, human, 13 17 and other resources than the Company, which may give such competitors certain competitive advantages, including the ability to negotiate lower prices on raw materials and components than those available to the Company. There can be no assurance that the Company will be able to compete successfully with existing or future competitors or that competitive pressures faced by the Company will not materially and adversely affect the business, operating results, and financial condition of the Company. 4. MANAGEMENT OF GROWTH. The Company has grown rapidly in recent years, with revenues increasing from $2.4 million for the year ended December 31, 1991, to $7.4 million, $17.5 million and $39.2 million for the years ended December 31, 1993, 1994 and 1995, respectively.The Company intends to continue to pursue its growth strategy through increasing sales of existing and new products. This strategy will require increased personnel, expanded information systems, and additional financial and administrative control procedures. There can be no assurance that the Company will be able to attract and retain qualified personnel or successfully manage expanding operations. Further, there can be no assurance that the Company will be able to sustain its recent rate of growth or continue its profitable operations. 5. LIMITED EXPERIENCE IN MANUFACTURING AND MARKETING STAND-ALONE PRODUCT LINE. The Company has limited experience in manufacturing and marketing its stand-alone networking products for the LAN environment. There can be no assurance that the Company will be successful in manufacturing these products in commercial quantities or that the performance of the stand-alone products will satisfy customer expectations. In addition, there can be no assurance that the Company will successfully market any of its existing or future products. 6. RELIANCE ON MAJOR CUSTOMERS. For the years ended December 31, 1992, 1993, 1994 and 1995, the Company's three largest customers accounted for an aggregate of approximately 28%, 22%, 13% and 14%, respectively, of the Company's net revenues. Management believes that if the Company continues to expand and diversify Its product lines and customer base, of which there can be no assurance, its reliance on any single customer or small group of customers should not be as significant to the Company's operations in the future. The loss of any major customer presently or in the future could, however, have a material adverse effect on the Company's business. 7. LACK OF PATENT PROTECTION. The Company holds no patents and has not filed any patent applications with respect to its technology. The Company currently relies on unpatented proprietary know-how, which may be duplicated, and employs various methods, including confidentiality agreements with employees, to protect its proprietary know-how. Such methods may not afford complete protection, however, and there can be no assurance that others will not independently develop such know-how or obtain access to it. If any patent applications are filed by the Company, there can be no assurance that any patents will be issued, or, if issued, would provide the Company with meaningful protection from competition. In addition, there can be no assurance that the Company's products will not be found to infringe on any patent held by others. In the event that any such products are found to so infringe, the Company would be required to seek a license with respect to such patented technology, or incur substantial costs to redesign the infringing products. There can be no assurance that any such license would be available on terms acceptable to the Company or at all, that any of the Company's products could be redesigned on an economical basis or at all, or that any such redesigned products would be competitive with the products of the Company's competitors. 8. INTERNATIONAL SALES. For the year ended December 31, 1995, international sales accounted for approximately 45% of net revenues. Approximately 27%, 18% and 19% of the Company's net revenues for the years ended December 1992, 1993 and 1994, respectively, were from sales to foreign countries, and approximately 13% of the Company's backlog as of December 31, 1995 consisted of orders placed by foreign customers. Sales to foreign customers are subject to government controls and other risks associated with international sales, including difficulties in obtaining export licenses, fluctuations in currency exchange rates, political instability, trade restrictions, and changes In duty rates. Although the Company has not experienced any material difficulties in this regard to date, there can be no assurance that it will not experience any such material difficulties In the future. The Company sells products and receives payments for such products in U.S. dollars. The Company has not entered into forward exchange contracts or otherwise engaged in hedging activities. 14 18 9. DEPENDENCE ON SUPPLIERS. The Company relies primarily on outside suppliers for substantially all of its parts, components, and manufacturing supplies. Certain materials are available from only a limited number of suppliers. While the Company has not encountered any difficulty in obtaining an adequate supply of parts, components, and manufacturing supplies during Its development and initial marketing phases, there can be no assurance that the Company's suppliers will continue to meet all of the Company's needs on a timely basis or at all. Although the Company maintains a reserve of necessary parts and raw materials, a shortage of the necessary parts and components or the Inability of the Company to obtain such parts and components from alternative suppliers would have a material adverse effect on the Company's operations. 10. POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's quarterly operating results could fluctuate substantially. The Company's expense levels during any particular period are based, in part, on expectations of future sales. If sales in a particular quarter do not meet expectations, operating results could be materially adversely affected. Factors affecting quarterly operating results include, without limitation, the timing of delivery and availability of products from suppliers, the product mix sold by the Company, and price competition for products sold by the Company. In addition, price competition for the products sold by the Company is intense and could result in gross margin declines, which could have a material adverse effect on the Company's results of operations. 11. DEPENDENCE ON KEY PERSONNEL. The Company is substantially dependent upon a number of key employees, including Dr. Shlomo Margalit, its Chairman of the Board of Directors and Chief Technical Officer, Dr. Zeev Rav-Noy, its Chief Operating Officer, and Noam Lotan, its President and Chief Executive Officer. The loss of the services of any one or more of these officers could have a material adverse effect on the Company. The Company has entered into employment agreements with each officer, and owns and is the beneficiary of key man life insurance policies in the amounts of $1,000,000 each on the lives of Drs. Margalit and Rav-Noy and Mr. Lotan. 12. ATTRACTION AND RETENTION OF QUALIFIED PERSONNEL. The Company's ability to develop, manufacture, and market its products, and its ability to compete with its current and future competitors, depends, and will depend, in large part, on its ability to attract and retain qualified personnel. Competition for qualified personnel in the fiber optics industry is intense, and the Company will be required to compete for such personnel with companies having substantially greater financial and other resources than the Company. If the Company should be unable to attract and retain qualified personnel, the business of the Company could be materially adversely effected. The Company relies exclusively on its own production capability for critical semiconductor lasers and LED's. In addition, the Company has a limited number of employees dedicated to the operation of its wafer fabrication equipment, a loss of which could result in the Company's inability to effectively operate such equipment for a limited period of time, until it was able to train new employees. 13. CONTROL OF THE COMPANY. The officers and directors of the Company beneficially own approximately 28% of the outstanding shares of Common Stock. As such, such persons will continue to exert substantial influence over the affairs and policies of the Company, including the election of the directors thereof. 14. SALES PURSUANT TO RULE 144; SHARES ELIGIBLE. The sale, or availability for sale, of a substantial number of shares of Common Stock in the public market subsequent to this offering pursuant to Rule 144 under the Securities Act ("Rule 144") or otherwise could materially adversely affect the market price of the Common Stock and could impair the Company's ability to raise additional capital through the sale of its equity securities or debt financing. The availability of Rule 144 to the holders of restricted securities of the Company is conditioned on, among other factors, the availability of certain public information concerning the Company. Of the 10,827,364 shares of Common Stock to be outstanding following this offering, assuming the exercise of the Warrants in full by the Selling Warrant Holders, 2,627,004 shares are "restricted securities" as that term is defined in Rule 144 and may, under certain circumstances, be sold without registration under the Securities Act. All of such shares of Common Stock are currently eligible for sale under Rule 144. In addition, the holders of the Representative's Warrants will have certain demand registration rights with respect to such warrants and the Common Stock underlying such warrants. 15 19 15. SHARE PRICES MAY BE HIGHLY VOLATILE. The market prices of the Common Stock may be highly volatile. Factors such as announcements by the Company or its competitors concerning acquisitions or dispositions, technological innovations, new procedures, proposed governmental regulations, and general market conditions may have a significant Impact on the market price of the Common Stock. 16. NO DIVIDENDS. The Company has not paid dividends on its Common Stock since its inception and does not intend to pay any dividends to its stockholders in the foreseeable future. The Company currently intends to reinvest earnings, if any, in the development and expansion of its business. See "Dividend Policy." 17. POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company is authorized to issue up to 1,000,000 shares of Preferred Stock, par value $.01 per share. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by stockholders. The terms of any such series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion, and redemption rights, and sinking fund provisions. No preferred stock is currently outstanding, and the Company has no present plan for the issuance thereof. The Company has agreed not to issue any shares of preferred stock until December 7, 1997, without the prior written consent of Thomas James Associates, Inc. the Company's underwriter in its initial public stock offering. The issuance of any such preferred stock could materially adversely affect the rights of the holders of Common Stock, and therefore, reduce the value of the Common Stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict the Company's ability to merge with, or sell its assets to, a third party, thereby preserving control of the Company by the present owners. 18. RECENT ACQUISITIONS. The Company has recently acquired certain assets and liabilities of Galcom and Ace 400 Communications, Ltd, both of which had incurred substantial losses prior to their acquisitions. While the Company believes it can operate the acquired assets profitably, there can be no assurance of this. See "Business - Recent Acquisitions." USE OF PROCEEDS The net proceeds to be received by the Company from the exercise of all the Warrants, assuming the exercise of all the Warrants by the Selling Warrant Holders at the varying Warrant exercise prices, after deducting the expenses payable by the Company, are estimated to be approximately $13,409,383. The Company presently intends to use the net proceeds from the exercise of the Warrants as follows: approximately 30% of the net proceeds for research and development activities, primarily development of new products and new generations of existing products; approximately 20% of the net proceeds for capital expenditures, primarily manufacturing and research and development test equipment; approximately 10% of the net proceeds for domestic and international marketing activities; and the balance of the net proceeds for working capital and general corporate purposes, including the possible acquisition of, or investment in, complementary businesses, products, or technologies. If less than all of the Warrants are exercised, the Company will apply the proceeds actually received in the order of priority set forth in the immediately preceding sentence. There are no present understandings, commitments, or agreements with respect to any such acquisition or investment. The allocation of the net proceeds set forth above represents the Company's best estimate based upon its present plans and certain assumptions regarding general economic and industry conditions and the Company's future revenues and expenditures. The Company reserves the right to reallocate the net proceeds within the above described categories or to other purposes in response to, among other things, changes in its plans, industry conditions, and the Company's future revenues and expenditures. Proceeds not immediately required for the purposes described above will be invested principally in U.S. government securities, short-term certificates of deposit, money market funds, and interest bearing savings and management accounts. 16 20 DIVIDEND POLICY The Company has not paid dividends on the Common Stock since its inception and does not intend to pay any dividends to its stockholders in the foreseeable future. The Company currently intends to reinvest earnings, if any, in the development and expansion of its business. The declaration of dividends in the future will be at the election of the Board of Directors and will depend upon the earnings, capital requirements, and financial position of the Company, general economic conditions, and other pertinent factors. 17 21 CAPITALIZATION The following table sets forth the Company's capitalization at March 31, 1996 which gives effect to the Galcom and Ace 400 Communications, Ltd. Acquisitions.
MARCH 31, 1996 -------------- Long-term debt: $ 340,000 Stockholders' equity: Preferred Stock, $0.01 par value, 1,000,000 shares authorized; no shares outstanding actual, pro forma, and as adjusted -- Common Stock, $0.0067 par value, 20,000,000 shares authorized; 9,587,714 shares outstanding 64,000 Capital in excess of par value.......................... 23,627,000 Retained earnings ......................................... 3,583,000 ----------- Total stockholders' equity and capitalization......... $27,274,000 ===========
PRICE RANGE OF COMMON STOCK The Common Stock has been quoted on the NASDAQ/NM under the symbol "MRVC" since February 28, 1994. The Company effected its initial public offering of Common Stock on December 7, 1992 at a price of $4.00 per share and was listed on the NASDAQ SmallCap Market. The following table sets forth the high and low closing bid prices quoted with respect to the Common Stock for the period from December 7, 1992 to February 27, 1994, as reported by the NASDAQ SmallCap Market and the high and low closing sale prices of the Common Stock for the period from February 28, 1994 through March 31, 1996, as reported by the NASDAQ/NM. Such prices do not include retail markups, markdowns, or commissions and, with respect to the period from December 7, 1992 through February 27, 1994, do not necessarily reflect actual transactions. At December 31, 1995, the Company had approximately 115 stockholders of record and 4200 beneficial owners.
HIGH LOW ---- --- 1993: First Quarter........................... $4.17 $3.33 Second Quarter.......................... 3.92 3.50 Third Quarter........................... 3.42 3.00 Fourth Quarter.......................... 3.08 2.42 1994: First Quarter........................... 3.46 2.83 Second Quarter.......................... 4.42 3.08 Third Quarter........................... 6.92 4.25 Fourth Quarter.......................... 8.08 6.42 1995: First Quarter .......................... 9.83 7.17 Second Quarter.......................... 8.92 7.25 Third Quarter........................... 14.25 8.50 Fourth Quarter.......................... 16.92 11.00 1996: First Quarter .......................... 35.33 16.83
On May 15, 1996, the last sale price of the Common Stock as reported by the NASDAQ/ NM was $50.75 per share. 18 22 SELECTED FINANCIAL DATA The following selected statement of operations data for the three years in the period ended December 31, 1995 and the balance sheet data as of December 31, 1994 and 1995 are derived from the financial statements and notes thereto included elsewhere herein audited by Arthur Andersen LLP, independent public accountants, as set forth in their report also included elsewhere herein. The selected statement of operations data for the two years in the period ended December 31, 1992 and the balance sheet data as of December 31, 1991, 1992 and 1993 are derived from audited financial statements not included herein. The pro forma selected statement of operations data for the year ended December 31, 1995 is derived from audited financial statements of the Company and the acquired Companies. The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements of the Company and the notes thereto included elsewhere in this Prospectus. STATEMENT OF OPERATIONS DATA:
Year Ended -------------------------------------------------------------------------------- December 31, December 31, December 31, December 31, December 31, 1991 1992 1993 1994 1995 ------------ ------------ ------------ ------------ ------------ Revenues, net ....... $ 2,401,000 $ 4,422,000 $ 7,426,000 $ 17,526,000 $ 39,202,000 Cost of goods sold .. 1,434,000 2,280,000 3,936,000 10,328,000 22,608,000 Non Recurring Charges(5) .......... -- -- -- -- (7,676,000)(5) Income (loss) before income taxes and extraordinary item .. 209,000 800,000 1,326,000 2,601,000 (1,271,000) Extraordinary item .. -- 42,000 -- -- -- Net income (loss): Pro forma(1) ...... 189,000 Historical ........ 560,000 839,000 1,618,000 (1,273,000) Net income (loss) per share: Pro forma(1) ...... $ 0.06 Historical ........ $ 0.15 $ 0.14 $ 0.26(4) $ (0.14) Weighted average common and common equivalent shares outstanding(2) 3,627,627 3,818,029 6,025,084 6,284,001 9,188,737 ============ ============ ============ ============ ============ Actual Three Months Ended PRO FORMA (3) (unaudited) ------------- ---------------------------- December 31, March 31, March 31, 1995 1995 1996 ------------ ----------- ----------- Revenues, net ............... $47,005,000 $ 6,737,000 $15,529,000 Cost of goods sold .......... 27,500,000 4,260,000 8,989,000 Non Recurring Charges(5) .................. -- -- -- Income (loss) before income taxes and extraordinary item .......... 5,247,000 1,085,000 2,800,000 Extraordinary item .......... -- Net income (loss): Pro forma(1) Historical ................ -- 705,000 1,879,000 Net income (loss) per share: Pro forma(1) Historical ................ -- $ 0.08 $ 0.18 Weighted average common and common equivalent shares outstanding(2) ....... 9,188,737 8,834,375 10,706,357 =========== =========== ===========
19 23
BALANCE SHEET DATA: At December 31 At March 31 ------------------------------------------------------------------ ----------- 1991 1992 1993 1994 1995 1996 ----------- ---------- ----------- ----------- ----------- ----------- Working capital (deficit) ....... $ (160,000) $3,773,000 $ 3,514,000 $11,303,000 $22,019,000 23,825,000 Total assets .... 946,000 6,389,000 7,328,000 16,667,000 33,307,000 36,687,000 Total liabilities 1,125,000 1,437,000 1,537,000 3,761,000 8,049,000 9,413,000 Long-term debt, net of current .. 161,000 34,000 -- -- 271,000 319,000 portion Stockholders' equity (deficit) (179,000) 4,952,000 5,791,000 12,906,000 25,258,000 27,274,000
- -------------------- (1) The pro forma Income statement income tax effects of the Company's change from a nontaxable entity (S corporation) to a taxable entity (C corporation) are presented for all periods, except for the periods ended December 31, 1992, 1993, 1994 and 1995, which are presented on a historical basis. (2) See Note 1 of Notes to Financial Statements. (3) Pro forma data gives effect to the Galcom and Ace North Hills Acquisitions as if the acquisitions had occurred on January 1, 1995. (4) Fully diluted earnings per share information differs from primary earnings per share information for the year ended December 31, 1994. See the Statements of Operations included in the Financial Statements. (5) The non-recurring items consist of purchased technology in progress and restructuring charges. Purchased technology in progress for the year ended December 31, 1995 was $6,211,000. The purchased technology is for R&D projects in progress at the time of acquisition of assets from Galcom and Ace 400 Communications, Ltd. Restructuring costs during the year ended December 31, 1995 were $1,465,000. The restructuring is associated with a plan adopted by the Company in 1995 calling for the merger of the newly acquired subsidiaries and the Company's LAN product division. The plan also calls for the closure of some facilities, termination of redundant employees and cancellation of representation agreements. 20 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company was organized and commenced operations in July 1988. Since its inception, the Company has manufactured and marketed semiconductor laser diodes and LEDs for the fiber optics industry. The Company began volume shipments of discrete lasers and LED devices in 1989. In 1990, the Company introduced lasers and LEDs mounted in industry standard fiber optic receptacles designed and manufactured by the Company. In 1991, the Company introduced a line of transmitting and receiving modules. In 1992, the Company introduced its first stand-alone product, a wavelength converter that allows the connection of certain telephone exchanges or private automatic branch exchanges over single mode fiber optic cable. In 1993, the Company expanded its stand-alone product line to Include products incorporating Ethernet switching technology aimed at improving network throughput and distance enhancement in LANS. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, statement of operations data of the Company expressed as a percentage of revenues.
Year Ended Actual Three Months Ended -------------------------------------------- ------------------------- December 31, December 31, December 31, MARCH 31, MARCH 31, 1993 1994 1995 1995 1996 ---- ---- ---- ---- ---- Revenues, net ................................ 100% 100% 100% 100% 100% Cost of goods sold ........................... 53% 59% 58% 63% 58% Gross profit ................................. 47% 41% 42% 37% 42% Operating expenses: Research and development .................. 15% 12% 10% 10% 11% Selling, general, and administrative .......................... 17% 15% 17% 14% 14% Purchased technology in progress ..................................... 16% -- -- Restructuring costs ....................... 4% -- -- Operating income ............................. 15% 14% (5%) 13% 17% Other income (expense), net ....................................... 3% 1% 2% 3% 1% Income (loss)before taxes..................... 18% 15% (3%) 16% 18% Pro Forma Financial data (Excluding non-recurring charges, net of tax effects) Operating income .......................... -- -- 15% -- -- Income before taxes ....................... -- -- 17%
During the year ended December 31, 1995, the Company acquired assets of Galcom and Ace 400 Communications, Ltd. QUARTERS ENDED MARCH 31, 1996 AND 1995 Revenues for the quarter ended March 31, 1996 from product sales were $15,529,000 as compared to $6,737,000 for the quarter ended March 31, 1995, an increase of $8,792,000 or 131 percent. Revenues 21 25 increased as a result of greater marketing efforts and greater market acceptance of the Company's products, both domestically and internationally. International sales accounted for approximately 39 percent of revenues for the period ended March 31, 1996 as compared to 25 percent of revenues for the period ended March 31, 1995. International sales grew as a percentage of sales because of greater marketing efforts in overseas markets as well as increased sales and marketing resources put in place by the Company to service overseas markets. GROSS PROFIT Gross profit was $6,540,000 for the quarter ended March 31, 1996 as compared to $2,477,000 for the same period in 1995, an increase of 164 percent. Gross profit as a percentage of revenues increased from 37% to 42% primarily as a result of lower cost production techniques and improved discounts obtained from vendors as the Company has increased the volume of its purchases. RESEARCH AND DEVELOPMENT Research and development ("R&D") expenses were $1,684,000 and $702,000 and represented 11 percent and 10 percent respectively of revenues for the quarters ended March 31, 1996 and 1995. The 140 percent increase in R&D spending was attributable to the continued development of the Company's fiber optic and networking products, including two-way simultaneous fiber optic transmission modules, Ethernet/Fast Ethernet Switches and ATM products. Additional costs were also associated with the hiring of additional research and development personnel and consultants. The Company intends to continue to invest in the research and development of new products. Management believes that the ability of the Company to develop and commercialize new products is a key competitive factor. SELLING, GENERAL AND ADMINISTRATIVE Selling, General and Administrative ("SG&A") expenses increased to $2,136,000 for the quarter ended March 31, 1996 from $917,000 for the quarter ended March 31, 1995. The increase was due primarily to increased marketing and personnel costs, as well as other administrative expenses. As a percentage of revenues, SG&A was unchanged at 14 percent. NET INCOME Net income increased to $1,879,000 for the quarter ended March 31, 1996 compared with a net income of $705,000 for the quarter March 31, 1995. This increase of 167 percent is primarily due to substantially increased sales and higher gross profit margins. YEARS ENDED DECEMBER 31, 1994 AND 1995 Revenues Revenues for the year ended December 31, 1995 were $39,202,000, as compared to $17,526,000 for the year ended 1994. The changes represented an increase of $21,676,000 or 124 percent for the year ended 1995. Revenues increased as a result of greater marketing efforts and greater market acceptance of the Company's products, both domestically and internationally. Additional sales and marketing resources obtained in the acquisition of assets during the year ended December 31, 1995 also contributed additional revenues. International sales accounted for approximately 45 percent of revenues for the year ended 1995 as compared to 19 percent of revenues for the year ended 1994. International sales, as a percentage of total revenues increased because of greater marketing efforts in overseas markets and a larger presence of sales resources, obtained in the acquisition of assets, in those markets. Gross Profit Gross profit for the year ended 1995 was $16,594,000 as compared to $7,198,000 for the year ended 1994. The change represented an increase of $9,396,000 or 131 percent for the year ended 1995. The 22 26 increase in gross profit was primarily due to increased sales. Gross profit as a percentage of revenues for the years ended 1994 and 1995 was 41% and 42% respectively. Research and Development Research and development ("R&D") expenses for the years ended December 31, 1994 and 1995, were $2,144,000 and $4,044,000 which represented 12 percent and 10 percent of revenues, respectively. The percent decrease in R&D spending was attributable to the increased revenues. The Company intends to continue development of the Company's fiber optic products, including new stand-alone products and to invest in the research and development of other new products. Management believes that the ability of the Company to develop and commercialize new products is a key competitive factor. Selling, General and Administrative Selling, General and Administrative ("SG&A") expenses for the year ended December 31, 1995 increased to $6,799,000 from $2,615,000. As a percentage of revenues, SG&A increased from 15 to 17 percent for the year ended December 31, 1994 and December 31, 1995, respectively. The increase in SG&A expenses is due primarily to additional personnel and overhead costs at the newly acquired subsidiaries and increased marketing and personnel costs at the parent company. Purchased Technology in Progress and Restructuring Costs In connection with the Company's acquisition of certain assets of Galcom and ACE Communications, Inc., the Company acquired incomplete research and development (R&D) projects that will be included in the current R&D activities of the Company. For projects that will have no alternative future use to the Company and where technological feasibility had not yet been established, the Company allocated $6,211,000 of the purchase price to technology in progress and recorded the expense during the year ended December 31, 1995. Also in connection with the Company's acquisitions, during the year period ended December 31, 1995 the Company recorded $1,465,000 as restructuring costs, which primarily related to the closing of several Company facilities, a reduction of its workforce, and the settlement of distribution agreements. Immediately after the acquisition of the businesses, the Company undertook a restructuring plan that called for a merger of the two operations into one and an assumption by the remaining entity of certain international and U.S. operations previously undertaken directly by MRV. This included, for example, sales by the subsidiary of MRV's LAN products into some of the sale channels developed by MRV prior to the acquisitions. Since the operating plans of the Company did not call for distinctions of these operations from those of the businesses acquired, it is not practicable to quantify their impact. The product lines of the businesses acquired are aimed at computer connecting for the IBM AS400 and mainframe environment. The Company's LAN products are aimed also at the computer connectivity environment although primarily for PCs. Inventories Inventories have increased as a result of increased sales. Inventories as a percentage of assets have increased because an increasing portion of the Company's business has come from LAN products which have longer production cycles than the Company's opto-electronic products. Commitments and Contingent Liabilities of Acquired Companies Royalties are payable by both Galcom and Ace to the office of the Chief Scientist of Israel ("OCS") at the rate of 3%, in the case of Galcom and at the rate of 2-3% in the case of Ace on proceeds from the sale of products arising from the research and development activities for which OCS has provided grants. Ace has received to date $5,150,000 and Galcom has received $648,000 in grants from OCS. Ace has paid royalties to date to OCS of $685,000 and Galcom has paid royalties to OCS to date of $27,000. The total amount of 23 27 royalties may not exceed the amount of the grants. The Company does not expect that revenues from royalty bearing products will result in material royalty payment obligations in the future. Net Income Net income decreased from $1,618,000 for the year ended December 31, 1994 to a net loss of $1,273,000 for the year ended December 31, 1995. The decrease in net income is principally due to non-recurring charges during the year ended December 31, 1995 of $7,676,000 for the cost of purchased technology in progress acquired in the acquisitions of subsidiaries and costs associated with the adoption of a restructuring plan. Excluding the non-recurring charges, net of their tax effects, net income would have increased to $4,345,000 for the year ended December 31, 1995. The increase of 169 percent over the same period in 1994 is primarily due to substantially increased sales. YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO YEAR ENDED DECEMBER 31, 1993. Revenues Revenues for the year ended December 31, 1994 from products sales were $17,526,000, as compared to $7,426,000 for the year ended December 31, 1993, an increase of 136%. International sales accounted for approximately 19% of revenues for the year ended December 31, 1994 as compared to 18% of revenues for the year ended December 31, 1993. Revenues increased primarily as a result of greater market acceptance of the Company's products, both domestically and internationally. New product introductions in 1994 included Sonet Transmitters, ATM Transmitters, Return Path Isolator Lasers, Multimode/Singlemode converters for ATM and FDDI transmission. These products contributed to the increase in sales along with increases in the sales of existing products. Gross Profit Gross profit was $7,198,000 for the year ended December 31, 1994 as compared to $3,490,000 for 1993, due to increased revenues. Gross profit as a percentage of revenues decreased from 47% in 1993 to 41% in 1994. Gross profit as a percentage of revenues declined primarily as a result of a change in the mix of products sold to include more items with lower gross margins. Research and Development Research and development ("R&D") expenses were $2,144,000 and $1,103,000 and represented 12% and 15% respectively, of revenues for the years ended December 31, 1994 and 1993, respectively. The 94% increase in R&D spending was attributable to the continued development of the Company's fiber optic and networking products, including new stand-alone LAN products as well as to costs associated with the hiring of additional research and development personnel and consultants. The Company intends to continue to invest in the research and development of new products. Management believes that the ability of the Company to develop and commercialize new products is a key competitive factor. Selling, General and Administrative Selling, General & Administrative ("SG&A") expenses increased to $2,615,000 for the year ended December 31, 1994 from $1,259,000 for the year ended December 31, 1993. As a percentage of revenue, SG&A decreased to 15% from 17%. The increase is due primarily to increased marketing and personnel costs, as well as other administrative expenses. Net Income Net income increased to $1,618,000 for the year ended December 31, 1994 compared to $839,000 for the year ended December 31, 1993. The increase is primarily due to substantially increased revenues and resulting operating efficiencies. 24 28 YEARS ENDED DECEMBER 31, 1993 AND 1992 Revenues from products sales for the year ended December 31, 1993 were $7,426,000, as compared to $4,080,000 for the year ended December 31, 1992, an increase of $3,346,000 or 82%. During the year ended December 31, 1993, the Company had no revenue from technology transfer contracts, as compared to $342,000 during the year ended December 31, 1992. International sales accounted for approximately 18% of revenues for the year ended December 31, 1993, as compared to 27% of revenues for the year ended December 31, 1992. Revenues increased primarily as a result of greater market acceptance of the Company's products, both domestically and internationally. Gross profit for the year ended December 31, 1993 increased to $3,490,000 from $2,142,000 for the year ended December 31, 1992. Such increase was attributable primarily to increased sales. Gross profit as a percentage of revenues remained relatively unchanged in 1993 from 1992. R&D expenses for the year ended December 31, 1993 were $1,103,000, as compared to $589,000 for the year ended December 31, 1992, which represented 15% and 13%, respectively, of revenues, respectively. The 87% increase in R&D spending was attributable to the continued development of the Company's fiber optic and networking products, including new stand-alone LAN products, as well as to costs associated with the hiring of additional R&D personnel and consultants. SG&A expenses for the year ended December 31, 1993 were $1,259,000, as compared to $631,000 for the year ended December 31, 1992, which represented 17% and 14% of revenues, respectively. The increase was attributable primarily to increased marketing and personnel costs, as well as other administrative expenses. Net income for the year ended December 31, 1993 increased to $839,000 from $560,000 for the year ended December 31, 1992. Income before extraordinary item increased from $518,000 to $839,000, an increase of 62%. The increase was primarily attributable to increased sales and resulting operating efficiencies. INTERNATIONAL SALES International sales are not concentrated in any specific geographic regions. None of the geographic regions sold to constituted, individually, a material amount of overall sales. The estimated operating profit from international sales for the periods ended December 31, 1995, 1994 and 1993 were $2,646,000, $466,000 and $201,000, respectively. The amount shown for 1995 is before nonrecurring charges. Other than 16% of assets in Israel, there were no significant assets located outside of the U.S. for 1995. In prior years substantially all the assets were located in the U.S. LIQUIDITY AND CAPITAL RESOURCES In December 1992, the Company completed an initial public offering of 488,750 units consisting of four and a half shares of Common Stock and three Redeemable Common Stock Warrants. The net proceeds of the initial public offering were $4,529,000. The Company used a portion of the net proceeds of its initial public offering to repay certain of its outstanding notes payable. On December 31, 1995, there were no outstanding loans and notes payable. The Company is continuing to utilize the proceeds of the public offering to fund working capital, research and development activity, marketing and for planned capital expenditures. Pending utilization, proceeds have been invested in short-term and long-term interest-bearing government securities. In 1994, the Company received proceeds of approximately $5,497,000 from the issuance of 1,719,715 shares of Common Stock, upon exercise of the same number of IPO Warrants. Net cash used in operating activities for the year ended December 31, 1995 was $6,198,000 and $2,087,000, for the same period in 1994. For the year ended December 31, 1995, the funds were used for increased inventories and receivables as a result of increased revenues. Net cash provided by financing activities for the years ended December 31, 1995 and 1994 were $9,669,000 and $5,492,000. In 1995, the cash provided by financing activities resulted primarily from the issuance of 1,350,000 shares of common 25 29 stock at $8.00 per share less offering costs and the issuance of 94,325 shares in connection with the exercise of stock warrants and options. For the year ended December 31, 1994, the cash provided by financing activities were the result of the exercise of IPO Warrants. Net cash used in investing activities for the year ended December 31, 1995 was $5,565,000 which resulted primarily from the restriction of the Company's cash as security against letters of credit issued by a bank on behalf of the Company. EFFECTS OF INFLATION The Company believes that the relatively moderate rate of inflation over the past few years has not had a significant impact on the Company's sales or operating results, or on the prices of raw materials. INCOME TAXES Through December 31, 1991, the Company elected treatment as an S corporation under provisions of the Internal Revenue Code of 1986, as amended. While this election was in effect, the Company's income, whether distributed or not, was taxed at the stockholder level. Effective January 1, 1992, the Company terminated the S corporation election and became a C corporation. In February 1992, the Financial Accounting Standards Board issued a new standard with respect to the accounting for income taxes, Statement of Financial Accounting Standards No. 109 (SFAS 109). The Company has adopted this new standard effective January 1, 1992. POST-RETIREMENT BENEFITS The Company does not provide post-retirement benefits affected by SFAS 106. 26 30 BUSINESS GENERAL The Company designs, manufactures, and markets semiconductor laser diodes, LEDs, and fiber optic transmitting and receiving modules for the transmission of large amounts of information at high speeds over long distances and LAN switching products for the computer networking industry. The Company assembles and integrates these devices into components that are sold primarily to OEMs in the fiber optic market. Products incorporating these devices are used primarily in computer local and wide area networks, voice communications, cable television, and fiber optic test instruments. The Company markets and sells products directly to OEMs in the United States and Canada and indirectly through independent manufacturers' representatives, VARS, and systems integrators. Internationally, the Company markets and sells its products primarily through approximately 80 independent distributors in Europe, the Middle East, and the Far East. Domestic manufacturers of fiber optic systems and instruments using the Company's products include: General Instruments, Reliance Electric, Synoptics, Optical Data System, Cisco Systems, Laser Precision Corp., ADC/Fibermux, 3M / Photodyne, and Network Systems Corporation. International customers include: Exfo Engineering, Inc., Photon Technology (China), and Kingfisher International PTY, Ltd. Based upon its proprietary opto-electronic chip technology, the Company has developed and markets three product lines: laser diodes and LED-based components; integrated transmitting and receiving modules; and stand-alone devices. The Company's LED and laser diode product line consists of semiconductor components intended primarily for the fiber optic communications market. Laser diodes and LEDs are solid state semiconductor light sources that convert electrical power to light for transmission over fiber optic cable. The Company's laser diode and LED technology is integrated with electronics in the Company's second product line, transmitting and receiving modules that provide data links for the data communications market. The Company's third product line consists of stand-alone products for bandwidth and distance enhancement in LANS. The Company's stand-alone products include Ethernet switches and fiber optic LAN extenders for campus and metropolitan area networks. Ethernet switches subdivide a LAN into smaller segments with fewer devices to improve total network availability while providing temporary, but instant, interconnections between the smaller network segments. The Company markets these and other related products under the brand names NBase Communications and West Hills LAN Systems. The worldwide fiber optics market, including cables, connectors, and transceivers, was estimated by an industry source to be approximately $5.7 billion in 1994 and is estimated to grow to $14.5 billion by 1999. According to Bellcore (Bell Communications Research), in 1993 there were over 8 million kilometers (km) of telecommunications of optical fiber installed in the United States and, by the year 2000, the installed base is expected to reach 25 million km. The Company believes that there are significant business opportunities for emerging fiber optic product and component manufacturing companies as a result of (I) the need of telecommunications companies, including the RBOCs and the ALTs competitive therewith, either to replace existing copper cabling in order to increase capacity or to expand existing networks and (II) the use of fiber optic technology as the communications medium of choice in the data communications market. The Company believes that its extensive experience with basic semiconductor opto-electronic technology, its knowledge and understanding of the telecommunications and data communications markets, and its customer base afford it a competitive advantage in such industry. The Company's operating strategy is to capitalize on the commercial popularity of existing products and to develop and produce an increasing range of fiber optic communications products, including transmitters, receivers, and stand-alone products, which enhance distance and bandwidth in telecommunications networks and LANS. The Company has implemented its operating strategy by developing and manufacturing highly functional and powerful proprietary laser diodes and LEDs and by applying its technology to produce stand-alone products incorporating multiple fiber optic data link modules for use in data communications. As part of the Company's operating strategy, the Company intends to use a portion of the proceeds of this offering to enhance its basic optoelectronic components technology and to develop and design new subsystems and stand-alone products for use in the LAN and MAN environments. 27 31 Recent Acquisitions The Company recently acquired certain assets of Galcom Networking Ltd. ("Galcom") and Ace Communications Inc./Electronics Inc. ("Ace/North Hills"), both of Israel. The assets acquired were contributed by the Company to a new wholly-owned subsidiary called NBase Communications, Inc. This allows the Company to combine its MRV LAN Connectivity and LAN Switching Products under the NBase brand. The Galcom and Ace/North Hills acquisitions provided the Company with experienced personnel and technology for the Token Ring LAN, IBM Connectivity and Multi-Platform Network Management IBM NetView and HP OpenView markets. The Company recently opened a new ATM design center in Israel. In addition to these acquisitions, the Company under the NBase trademark was among the first in the industry to ship Fast Ethernet Segment Switches Testing at NSTL (a division of McGraw-Hill, Inc.) placed the NBase MegaSwitch second highest, comparing 23 industry-leading brands of Ethernet Switches, and Byte Magazine named the Company's MegaSwitch "Best stackable switch" in the July 1995 issue. While MRV continues to serve the OEM customer with opto-electronic components for fiber optic transmission, the Company intends to offer end users and carriers products for Ethernet Switching, ATM, remote office connectivity purposes, and other protocols. The Company's in-house semiconductor laser foundry allows the Company to provide high speed LAN Connectivity products for applications and distances exceeding 50 km for office, campus, and metropolitan network applications. On May 1, 1995, the Company completed the acquisition of certain assets and the distribution business of Galcom Networking, Ltd. ("Galcom") pursuant to the Agreement for the Sale and Purchase of Assets between Galcom and the Company. The purchase price paid by the Company was approximately $900,000 in cash and the assumption of approximately $1,800,000 in trade liabilities and debt, which the Company believed was the fair market value for the acquisition. The source of the funds used for the acquisition was from the proceeds of the Company's public offering in January 1995. The assets acquired by the Company consisted of fixed assets, inventory, intangible assets, and other assets and rights used in Galcom's business as a manufacturer of computer connectivity equipment and related products, and the Company intends to continue to use such assets for those purposes. In connection with the acquisition of assets from Galcom Networking, Ltd the Company issued Warrants (the "Galcom Warrants") to purchase 112,500 shares at prices ranging from $9.83 to $14.75 per share. The Galcom Warrants are exercisable for a period of 5 years. The 112,500 shares underlying the Galcom warrants are included in this Prospectus. Also in connection with the acquisition of Galcom assets, the Company issued 37,500 Warrants to Messrs. Henri Telner, Philipe Scwarc, Danny Yellin, Yakov Sfadya, who were then employees of Galcom, at prices ranging from $8.50 to $9.50 per share. These Warrants are exercisable for a period of 5 years. The majority of these warrants were sold in a private sale in January 1996 to several parties who are listed in the Selling Warrant Holders table. See "Principal and Selling Stockholders and Selling Warrant Holders" below. On June 29, 1995, the Company completed the acquisition of certain assets and the distribution business of Ace 400 Communications Ltd. ("Ace") pursuant to the Agreement for the Sale and Purchase of Assets among Ace and the Company. The purchase price paid by the Company was approximately $4,316,000 comprised of $100,000 in cash, assumption of approximately $466,000 in trade liabilities and debt and the issuance of MRV Communications common stock at a fair market value of approximately $3,750,000. In addition, the Company extended a right to Ace to sell to the Company up to $400,000 of inventory. Ace, however, could sell that inventory to other parties if it could receive a higher price. The source of the funds used for the acquisition was from the proceeds of the Company's public offering in January 1995. The assets acquired by the Company consisted of fixed assets, inventory, intangible assets and other assets and rights used in Ace's business as a manufacturer and distributor of computer connectivity equipment and related products, and the Company intends to continue to use such assets for those purposes. In connection with the acquisition of assets from Ace 400 Communications, Ltd the Company issued Warrants (the "Ace Warrants" ) to Lipa Meir/Alon Cohen Trustees to purchase 150,000 shares at $9.15 per share. The Ace Warrants are exercisable for a period of 5 years. Also in connection with the acquisition of Ace assets, the Company issued 15,000 Warrants to Benny Glazer who was then an employee of Ace 28 32 at a price of $9.33 per share. These Warrants are exercisable for a period of 5 years. In April and May 1996, Lipa Meir/Alon sold all of their shares and 141,500 warrants in a private sale to several parties who are listed in the Selling Warrant Holders table. See "Principal and Selling Stockholders and Selling Warrant Holders" below. INDUSTRY BACKGROUND FIBER OPTICS Fiber optic cable is highly transparent glass capable of carrying thousands of pieces of information simultaneously through light conduction. Laser diodes, LEDs, and optical transmitting and receiving modules, such as those manufactured and marketed by the Company, enable the transmission of light over fiber optic cable. Since the turn of the century, scientists and engineers have been aware of the inherent transmission capabilities of optical fibers. In the 1970's researchers were able to exploit the fiber optic technology for commercial applications and produce fiber optic cable in commercial quantities. With this commercialization, fiber optic technology emerged as an alternative medium of transmission to metallic cable. During the last 15 years, significant advances have been made in fiber optic technology resulting in the displacement of metallic cable technology in many areas of communications. Due to its ability to carry greater quantities of data and information over greater distances, without interference from power lines, lightning, or other electrical or radio signals, fiber optic technology has become the technology of choice for telecommunications, high speed data communications, cable television, and broadcast-quality television. In addition, as a result of the extreme difficulty in accessing data transmitted by way of a fiber optic cable without detection, fiber optic technology has also become an effective medium of transmission for secure communications in government and military applications. As a result of these advantages, the market for fiber optic products continues to grow both domestically and internationally in several sectors, including: telecommunications; data communications, especially for LANS; and test and measurement equipment. TELECOMMUNICATIONS The most common deployment of fiber optic cable and equipment is currently in high capacity trunk lines for long distance and inter-exchange telecommunications. According to Bellcore (Bell Communications Research), in 1993 there were over 8 million kilometers (km) of telecommunications fiber installed in the United States and, by the year 2000, the installed base is expected to reach 25 million km. As long distance carriers have installed fiber optic technology in their networks generally, the Company believes that the future growth of the fiber optic market will result, in part, from the conversion of copper cable to higher capacity fiber optic cable and the installation of new fiber optic cable by the RBOCS, regional carriers, and ALTS. The Company believes that there will be a substantial increase in the utilization of fiber optics as the ALTs begin to compete with the RBOCs and the local telephone companies. In addition, the Company believes that trends such as dispersion of business offices to suburban and rural areas, increased telecommuting, and interactive services, including home shopping, video-on-demand, and video conferencing, will require substantial deployment of fiber optic cable to neighborhoods and individual subscribers. The installation of fiber optic cable is also being undertaken internationally. The Company believes that expanded business demand for global communications will drive trunk capacity expansion. DATA COMMUNICATIONS Local Area Networks. Data communications is currently the fastest growing sector of the fiber optic market. The proliferation of personal computers ("PCs") and workstations during the 1980s has created an installed base of millions of users connected to LANS. According to an industry source, by 1994, over 60 million PCs or 40% of all PCs worldwide, will be connected to a LAN. Such industry source also forecasts that the average number of users per LAN will increase from 12 in 1990 to 21 in 1994, reducing the 29 33 available bandwidth per user by 43%. This reduction comes at a time when the trend is toward applications that require more network bandwidth per user. Using fiber optic cable as the transmission medium in such networks enhances the transmission speed by increasing bandwidth, distance, reliability, and data integrity of the transmission of data. Enterprise-wide networks facilitate efficient and rapid data communication among connected workgroups and provide for more effective utilization of information and computer resources. This permits the sharing of information and resources across the organization for applications such as electronic mail, decentralized databases, multi-site engineering and product development, transaction processing, and electronic image transfer. LANs currently rely on one of two primary connection technologies: Ethernet or Token Ring. Ethernet was introduced in the early 1980s and was subsequently adopted and promoted by companies such as Digital Equipment Corporation, Hewlett-Packard Company, and Sun Microsystems, Inc. The wide availability of Ethernet led to its early and widespread acceptance. Users on Ethernet networks share a bandwidth of 10 megabits per second ("Mb/s"). Initially, these networks were developed around a single cable system (bus) and evolved to a star network topology based on existing twisted-pair wiring. A second connectivity standard, Token Ring, emerged after Ethernet in the mid-1980s and was introduced and promoted by IBM as its preferred LAN technology for supporting large data processing requirements. The LAN industry is characterized by rapidly changing technology and evolving industry standards. LAN technology developed as the demand for more bandwidth grew and now includes several different current and emerging network standards, including 100 Mb/s Ethernet ("Fast Ethernet") and Asynchronous Transfer Mode ("ATM"). Networks have become increasingly oriented toward client/server computing. The client/server approach is based upon the use of a central, high-powered resource (the "server") to serve a number of user stations such as PCs or workstations (the "clients"). The client/server model is used for such applications as central file storage and sharing, printer sharing, and database transaction processing. LAN Congestion Problems and Ethernet Switching. The rapid advances in microprocessor and personal computer technology have brought increasingly powerful applications that are taking advantage of the dramatic rise in raw computing power. To keep up with the growing number of users and increased traffic flow on their LANS, network managers have learned to subdivide, or "segment" their LANs to localize the traffic. By subdividing the Ethernet LAN into multiple 10Mb/s segments, each with f ewer devices, LAN segmentation temporarily solved the congestion problem, because fewer devices are sharing a single 10 Mb/s Ethernet segment. However, this segmentation increased the need for intersegment connectivity, which was initially provided through the use of local bridges and routers. Switching technology provides inter-segment connectivity with higher throughput and lower delay than local bridges and routers. Ethernet switches allow simultaneous "data conversations" between multiple 10 Mb/s segments. The technology also allows network managers to allocate greater bandwidth to centralized servers, thereby improving throughput in client/server computing. In comparison to bridges, routers, and other high speed technologies, Ethernet switches have the following advantages: ease of installation; low cost; compatibility with existing legacy LAN technologies; use of existing cables; and no changes at the desktop. Through the use of fiber optic transceivers, Ethernet switching technology can be deployed in a building, campus, or metropolitan area. An industry source has estimated that the total worldwide market for switching hubs will increase from $90 million in 1993 to more than $550 million in 1998. High-Speed Networks. The growing importance of LANs and the increasing complexity of desktop computing applications has fueled the need for high-speed networks. A number of highspeed LAN technologies have been proposed to provide greater bandwidth and alleviate traffic "bottlenecks." 30 34 FDDI. Fiber distributed data interface ("FDDI") is a high speed (100 Mb/s) LAN standard that was developed in the 1980s to meet the demand for a high speed, reliable network. This high speed network is based on a fiber optic ring that extends to up to 500 stations (nodes) and over a total fiber length of 1 00 km. As the use of FDDI becomes more cost effective, the market for fiber optic cable and components is expected to increase. Presently, several regional and national carriers are offering FDDI in their MANs for high speed data transmission. Fast Ethernet. In 1993, a group of networking companies, including Cabletron, 3 Corn, Intel, and Synoptics, formed the Fast Ethernet alliance. The group drafted specifications for the use of Ethernet LAN at the speed of 100 Mb/s, over unshielded and shield twisted pair wiring, as well as over fiber optic media. Implemented in desktop Ethernet adapter cards, shared hubs, and switched Ethernet hubs, Fast Ethernet technology allows for simultaneous implementation of existing 10 Mb/s legacy and 100 Mb/s Fast Ethernet in the same LAN. ATM. ATM is now being standardized by the Consultative Committee for International Telephone and Telegraph and the ATM Forum. ATM can run at speeds between 25 Mb/s and 622 Mb/s. ATM has the ability to work as a wide area network and LAN backbone, as well as a desktop solution, and is currently viewed by industry sources as the most effective choice for merging voice, video, and data. At higher speeds, such as 622 Mb/s, ATM becomes the ideal backbone for FDDI and Fast Ethernet networks. Some vendors have already announced technology that integrates ATM backbones with 10 Mb/s Ethernet, 100 Mb/s Ethernet, and 10/100 Mb/s Ethernet switches for the desktop. TEST AND MEASUREMENT EQUIPMENT Fiber optic testing and measuring equipment, primarily hand-held optical power and "loss" meters, sophisticated fault locators, and optical time domain reflectometers ("OTDRs") is required to install, operate, and maintain fiber optic networks. OTDRs are field portable instruments that transmit pulses of light into an optical fiber and recapture the reflection of the pulses generated by a laser diode. By analyzing these reflections, the OTDR identifies faulty connectors and splices, and cable breaks. Management believes that the Company is currently one of three or four suppliers of pulsed lasers to U.S. OTDR manufacturers. Fiber optic testing and measurement equipment is sold primarily in the telecommunication and data communication markets. Growth in this market segment is derived from the general demand for optical fiber installations in these sectors. BUSINESS STRATEGY AND PRODUCTS The Company believes that there are significant business opportunities for emerging fiber optic product and component manufacturing companies as a result of (i) the need of telecommunications companies, including the RBOCs and the ALTs competitive therewith, either to replace existing copper cable with higher capacity fiber optic cable or to expand existing networks, and (II) the use of fiber optic technology as the communications medium of choice in the data communications market. The Company believes that its extensive experience with basic semiconductor optoelectronic technology, its knowledge and understanding of the telecommunications and data communications markets, and its customer base afford it a competitive advantage in such industry. The Company's operating strategy is to capitalize on the commercial popularity of existing products and to develop and produce an increasing range of fiber optic communications products, including transmitters, receivers, and stand-alone products, which enhance distance and bandwidth in telecommunications networks and LANS. The Company has implemented its operating strategy by developing and manufacturing highly functional and powerful proprietary laser diodes and LEDs and by applying its technology to produce stand-alone products incorporating multiple fiber optic data link modules for use in data communications. As part of the Company's operating strategy, the Company intends to use a portion of the net proceeds from this offering to enhance its basic optoelectronic components technology and to develop and design new subsystem and stand-alone products for use in the LAN and MAN environment. 31 35 The Company offers a family of laser diodes and LEDs, data links products, and stand-alone products. Laser Diodes and LEDs. Every fiber optic communication system utilizes semiconductor laser diodes or LEDs as its source of optical power. A laser diode, the smallest of the commercial laser devices, is a solid state semiconductor device that efficiently converts electronic signals into pulses of light of high purity and brightness. By varying the drive current, the light output is modulated and can carry information in the form of voice, video, or data signals. The light output of a laser diode travels through an optical fiber carrying the information over distances ranging from a few meters to 100 km. Although LEDs function in a manner similar to laser diodes, generally LEDs have less power and produce a wider spectrum of light than optical laser diodes. The Company believes that its LEDs, which can carry data over distances in excess of 20 km, are among the most powerful in their wavelength range in terms of optical power coupled into single mode fiber. There are several applications, such as in general purpose LANs and in FDDI applications covering distances of up to 20 km, where the use of LEDs is more appropriate than laser diodes due to cost, simplicity of drive circuitry, and lower requirements of LEDs with respect to transmission speed and optical power. The Company's semiconductor laser diodes are discrete components in the 1,300 manometer (nm) to 1,550 nm (infrared) spectral range. The laser diodes may contain a thermoelectric cooler (used for temperature stabilization) and a photo-detector used to monitor the optical output power of the device. For applications such as multi-channel analog cable television, which requires a high signal-to-noise ratio for clear pictures, certain of the Company's laser diodes are supplied with optical isolators that minimize optical reflections, thus providing reduction in noise level. The Company's discrete components are provided in various industry standard packages to facilitate mounting on electronic circuit boards. These packages are also compatible with certain standard optical interfaces, including fiber 11 pigtail," ST connector, FC/PC connector, and SC connector. To meet various optical specifications and package types, the Company manufactures approximately 250 different laser diodes and LEDs. Data Links Product Line. In September 1991, the Company introduced an LED or laser based single mode transmitter/ receiver product line, designed for data communications applications, including LANs and FDDI. Such product line consists of products compatible with single mode fiber optic cable, which is more suitable for long distance and high speed transmission than multimode fiber optic cable. For example, the Company's single mode laser transmitter operates over 70 km of fiber at a transmission speed of 125 Mb/s. As most currently available data link modules are designed for multimode fiber optic cable, the Company has designed its products to be adaptable, providing for easy conversion from a multimode type data link to a single mode optical fiber. The devices are pin compatible with other standard multimode type data links and with industry standard electrical interfaces, and include additional options such as choice of wavelength and optical interface. The Company has recently introduced data link products designed for a synchronous optical network, a telecommunications transmissional standard ("SONET"), and ATM transmission. The Company believes that a significant market exists for single mode transmitter/receivers for transmitting data over long distance at high speeds. The Company also believes that the price/performance ratio of Rs module level products have allowed, and will continue to allow, it to compete effectively in this market segment. Currently, the Company manufactures approximately 150 transmitter/receiver modules, which are utilized in stand-alone products and systems manufactured by the Company's customers. 32 36 Figure 1 illustrates an example of a MAN consisting of LANs In five different locations in a metropolitan area that are connected by way of a high speed fiber optic network. This type of MAN facilitates efficient and rapid data communications among connected workgroups. The Company's products (represented by the triangles) provide the fiber optic transmission between the nodes on the MAN. FIGURE 1 ENTERPRISE-WIDE METROPOLITAN AREA NETWORK (MAN) [GRAPHIC - FLOWCHART] 33 37 Stand-Alone Products. The Company has developed stand-alone products for multimode fiber optic cable to single mode fiber optic cable conversion in the LAN and MAN environments. Single mode fiber optic cable is more suitable for long distance and high speed transmission than multimode fiber optic cable and generally requires long wavelength light sources. Introduced in 1992, the Company's stand-alone products allow the connection, through single mode fiber optic cable, of remote LANS, Including LANs utilizing FDDI and ATM. In November 1993, the Company introduced its NBase Switch NH203, a four port workgroup Ethernet switch. Utilizing a non-blocking, "cut-through" multiple bus architecture, the NH203 forwards data between four Ethernet segments, with up to 1,024 users. The NH203, the first of a family of Ethernet switches, also provides full duplex Ethernet connectivity into servers, to boost performance in a client/server environment. Full duplex Ethernet allows two nodes sharing a dedicated segment to simultaneously send and receive data in a "collision free" mode. Used in conjunction with the Company's single mode fiber optic cable compatible Ethernet transceivers, full duplex mode also allows the connection of Ethernet LANs to distances of over 50 km, via single mode fiber optic cable. The NH203 was recently superseded by the NH204, providing more advanced features, including support for 2,024 users and network management in the form of standard-based simple network management protocol software. In November 1994, the Company announced two new NBase Switch products supporting the new 100 Mb/s Fast Ethernet standard: The MegaSwitch NH208 and NH215. The NH208 and NH215 consist of 6 and 13 switched Ethernet ports, respectively, as well as two 100 Mb/s Fast Ethernet modules. Each switched Ethernet port can accommodate a single LAN user or and entire network segment. Up to 4,096 Ethernet users and two Fast Ethernet connections are supported. The Company plans to introduce modules supporting the 25 Mb/s and 155 Mb/s ATM standard in the future. Figure 2 illustrates a network in which the Company's Ethernet switch is used to connect clients to file servers, using high speed, Fast Ethernet. This network relieves server bottlenecks and alleviates network congestion, while preserving user's investment in Ethernet network equipment. FIGURE 2 FAST ETHERNET SWITCH IN A CLIENT/SERVER ENVIRONMENT [GRAPHIC - FLOW CHART] 34 38 TECHNOLOGY OVERVIEW PROPRIETARY CHIP TECHNOLOGY The Company's three product lines are based upon its proprietary opto-electronic chip technology. The Company manufactures the chips incorporating a proprietary composition and geometric structure that gives its laser diodes and LEDs the following characteristics: - - Low threshold current. Threshold current is the minimum current required for the light emitting process to begin. A low threshold current is an indication of high efficiency and high reliability. - - Operating temperature in excess of 100(degree) C. The laser diodes and LEDs are designed to operate at high ambient temperature, which expands the range of applications and enhances reliability. - - High Facet Power, in excess of 150mW. Facet power is a measure of the raw optical intensity of the light generated by the laser diode or LED prior to coupling into optical fiber. - High transmission speed. Frequency response above 10 GHz. - - High linearity. Laser linearity is a significant parameter for analog applications, such as cable TV and video transmission. - - High operating current tolerance. The Company's laser chip tolerates drive current substantially higher than normal operating current, an indication of the chip's high reliability. The Company has utilized its chip technology to become, to the Company's knowledge, one of three or four U.S. semiconductor laser manufacturers for the OTDR market. The Company's LEDs are able to couple high power to single mode fiber optic cable, which enables the LEDs to be used in applications where high power is required for long distance transmission. For example, fiber optic transmitters using the Company's LEDs achieved transmission distances in excess of 20 km at data rates of 125 Mb/s. PROPRIETARY PACKAGING TECHNIQUE The Company has developed a proprietary method for fiber optic cable and active device alignment, which maximizes coupling efficiency between the light emerging from the laser chip and the single mode fiber optic cable. This technology also enhances long-term power stability over a wide range of temperatures, thus enabling devices to operate at temperatures above 90(degree) C and to be stored at temperatures exceeding 130(degree) C. This feature is significant for devices, such as portable testing and measuring equipment, that must operate under severe environmental conditions. PROPRIETARY LAN SWITCHING TECHNOLOGY The Company has developed expertise in the areas of high speed network switching, network management software, and network traffic optimization. The Company has developed products based on its proprietary switching technology that improve network throughput and enhance the distance for which fiber optic cable is an effective transmission medium. In addition, the Company has developed a proprietary flow control technology that prevents loss of data when destination segments are too congested to receive new data traffic from the switch. The Company believes that by developing products combining its switching technology with its fiber optic transmission technology it can increase performance and lower LAN interconnection delays in campus and metropolitan area fiber networks. MARKETING AND SALES The Company has established a direct and indirect sales and distribution network to serve the fiber optic component and instrumentation markets. The Company markets its products directly in the United States 35 39 and Canada to systems and instruments manufacturers, and indirectly through independent manufacturers' representatives, VARS, and system integrators. International marketing is conducted primarily by approximately 80 independent distributors. UNITED STATES DIRECT SALES In order to meet the needs of customers with diverse and complex fiber optic transmission, measurement, and computer networking requirements, the Company markets and sells its products in the United States through its in-house sales force. The Company believes that direct sales communication with customers results in better service and also provides the Company with a better understanding of customers' current and future needs. UNITED STATES INDIRECT SALES The Company currently utilizes independent manufacturers' representatives on a commission basis to supplement its domestic sales efforts. As of December 31, 1995, the Company had arrangements with two manufacturers' representatives which are terminable upon 60 days prior notice. The Company intends to seek agreements with additional manufacturers' representatives. INTERNATIONAL SALES For the years ended December 31, 1994 and 1995, approximately 19% and 45%, respectively, of the Company's revenues were attributable to international sales. The Company's international sales force is composed of two full-time sales people located In Germany and England. International sales are made primarily, however, through approximately 80 independent distributors in Europe, the Middle East, and the Far East. To the extent that certain of such relationships are based upon written agreements, some of such distribution agreements provide for exclusive distribution rights within certain territories, such agreements generally do not require the distributors to purchase minimum quantities of the Company's products; such agreements are, however, generally terminable by the Company upon 60 days notice. The Company is currently negotiating with additional distributors to expand its international network. Sales to foreign distributors are subject to government controls and other risks associated with international sales, including difficulties in obtaining export licenses, fluctuations in currency exchange rates, political instability, trade restrictions, and changes in duty rates. Although the Company has not experienced any material difficulties related to such factors to date, there can be no assurance that it will not experience material difficulties in the future. Additionally, foreign countries may impose restrictions on the ability of foreign manufacturers to change or terminate distributors. Although the Company is not aware of any restrictions in those countries where it currently has agreements, there can be no assurance that such restrictions will not be adopted in the future or that the Company will not enter into distribution agreements in other countries where such restrictions have been adopted. As a result of its recent acquisitions, the Company obtained additional sales offices and personnel in Israel and Europe. These resources are being utilized to expand the sales of MRV's LAN products as well as to continue sales of some products previously marketed by Galcom Networking, Ltd and Ace 400 Communications, Ltd. The Company receives payment for its products in U.S. dollars. The Company has not entered into any forward exchange contracts or otherwise engaged in any hedging activities. MAJOR CUSTOMERS The Company has sold its products worldwide to over 500 customers. The Company anticipates that these parties will continue to be major customers in the foreseeable future. The loss of any of these major customers, however, could have a material adverse effect on the Company's business. Management believes that if the Company continues to expand and diversify its product lines and customer base, of which there can be no assurance, its reliance in the future on any single customer or small groups of customers will not be as significant. Current customers include: 36 40 DATA COMMUNICATIONS VIDEO/VOICE COMMUNICATIONS ADC/Fibermux Corp. Industrial Technology Racal Datacom The Grass Valley Group Optical Data Systems General Instruments Bay Networks Optelecom Cisco Systems Network Systems Corporation Pandacom RAD Retix Lannet Canoga Perkins Nichimen Data Systems Nortel Connectware Anixter TELECOMMUNICATIONS INSTRUMENTATION Broadband Network Laser Precision Corp. Reliance Electric Exfo Engineering, Inc. Asea Brown Boveri 3M/Photodyne Photon Technology (China) Photon Kinetics Kingfisher International PTY, Ltd. Wandell & Goltermann Noyes RESEARCH AND DEVELOPMENT The market for fiber optic components and data links is characterized by rapidly changing technology and customer requirements. The Company has focused on developing (I) high performance chip structures, device packaging, and single mode fiber alignment technology, (II) opto-electronic transmitter/receiver technology, and (III) LAN switching technology. The Company believes its future success depends in part upon its ability to continue to enhance its existing products and to develop new products. The Company has devoted, and will be required to continue to devote, significant resources to the development of new transmission /reception devices and data links to address specific market needs, such as SONET and ATM, and to expand the Company's stand-alone product line. The Company also expanded its stand-alone product line to include Ethernet switching and fiber optic multimode to single mode converters. MANUFACTURING The Company's manufacturing operations are currently located at the Company's headquarters in Chatsworth, California and in Yokneam Israel. The Company's manufacturing operations consist of (1) a wafer processing facility for semiconductor, laser diode, and LED chip manufacturing, (II) high precision optical, electronic, and mechanical assembly, and (iii) final assembly and testing. Many of the key processes used in the Company's products are proprietary. Consequently, many of the key components of the Company's products are designed and produced internally. Although the Company generally uses only standard parts and raw materials, certain parts and components are available from only a limited number of suppliers. The Company's policy is to maintain a reserve of necessary parts and raw materials to help minimize any disruption to the Company as a result of temporary unavailability of such parts or raw materials or delays in the receipt thereof by the Company. An inability of the Company to obtain limited source components in adequate quantities on a timely basis could have a material adverse effect on the Company's operating results. In addition, operating results could be materially adversely affected by the receipt of a significant number of defective components, a delay in component delivery, an increase in 37 41 component prices, or the inability of the Company to obtain lower component prices in response to competitive pressures on the pricing of the Company's products. To date, the Company has generally been able to obtain adequate supplies of all of its parts and raw materials in a timely manner from existing sources at competitive prices. The Company relies exclusively on its own production capability for critical semiconductor lasers and LEDs used in its products. These semiconductor devices are manufactured under stringent and accurate procedures using state-of-the-art wafer fabrication technology. Because the Company manufactures these and other key components of its products at its own facility and such components are not readily available from other sources, any interruption of the Company's manufacturing process could have a material adverse effect on the Company's operations. Furthermore, the Company has a limited number of employees dedicated to the operation and maintenance of its wafer fabrication equipment, the loss of any of whom could result in the Company's inability to effectively operate and service such equipment. Wafer fabrication is sensitive to a wide variety of factors, including variations and impurities in the raw materials, difficulties in the fabrication process, performance of the manufacturing equipment, defects in the masks used to print circuits on a wafer, and the level of contaminants in the manufacturing environment. There can be no assurance that the Company will be able to maintain acceptable production yields and avoid product shipment delays. In the event adequate production yields are not achieved resulting in product shipment delays, the Company's business, financial condition, and results of operations could be materially adversely affected. The Company has not experienced problems with production yields and has not incurred any material product shipment delays. There can be no assurance that such events will not occur in the future. The Company assembles all of its opto-electronic products. Relevant assembly processes include die attach, wirebond, substrate attachment, and fiber coupling. The Company also conducts tests throughout its manufacturing process using commercially available and in-house built testing systems that incorporate proprietary procedures. The Company performs final product tests on 100% of its products prior to shipment to customers. The Company is subject to a variety of federal, state, and local governmental regulations related to the storage, use, discharge, and disposal of toxic, volatile, or otherwise hazardous chemicals used in its manufacturing process. There can be no assurance that changes in environmental regulations will not result in the need for additional capital equipment or other requirements. Further, such regulations could restrict the Company's ability to expand its operations. Any failure by the Company to obtain required permits for, control the use of, or adequately restrict the discharge of, hazardous substances under present or future regulations could subject the Company to substantial liability or could cause its manufacturing operations to be suspended. Such liability or suspension of manufacturing operations could have a material adverse effect on the Company's operating results. The Company has not incurred any material costs in complying with federal, state and local environmental requirements to date. However, no assurance can be given that such costs will not be incurred in the future. BACKLOG At December 31, 1995, the Company's backlog of orders was approximately $7,940,000, as compared to a backlog of approximately $4,270,000 at December 31, 1994. The Company expects to fill this backlog within the next 12 months. All of these orders are subject to cancellation without penalty, and there can be no assurance that the orders comprising the backlog will be shipped or that orders will not be canceled in whole or in part. COMPETITION The fiber optic components, computer networking, and telecommunications industries are highly competitive and subject to rapid technological change. The Company believes that the principal competitive factors in the market for fiber optic components and instruments and data links are: (i) support for multiple optical interfaces; (ii) power; (iii) wavelengths; (iv) electrical interface standards; (v) mechanical packaging; (vi) price; and (vii) reliability. The Company believes that its products are favorably priced compared to equivalent products currently available from its competitors. In addition, management believes that its LEDs 38 42 and LED based transmitters offer substantially greater power in their wavelength range and greater reliability than competing products. Based on its assessment of the price/performance ratio of competitive products, the Company believes that its products currently compare favorably with similar products, although there can be no assurance that they will continue to do so. The Company's current competitors include AT&T, NEC, Hewlett Packard, Ortel, Mitsubishi, Fujitsu, and other companies that offer or have announced similar products. Some of these competitors have substantially greater financial, marketing, technical, human, and other resources than the Company, which may give such competitors certain competitive advantages, including the ability to negotiate lower prices on raw materials and components than those available to the Company. There can be no assurance that the Company will be able to compete successfully with existing or future competitors or that competitive pressures faced by the Company will not materially and adversely affect the business, operating results, and financial condition of the Company. PROPRIETARY RIGHTS AND LICENSES The Company holds no patents and has not filed any patent applications with respect to its technology. The Company currently relies on unpatented proprietary know-how, which may be duplicated, and employs various methods, including confidentiality agreements with employees, to protect its proprietary know-how. Such methods may not afford complete protection, however, and there can be no assurance that others will not independently develop such know-how or obtain access to it. If any patent applications are filed by the Company, there can be no assurance that any patents will be issued, or, if issued, would provide the Company with meaningful protection from competition. In addition, there can be no assurance that the Company's products will not be found to infringe on any patent held by others. In the event that any such products are found to so infringe, the Company would be required to seek a license with respect to such patented technology, or incur substantial costs to redesign the infringing products. There can be no assurance that any such license would be available on terms acceptable to the Company or at all, that any of the Company's products could be redesigned on an economical basis or at all, or that any such redesigned products would be competitive with the products of the Company's competitors. WARRANTIES The Company provides a limited one-year warranty on equipment and parts and, to date, has not experienced any significant warranty claims. Products sold under the NBase Switch trademark are warranted for between one and three year periods. EMPLOYEES As of December 31, 1995, the Company had 207 full-time employees, including five executive officers, 106 in production, 32 in marketing and sales, 31 in research and development, and 38 in general administration. In addition, the Company had five part-time employees working in production. None of the Company's employees are represented by a union or governed by a collective bargaining agreement, and the Company believes its relationship with its employees is satisfactory. FACILITIES The Company's administrative, sales and marketing, R&D, and manufacturing facility is located in Chatsworth, California. The facility covers approximately 17,700 square feet and is leased from an unaffiliated landlord at an annual base rent of approximately $106,000 (plus local taxes) for a lease term expiring March 19, 1999. In addition, the Company leases additional space near its primary facility --Chatsworth -- consisting of approximately 5,000 square feet from an unaffiliated landlord at an annual base rent of approximately $43,000. The lease term expires in July 1995 and is renewable for consecutive one-year terms on an annual basis. The Company also leases space in Gaithersburg, Maryland for its sales office and warehouses. This facility covers approximately 3,150 square feet and is leased from an unaffiliated landlord at an annual base rent of approximately $36,000 per year (plus local taxes) for a lease term expiring May, 1996. 39 43 The Company's administrative, sales and marketing, R&D, and manufacturing operations in Israel are located in Tel Aviv, Yokneam and Barkan in facilities that cover approximately 30,000 square feet and are leased for total annual base rents of approximately $156,000. All of the leases for facilities in Israel expire within less than one year and the Company is presently negotiating alternative locations in which to merge the operations. The Company also leases a facility in Lenexa, Kansas consisting of 7,000 square feet. This facility is being shut down. The Company anticipates it may be required to pay $50,000 to terminate the lease on this facility. This facility was used for sales, marketing and warehousing. However, the facility is being shut down because the Company is consolidating the operations of the Kansas facility with that of its Maryland facility. The Company believes that its present facilities are sufficient to meet its current needs. LITIGATION The Company is not party to any material litigation. 40 44 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The current executive officers and directors of the Company are as follows:
NAME AGE POSITION ---- --- -------- Noam Lotan(1).................................. 44 President, Chief Executive Officer, Director Shlomo Margalit(1)............................. 54 Chairman of the Board of Directors, Chief Technical Officer, and Secretary Zeev Rav-Noy(1)................................ 48 Chief Operating Officer, Treasurer, and Director Edmund Glazer.................................. 36 Vice President of Finance and Administration, Chief Financial Officer Khalid (Ken) Ahmad............................. 43 Vice President of Marketing and Sales Ofer Iny....................................... 28 Vice President of Engineering Leonard Mautner(2)(3).......................... 77 Director Milton Rosenberg(2)(3)......................... 72 Director
- ------------------ (1) Member of the Executive Committee. (2) Member of the Compensation Committee. (3) Member of the Audit Committee. Each director is elected for a period of one year at the Company's annual meeting of stockholders and serves until the next annual meeting and until his successor is duly elected and qualified. Officers are elected by, and serve at the discretion of, the Board of Directors. The members of the Board of Directors who are not employees of the Company receive cash compensation of $800 per month and $500 for each Board of Directors meeting attended, while serving as directors. The principal occupations of each director and executive officer of the Company for at least the past five years are as follows: Noam Lotan has been the President, Chief Executive Officer, and a Director of the Company since May 1990 and became Chief Financial Officer of the Company in October 1993. From March 1987 to January 1990, Mr. Lotan was Managing Director of Fibronics (UK) Ltd., the United Kingdom subsidiary of Fibronics International Inc. ("Fibronics"), a manufacturer of fiber optic communication networks. From January 1985 to March 1987, Mr. Lotan was a Director of European Operations for Fibronics. Prior to such time, Mr. Lotan held a variety of sales and marketing positions with Fibronics and Hewlett-Packard. Mr. Lotan holds a Bachelor of Science degree in Electrical Engineering from the Technion, the Israel Institute of Technology, and a Masters degree in Business Administration from INSEAD (the European Institute of Business Administration, Fontainebleu, France). Dr. Shlomo Margalit, a co-founder of the Company, has been Chairman of the Board of Directors and Chief Technical Officer since the Company's inception in July 1988. From May 1985 to July 1988, Dr. Margalit was a founder and Vice President of Research and Development for LaserCom, Inc. ("LaserCom"), a manufacturer of semiconductor lasers. From 1982 to 1985, Dr. Margalit was a Senior Research Associate at the California Institute of Technology ("Caltech"), and from 1976 to 1982, a Visiting Associate at Caltech. From 1972 to 1982, Dr. Margalit was a faculty member and Associate Professor at the Technion. During his tenure at the Technion, Dr. Margalit was awarded the "Israel Defense" prize for his work in developing infrared detectors for heat guided missiles and the David Ben Aharon Award for Novel Applied Research. Dr. Margalit holds a Bachelor of Science degree, a Masters degree, and a Doctor of Science degree (Ph.D.) in Electrical Engineering from the Technion. 41 45 Dr. Zeev Rav-Noy, a co-founder of the Company, has been its Chief Operating Officer and a Director of the Company since inception and was its President until May 1990. From May 1985 to July 1988, Dr. Rav-Noy was a founder and Vice President of Operations of LaserCom and, from 1982 to 1985, was a research fellow at Caltech. From 1979 to 1982 Dr. Rav-Noy served as a consultant to a number of companies, including Tadiran Electronic Industries, Inc., an Israeli telecommunication, military, and consumer electronics conglomerate, and the Yeda Research and Development Co. Ltd., a technology exploitation and application company affiliated with the Weizman Institute in Israel. Dr. Rav-Noy holds a Bachelor of Science degree and a Masters degree in physics from Tel Aviv University, and a Ph.D. in Applied Physics from the Weizman Institute in Israel. Edmund Glazer was appointed as Vice President of Finance and Administration and Chief Financial Officer in June 1995. He has been with the company since October 1994 serving as Operations Manager. In 1993 and 1994 Mr Glazer was a consultant providing document imaging and information systems to clients. From 1986 to 1993 Mr Glazer was Vice President of Finance at Concord Electrical Supply, a distributor of electrical and electronic products. From 1984 to 1986 Mr Glazer worked as a CPA at Singer, Lewak Greenbaum & Goldstein, CPA's. From 1981 to 1984 Mr Glazer worked as an auditor for Weber, Lipshie & Co. CPA's. In 1983 Mr Glazer obtained qualification as a Certified Public Accountant from the State of California. Mr Glazer holds a Bachelor of Science Degree in Business Administration from the University of Southern California. Khalid (Ken) Ahmad has been Vice President of Marketing and Sales since July 1990 and an Executive Officer since May 1992. From April 1990 to July 1990, Mr. Ahmad was a consultant to the Company. From January 1990 to March 1990, Mr. Ahmad was a consultant to Welwyn Microcircuits, a British hybrid manufacturer, providing market research information on fiber optic technology. In 1988 and 1989, Mr. Ahmad was marketing manager and regional sales manager for STC Components, a manufacturer of opto-electronic components. From 1985 to 1988, he was marketing operations manager for PCO, Inc. a manufacturer of opto-electronics devices and data links. From 1977 to 1985, Mr. Ahmad also held a variety of marketing and sales management positions with Canoga Data Systems and Deutsch. Mr. Ahmad holds a Bachelor of Science degree in Biology from California State University at San Bernardino. Ofer Iny has been Vice President of Engineering of the Company since May 1994. From January 1993 to May 1994, he was a consultant to the Company. From September 1991 to January 1993, Mr. Iny was a researcher at Jet Propulsion Laboratory, Microgravity and Microwave Group. From May 1990 to March 1992, Mr. Iny was Senior Engineer at Whittaker Electronic Systems, a manufacturer. Mr. Iny holds a Bachelor of Science degree in Physics from California State University, Northridge, and a Masters degree in Physics from University of California, Los Angeles ("UCLA"). Leonard Mautner has been an advisor to the Company since its inception and was elected a Director in March 1992. Mr. Mautner is President of Leonard Mautner Associates, a management consulting company, which he founded in 1973, and in addition, from 1982 to 1988, was a visiting lecturer at the Anderson School of Management of UCLA. Mr. Mautner is also a Director of two mutual funds, the First Pacific Advisors Perennial Fund and the First Pacific Advisors Paramount Fund. From 1969 to 1979, Mr. Mautner was a General Partner of Goodman & Mautner, Ltd., a venture capital partnership, and President of Goodman & Mautner, Inc., the partnership's investment manager. Mr. Mautner holds a Bachelor of Science degree in Electrical Engineering from the Massachusetts Institute of Technology. Milton Rosenberg has been an advisor to the Company since its inception and was elected a Director in March 1992. He is President of M. R. Associates, an investment and consulting company, which he founded in 1978. For the past 15 years, Mr. Rosenberg has been a director of Bell Industries, a New York Stock Exchange company engaged in the distribution of electronics components. Mr. Rosenberg has also been a director of Iomega Corporation, a manufacturer of data storage devices, since its inception in 1980. Mr. Rosenberg has been a consultant to high technology companies for over 20 years, Mr. Rosenberg holds a Bachelor of Science degree in Electrical Engineering from Drexel University and did graduate course work in Electrical Engineering at Princeton University. 42 46 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company's Compensation Committee reviews and acts on matters relating to, among other things, compensation levels and benefit plans for key executives of the Company. The committee consists of Messrs. Mautner and Rosenberg. Neither of Messrs. Mautner or Rosenberg are affiliated with other companies that have current business relationships with the Company. EXECUTIVE COMPENSATION The following table sets forth certain information regarding compensation paid by the Company for services rendered during each of the fiscal years shown in the table to the Company's Chief Executive Officer and its executive officers other than the Chief Executive Officer whose annual compensation exceeded $100,000. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------- LONG TERM FISCAL COMPENSATION NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS - --------------------------- ---- ------ ----- ------ Noam Lotan, ............................... 1995 $100,000 $ 0 0 President and Chief Executive Officer 1994 100,000 1,000 0 1993 100,000 -- 0 Zeev Rav-Noy, ............................. 1995 110,000 60,000 0 Chief Operating Officer and Treasurer 1994 110,000 60,000 0 1993 110,000 46,000 0 Shlomo Margalit, .......................... 1995 110,000 ___ 0 Chief Technical Officer and Secretary 1994 110,000 -- 0 1993 110,000 -- 0 Ken Ahmad, ................................ 1995 90,000 24,750 75,000* Vice President of Marketing and Sales 1994 90,000 36,000 0 1993 90,000 18,000 0
* Ken Ahmad holds options to purchase 75,000 shares of Common Stock. In accordance with the Company's Incentive Stock Plan these options vest yearly in equal portions on January 13, 1996, 1997 and 1998 respectively. None of the other executive officers set forth in the table above hold any options to purchase shares. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ------------------------------------------------------------------- NUMBER OF SECURITIES PERCENT OF UNDERLYING TOTAL OPTIONS/ OPTIONS/ SARS GRANTED EXERCISE OR SARS TO EMPLOYEES BASE PRICE EXPIRATION NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE - ---- ---------- -------------- ------ ---- Ken Ahmad 75,000 7.5% $7.25 1/13/2000
43 47 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR VALUES
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/ ACQUIRED ON REALIZED OPTIONS/SARS AT SARS AT DECEMBER 31, 1995 NAME EXERCISE (#) ($) DECEMBER 31, 1995 ($) - ---- ------------ --- ------------------------------- ------------------------------ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- ------------- ----------- ------------- Ken Ahmad -0- -0- 25,000 50,000 230,133 460,267
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS The Company's Certificate of Incorporation includes a provision that eliminates or limits the personal financial liability of the Company's directors, except in situations where there has been a breach of the director's duty of loyalty to the Company or its stockholders, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, liability under Section 174 of the Delaware General Corporation Law ("Section 174") relative to unlawful payment of dividends, stock purchases or redemptions, or any transaction from which the director derived an improper personal benefit. Furthermore, Section 174 eliminates monetary liability for gross negligence in exercising the duty of due care related to the directors' fiduciary duties under state corporate law, however, such section does not eliminate monetary liability of directors under the federal Securities laws. In addition, the Company's Bylaws include provisions to indemnify its officers and directors and other persons against expenses, judgments, fines and amounts paid in settlement in connection with threatened, pending or completed suits or proceedings against such persons by reason of serving or having served as officers, directors or in other capacities, except that in relation to matters with respect to which such persons shall be determined to be liable for misconduct or negligence in the performance of their duties, the Company's Bylaws provide for identification only to the extent that the Company determines that such person acted in good faith and in a manner not opposed to the best interests of the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against the public policy as expressed in the Act and is therefore unenforceable. EMPLOYMENT AGREEMENTS In March 1992, the Company entered into three-year employment agreements with Mr. Lotan, Dr. Margalit, and Dr. Rav-Noy. Pursuant to the agreements, Mr. Lotan serves as President, Chief Executive Officer, Chief Financial Officer, and a Director of the Company, Dr. Margalit serves as Chairman of the Board of Directors, Chief Technical Officer, and Secretary, and Dr. Rav-Noy serves as a Chief Operating Officer, Treasurer, and a Director. Mr. Lotan, Dr. Margalit, and Dr. Rav-Noy receive base annual salaries of $100,000, $110,000, and $110,000, respectively, and each is entitled to receive a bonus determined and payable at the discretion of the Board of Directors upon the recommendation of the Compensation Committee of the Board. Recommendations with respect to bonus levels are based on achievement of specified goals, such as new product introductions, profitability levels, revenue goals, market expansion, and other criteria as established by the Compensation Committee. Each officer also receives employee benefits, such as vacation, sick pay, and insurance, in accordance with the Company's policies. The Company has obtained, and is the beneficiary of, key man life insurance policies in the amount of $1,000,000 on the lives of each of Drs. Margalit and Rav-Noy and Mr. Lotan. All benefits under these policies will be payable to the Company upon the death of an insured. In November 1994, each of Mr. Lotan and Drs. Margalit and Rav-Noy agreed to extend the term of their respective employment agreement until March 1998. In August 1990, the Company and Mr. Ahmad executed a letter of employment outlining the terms of Mr. Ahmad's employment as Vice President of Marketing and Sales, at a base salary of $53,000 per annum plus commissions based upon sales targets. In May 1992, Mr. Ahmad was elected an executive officer of the Company. For the year ended December 31, 1993, Mr. Ahmad's base salary was $90,000 and he earned commissions of approximately $18,000. Mr. Ahmad's employment is at will. 44 48 STOCK OPTION PLAN On March 27, 1992, the Board of Directors and stockholders of the Company adopted the Plan, which provides for the grant to employees, officers, directors, and consultants of options to purchase up to 450,000 shares of Common Stock, consisting of both "incentive stock options" within the meaning of Section 422 of the United States Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified options. Incentive stock options are issuable only to employees of the Company, while non-qualified options may be issued to non-employee directors, consultants, and others, as well as to employees of the Company. In February 1995, the Board expanded the plan by 450,000 shares. In June 1995, the stockholders approved the expansion of the plan. Under the Plan, the Compensation Committee has the authority to determine the persons to whom options will be granted, the number of shares to be covered by each option, whether the options granted are intended to be incentive stock options, the duration and rate of exercise of each option, the option price per share, the manner of exercise, and the time, manner, and form of payment upon exercise of an option. The exercise price per share of Common Stock subject to incentive stock options may not be less than the fair market value of the Common Stock on the date the option is granted. The exercise price per share of Common Stock subject to non-qualified options will be established by the Board of Directors. The aggregate fair market value (determined as of the date the option is granted) of the Common Stock that any employee may purchase in any calendar year pursuant to the exercise of incentive stock options may not exceed $100,000. No person who owns, directly or indirectly, at the time of the granting of an incentive stock option to him, more than 10% of the total combined voting power of all classes of stock of the Company shall be eligible to receive any incentive stock options under the Plan unless the exercise price is at least 110% of grant. Non-qualified options are not subject to this limitation. No incentive stock option may be transferred by an optionee other than by will or the laws of descent and distribution and, during the lifetime of an optionee, the option will be exercisable only by the optionee. In the event of termination of employment other than by death or disability, the optionee will have three months after such termination or until the expiration of such option, whichever occurs first, to exercise the option. Upon termination of employment of an optionee by reason of death or permanent total disability, options remain exercisable for one year thereafter or until the expiration of such option, whichever occurs first, to the extent they were exercisable on the date of such termination. No similar limitation applies to non-qualified options. Stock options under the Plan must be granted within 10 years from the effective date of the Plan. Incentive stock options granted under the Plan cannot be exercised more than 10 years from the date of grant, except that incentive stock options issued to 10% or greater stockholders are limited to five year terms. All options granted under the Plan provide for the payment of the exercise price in cash or by delivery to the Company of shares of Common Stock already owned by the optionee having a fair market value equal to the exercise price of the options being exercised, or by a combination of such methods of payment. Therefore, an optionee may be able to tender shares of Common Stock to purchase additional shares of Common Stock and may theoretically exercise all of his stock options without making any additional cash investment. Any unexercised options that expire or that terminate upon an employee's ceasing to be employed With the Company become available once again for issuance. At September 30, 1995, options for 394,700 were outstanding under the Plan. CERTAIN TRANSACTIONS Between January 1, 1993 and October 31, 1994 the Company loaned Zeev Rav-Noy, its Chief Operating Officer and Treasurer and a Director of the Company, an aggregate of approximately $130,000. The largest amount owed by Dr. Rav-Noy to the Company during the years ended December 31, 1993, December 31, 1994 was approximately $56,000 and $65,000 respectively. Amounts advanced to Dr. Rav-Noy bore no interest. Prior to December 31, 1994, Dr. Rav-Noy had repaid all amounts owed by him to the Company. 45 49 PRINCIPAL AND SELLING STOCKHOLDERS AND SELLING WARRANT HOLDERS The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of March 31, 1996, of (1) each person known by the Company to own beneficially 5% or more of the Common Stock, (II) each current director of the Company, (III) each executive officer listed in "Management - Executive Compensation," (iv) each Selling Stockholder and Selling Warrant Holder, and (v) all current directors and executive officers as a group.
SHARES SHARES BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED BEFORE OFFERING(1) SHARES AFTER OFFERING(1) NAME AND ADDRESS NUMBER PERCENT BEING SOLD NUMBER PERCENT - ---------------- ------ ------- ---------- ------ ------- Shlomo Margalit ........................ 1,024,465 10.8 -- 1,024,465 10.8 c/o MRV Communications, Inc. 8917 Fullbright Avenue Chatsworth, CA 91311 Zeev Rav-Noy ........................... 988,465 10.4 -- 988,465 10.4 c/o MRV Communications, Inc. 8917 Fullbright Avenue Chatsworth, CA 91311 Noam Lotan ............................. 487,843 5.1 -- 487,843 5.1 c/o MRV Communications, Inc. 8917 Fullbright Avenue Chatsworth, CA 91311 Ken Ahmad (2) .......................... 126,231 1.3 -- 126,231 1.3 c/o MRV Communications, Inc. 8917 Fullbright Avenue Chatsworth, CA 91311 Leonard Mautner ........................ 38,137 * -- 38,137 * 1434 Sixth Street, Suite 10 Santa Monica, CA 90401 Milton Rosenberg (3) ................... 27,105 * -- 27,105 * 10975 Torreyana Road, Suite 304 San Diego, CA 92121 All Directors and Executive Officers ... 2,701,246 28.2 -- 2,701,246 28.2 as a group (eight persons)(4) TOTAL .................................. 9,524,293 -- 9,524,293
- --------------- * Less than one percent. (1) Pursuant to the rules of the Securities and Exchange Commission, shares of Common Stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. (2) Includes 24,999 shares issuable pursuant to stock options exercisable within 60 days from the date hereof. (3) Includes 12,000 shares issuable pursuant to stock options exercisable within 60 days from the date hereof. (4) Includes 45,999 shares issuable pursuant to stock options exercisable within 60 days from the date hereof.
SHARES SHARES BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED BEFORE OFFERING(1) SHARES AFTER OFFERING(1) SELLING STOCKHOLDERS NUMBER PERCENT BEING SOLD NUMBER PERCENT - -------------------- ------ ------- ---------- ------ ------- Everest Capital International Ltd. 254,997 3.7 254,997 -- Alavardo Partners 37,659 * 37,659 -- Arntz Builders Partners 1,200 * 1,200 Banque de Gestion E. de Rothschild, Luxembourg 4,000 * 4,000 -- Banque de Gestion E. de Rothschild, Luxembourg 5,000 * 5,000 -- Banque Privee Edmond de Rothschild/Geneva 30,000 * 30,000 -- Banque Privee Edmond de Rothschild/Geneva 5,000 * 5,000 -- CUS Trust 18,000 * 18,000 -- David Koch 329 * 329 --
46 50 Elizabeth D. Holiday - IRA 450 * 450 -- Ince & Co. 15,000 * 15,000 -- Ince & Co. 8,000 * 8,000 -- J Steven Emerson 23,000 * 23,000 -- Jonathan Andron 1,050 * 1,050 -- Mark Riez 1,500 * 1,500 -- Northview Trading 3,000 * 3,000 -- Robert Danloy Vrancken II 1,500 * 1,500 -- Spencer Allen - IRA 150 * 150 -- Tom Zimberoff - IRA 150 * 150 -- Aharon Orlansky 479 * 479 -- Banque Privee Edmond Rothschild/Geneva 9,000 * 9,000 -- Banque de Gestion E. de Rothschild, Luxembourg 8,000 * 8,000 --
ADDRESSES OF SELLING STOCKHOLDERS Banque Privee Edmond de Rothschild/Geneva c/o Brown Brothers Harriman 59 Wall Street New York, NY 10005 Banque de Gestion E. de Rothschild, Luxembourg BBH New York 59 Wall Street New York, NY 10005 Ince & Co. Morgan Guaranty Trust New York 55 Exchange Level A New York, NY 10260 Northview Trading Banque Financiere de la Cite P.O. Box 5030 1211 Geneve 11 Switzerland CUS Trust Custodial Trust Co. 101 Carnegie Ctr. Princeton, NJ 08540 Spencer Allen - IRA Andron Capital Management 3650 Mt. Diablo Blvd., Sutie 103 Lafayette, CA 94549 Arntz Builders Partners Andron Capital Management 3650 Mt. Diablo Blvd., Sutie 103 Lafayette, CA 94549 Elizabeth D. Holiday - IRA Andron Capital Management 3650 Mt. Diablo Blvd., Sutie 103 Lafayette, CA 94549 Tom Zimberof - IRA Andron Capital Management 3650 Mt. Diablo Blvd., Sutie 103 Lafayette, CA 94549 Jonathan Andron Andron Capital Management 3650 Mt. Diablo Blvd., Sutie 103 Lafayette, CA 94549 Robert Danloy Vrancken II Robert Danloy Vrancken II 2548 Fettersmill Rd. Huntingdon, PA 19006 Banque Privee Edmond Rothschild, Luxembourg Banque Privee Edmont Rothschild Luxembourg c/o Brown Brothers, Harriman & Co. 59 Wall Street New York, NY 10005 Banque Privee Edmond Rothschild/Geneva Borwn Brothers Harriman 59 Wall Street New York, NY 10005
47 51 Ince & Co. c/o Morgan Guaranty Trust New York La Cie Financiere E. Rothschild Banque 55 Exchange Level A New York, NY 10260 Mark Riez Mark Riez 6 rue de Villersexel 75007 Paris France David Koch David Koch 55 Argyle Rd. Scarsdale, NY 10583 J Steven Emerson J. Steven Emerson 10506 Ilona Avenue, Suite 1410 Los Angeles, CA 90064 Alavardo Partners Alvarado Partners 1 Embarcadero Ctr Suite 2330 San Francisco, CA 94111 Everest Capital Everest Capital Corner house, 20 Parliament St. Hamilton HM 12 Bermuda
- ------------------- (1) Pursuant to the rules of the Securities and Exchange Commission, shares of Common Stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
SHARES SHARES BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED BEFORE OFFERING(1) SHARES AFTER OFFERING(1) SELLING WARRANTHOLDERS NUMBER PERCENT BEING SOLD NUMBER PERCENT ---------------------- ------ ------- ---------- ------ ------- Hampshire Securities 21,807 * 21,807 -- Corporation William E. Aaron 1,687 * 1,687 -- Michael Stein 1,687 * 1,687 -- Caesar Fraschilla 3,000 * 3,000 -- Aharon Orlansky 37,312 * 37,312 -- Jeffrey M. Berman 23,772 * 23,772 -- Leo T. Abbe 23,772 * 23,772 -- Richard K. Abbe 23,772 * 23,772 -- John H. Starr 10,189 * 10,189 -- Phillipe Scwarz 8,500 * 8,500 -- Danny Yelin 8,499 * 8,499 -- Yakov Sfadya 8,500 * 8,500 -- Benny Glazer 15,000 * 15,000 -- Nathan Shilo, Trustee 495,000 * 495,000 -- GEM Design 18,000 * 18,000 -- Jacques Cory 22,500 * 22,500 -- David Koch 3,000 * 3,000 -- Oscar Gruss & Son 3,000 * 3,000 -- Northview Trading Ltd 1,500 * 1,500 -- Heidron Engler 3,000 * 3,000 -- Robert Coane 3,000 * 3,000 -- Jeanette Coane Cust for Robert 1,500 * 1,500 -- Coane Jr. Jeanette Coane Cust for Mary 1,500 * 1,500 -- Coane
48 52 Jeanne Coane Cust for Kevin 1,500 * 1,500 - Coane Daryl Hagler 26,250 * 26,250 - Timothy Essaye 7,500 * 7,500 - Oscar Gruss & Sons 3,750 * 3,750 - Dave Koch 1,500 * 1,500 - Bill Musser 30,000 * 30,000 - Isabelle Orlansky 6,000 * 6,000 - Isabelle Orlansky 22,500 * 22,500 - Northview Trading Ltd 3,750 * 3,750 - Dara Kiely 1,500 * 1,500 - James Powers 2,250 * 2,250 - Steven Rosner 3,750 * 3,750 - Terence Lambert 750 * 750 - Lipa Mier/Alon Cohen Trustees 8,500 * 8,500 - Everest Capital 32,500 * 32,500 - Mark Riez 1,500 * 1,500 - James C. Power 2,450 * 2,450 - Jay Tucker 1,500 * 1,500 - Barker Lee & Co. 2,550 * 2,550 - J.M.R. Barker Foundation 2,250 * 2,250 - Quaker Hill Associates, L.P. 600 * 600 - Upland Associates, L.P. 1,350 * 1,350 - Namakagon Associates, L.P. 3,750 * 3,750 - David Koch 750 * 750 - Jean Michel Nahon 7,500 * 7,500 - Lucien Selle 2,250 * 2,250 - Perlman Assoicates 30,000 * 30,000 - J.J. Newport 15,000 * 15,000 - James C. Powers 3,750 * 3,750 - Jay Tucker 3,000 * 3,000 - Daniel Perlman 1,200 * 1,200 - Bank of the West Trustee 600 * 600 - Tom Callahan 1,500 * 1,500 - CUS Trust 10,000 * 10,000 - Alvarado Partners 10,000 * 10,000 - Perlman & Associates 7,500 * 7,500 - Ahraon Orlanksy 9,180 * 9,180 - GME Designs 7,500 * 7,500 - The Excelsior Fund 50,000 * 50,000 - Jim Powers 1,000 * 1,000 - J. Steven Emerson 5,000 * 5,000 - Banque de Gestion G De 5,000 * 5,000 - Rothschild Luxembourg Joel Packer 3,000 * 3,000 - Banque Privee Edmond de 50,000 * 50,000 - Rothschild S.A./Geneva Sergio Ciambllini 15,000 * 15,000 - Elio Bianchi 15,000 * 15,000 - Everest Capital International Ltd. 71,000 * 71,000 - Bill Klepper 3,750 * 3,750 - Mark Allen 3,000 * 3,000 - TOTAL 1,238,927 * 1,238,927 -
49 53 ADDRESSES OF SELLING WARRANT HOLDERS J.M.R. Barker Foundation J.M.R. Barker Foundation Quaker Hill Associates, L.P. Quaker Hill Associates, L.P. Upland Associates, L.P. Upland Associates, L.P. Namakagon Associates, L.P. Namakagon Associates, L.P. Barker Lee & Company 530 Fifth Avenue 2nd Floor New York, NY 10036 Joel Packer Joel Packer 531 Main Street New York, NY 10044 Tom Callahan Tom Callahan 12 North Bridge Place Convent Station, NJ 07961 CUS Trust Custodial Trust Co. 101 Carnegie Ctr. Princeton, NJ 08540 Dara Kiely Dara Kiely 1 North Tweed Blvd. Upper Grand View, NY 10960 The Excelsior Fund The Excelsior Fund 7616 North 69th Place Paradise Valley, AZ 85253 Steven Rosner Steven Rosner 1220 Mirabeau La Gladwyne, PA 19035 Terence Lambert Terence Lambert 155 So. Bay Avenue Brightwaters, NY 11718 Heidron Engler Heidron Engler 301 E. 64th St. Apt. 2A New York, NY 10021 Bill Musser Bill Musser New Frontier 91 93rd Avenue, 6th Floor New York, NY 10022 Robert Coane Robert Coane Jeanette Coane Cust for Kevin Coane Jeannette Coane Cust for Kevin Jeanette Coane Cust for Mary Coane Coane Jeanette Coane Cust for Robert Coane, Jr. Jeannette Coane Cust for Mary Coane Jeannette Coane Cust for Robert Coane Jr. 46 West Lane Bay Shore, NY 11706 J. Steven Emerson J. Steven Emerson 10506 Ilona Ave. Suite 1410 Los Angeles, CA 90064 Daryl Hagler Daryl Hagler 12 Dike Dr. Wesley Hills, NY 10952 Timothy Essaye Timothy Essaye 3339 Cardinal Drive Vero Beach, LA 32963 Oscar Gruss & Sons Oscar Gruss & Sons 74 Broad St., 5th Floor New York, NY 10004 Isabelle Orlansky Isabelle Orlansky 201 E. 62nd St., Apt. 10A New York, NY 10021 David Koch David Koch 55 Argyle Rd. Scarsdale, NY 10583 50 54 Jean Michel Nahon Jean Michel Nahon 7616 North 69th Place Paradise Valley, AZ 85253 Lucien Selle Banque Financiere de la Cite Attn: Mr. Nerfin P.O. Box 5030 1211 Geneve 11 Switzerland Perlman Associates Perlman Associates 539 Dusie Avenue Closter, NJ 07624 JJ Newport JJ Newport 111 Broadway 3rd Flr. c/o Andrew Nicollett New York, NY 10006 James C. Power James C. Powers 345 E. 80 St. Apt. 185 New York, NY 10021 Jay Tucker Jay Tucker 325 E. 80 Apt. 185 New York, NY 10006 Daniel Perlman Daniel Perlman 2731 Broadway, Apt. 3E New York, NY 10025 Bank of the West Trustee Bank of the West 50 West San Fernando San Jose, CA 95113 Marki Riez Mark Riez 6 Rue de Villersexel 75007 Paris France James C. Powers James C. Powers 345 E. 80 St., Apt. 185 New York, NY 10021 Jay Tucker Jay Tucker 325 E. 79th Apt. 15B New York, NY 10021 Everest Capital Everest Capital Corner house, 20 Parliament St. Hamilton HM 12 Bermuda Banque Privee Edmond Rothschild Banque Privee Edmond Rothschild Luxembourg Luxembourg c/o Brown Brothers, Harriman & Co. 59 Wall Street New York, NY 10005 Banque Privee Edmond Rothschild/Geneva Brown Brothers Harriman 59 Wall Street New York, NY 10005 Alvarado Partners Alvarado Partners 1 Embarcadero Ctr. Suite 2330 San Francisco, CA 94111 Northview Trading Banque Financiere de la Cite P.O. Box 5030 1211 Geneve 11 Switzerland Elio Bianchi Elio Bianchi Sergio Ciambellini Sergio Ciambellini Via Oropa, 3 20132 Milano Italy 51 55 Bill Klepper Bill Klepper c/o MRV Communications, Inc. 8943 Fullbright Ave. Chatsworth, CA 91311 Mark Allen Mark Allen 29 Loring Drive Norwell, MA 02061 Some of the Selling Stockholder and Selling Warrant Holders are transferees. See "Business-Recent Acquisitions" and "Description of Securities and Warrants-Warrants." - ------------------- (1) Pursuant to the rules of the Securities and Exchange Commission, shares of Common Stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. 52 56 DESCRIPTION OF SECURITIES AND WARRANTS The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $0.0067 per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share. As of May 10, 1996, there were 9,588,437 shares of Common Stock outstanding. COMMON STOCK The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders. Holders of Common Stock also are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefore, subject to preferences that may be applicable to any outstanding Preferred Stock. In the event of liquidation, dissolution, or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any outstanding Preferred Stock. Holders of Common Stock have no preemptive, subscription, redemption, conversion, or cumulative voting rights. All the outstanding shares of Common Stock are, and the shares of Common stock offered hereby will be, when issued against the consideration set forth in this Prospectus, validly authorized and issued, fully paid, and nonassessable. PREFERRED STOCK Pursuant to the Company's Articles of Incorporation, the Board of Directors has the authority to issue 1,000,000 shares of Preferred Stock in one or more series and to fix the powers, designations, preferences, and relative, participating, optional, or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences, and the number of shares constituting any series, without any further vote or action by the Company's stockholders. The issuance of Preferred Stock in certain circumstances may have the effect of delaying, deferring, or preventing a change of control of the Company without further action by the stockholders, may discourage bids for the Common Stock at a premium over the market price of the Common Stock, and may adversely affect the market price of, and the voting and other rights of the holders of, the Common Stock. The Company has no shares of Preferred Stock outstanding and has no plans to issue any such shares. Warrants In January 1995, the Company issued to Hampshire Securities the Representative's Warrants to purchase up to 150,000 shares at $11.20 per share in connection with a public offering made by the Company and certain selling stockholders. Hampshire Securities subsequently made an assignment of a portion of the Representative's Warrants covering 126,693 shares among eight persons who are principals of Hampshire Securities. The Representative's Warrants provide certain rights with respect to the registration under the Securities Act of such warrants and the Warrant Shares. The holders of a majority of such warrants and the Warrant Shares may require the Company to file a registration statement under the Securities Act with respect to such warrants and shares. In addition, if the Company registers any of the Common Stock either for its own account or for the account of other security holders, the holders of the Representative's Warrants and the Warrant Shares are entitled to include such securities in the registration. This 150,000 shares underlying the Representative's Warrants are included in this Prospectus. In June 1994, the Company filed a registration statement with respect to the Issuance of 1,466,250 shares of Common Stock issuable upon exercise of the IPO Warrants issued in connection with the Company's initial public offering of December 7, 1992 and the Thomas James warrants to purchase 42,500 units, each unit consisting of four and a half shares of Common Stock and three IPO Warrants, held by Thomas James. The IPO Warrants were exercisable at $3.33 per share at any time until June 7, 1995 and were exercisable thereafter at $4.00 per share until December 7, 1997, unless previously redeemed. The Company sold the Thomas James Warrants to Thomas James at the closing of the Company's initial public offering. The Thomas James Warrants are exercisable at a price of $10.40 per unit at any time until December 7, 1997. On October 27, 1994, the Company called for redemption the IPO Warrants (excluding those underlying the Thomas James Warrants) at the redemption price of $0.03 per IPO Warrant. Pursuant to the terms of such redemption, the holders of the IPO Warrants had the right, on or before November 25, 1994, to exercise the IPO Warrants for shares of Common Stock at an exercise price 53 57 of $3.33 per share. As of December 31, 1995, 1,463,883 IPO Warrants had been exercised, respectively. Except as set forth below, all other IPO Warrants were redeemed. As of December 31, 1995, Thomas James had exercised 63,750 of the Thomas James Warrants and 115,320 of the IPO Warrants underlying the Thomas James Warrants. On January 15, 1992, the Company entered into an agreement with MRI pursuant to which MRI provided certain financial and management services and under which the Company issued MRI a four-year warrant to purchase up to 18,750 shares of Common Stock at the exercise price of $3.20 per share. The Company registered the shares of Common Stock underlying the warrant after December 7, 1994. MRI has exercised all of the Warrants. In connection with its initial public offering in 1992, the Company issued warrants to purchase an aggregate of 52,500 shares of Common Stock to the holders of certain bridge notes. Each warrant entitled the holder to purchase one share of Common Stock at a per share exercise price of $0.53 over a five-year period expiring in January 1997. The Company registered the shares underlying such warrants after December 7, 1994. The bridge note holders have exercised 48,750 of the Warrants. Selling Warrant Holders Of the 1,238,927 shares being sold by the Selling Warrant Holders, the Warrants are comprised of the following: In January 1995, the Company issued to Hampshire Securities the Representative's Warrants to purchase up to 150,000 Shares at $11.20 per share in connection with a public offering made by the Company and certain selling stockholders. Hampshire Securities subsequently made an assignment of a portion of the Representative's Warrants to the following eight persons who are principals of Hampshire Securities: William E. Aaron, warrants to purchase 1,687 shares; Michael Stein, warrants to purchase 1,687 shares; Ceaser Franschilla, warrants to purchase 3,000 shares; Aharon Orlansky, warrants to purchase 38,812 shares; Jeffrey M. Berman, warrants to purchase 23,772 shares; Leo T. Abbe, warrants to purchase 23,772 shares; Richard K. Abbe, warrants to purchase 23,772 shares; and John H. Starr, warrants to purchase 10,189 shares. The Company retained Representative's Warrants to purchase 23,307 shares. The Representative's Warrants are exercisable for a period of 3 years. The 150,000 shares underlying the Representative's Warrants are included in this Prospectus. In connection with the acquisition of assets from Galcom Networking, Ltd the Company issued Warrants (the "Galcom Warrants") to purchase 112,500 shares at prices ranging from $9.83 to $14.75 per share. The Galcom Warrants are exercisable for a period of 5 years. The 112,500 shares underlying the Galcom warrants are included in this Prospectus. Also in connection with the acquisition of Galcom assets, the Company issued 37,500 Warrants to Messrs. Henri Telner, Philipe Scwarc, Danny Yellin, Yakov Sfadya, who were then employees of Galcom, at prices ranging from $8.5 to $9.50 per share. These Warrants are exercisable for a period of 5 years. This Prospectus also covers those Warrants. In connection with the acquisition of assets from Ace 400 Communications, Ltd the Company issued Warrants (the "Ace Warrants" ) to Lipa Meir/Alon Cohen Trustees to purchase 150,000 shares at $9.15 per share. The Ace Warrants are exercisable for a period of 5 years. Also in connection with the acquisition of Ace assets, the Company issued 15,000 Warrants to Benny Glazer who was then an employee of Ace at a price of $9.33 per share. These Warrants are exercisable for a period of 5 years. This Prospectus also covers those Warrants.(1) In July 1995, the Company issued to Nathan Shilo Trustee, Warrants "Israel Warrants", in an incentive plan for employees and consultants of its subsidiary in Israel. The plan called for the issuance of Warrants to purchase up to 495,000 shares at prices ranging from $8.50 to $9.50. The Israel Warrants will vest in one third increments over a three year period and each increment is exercisable for five years after it has vested. This Prospectus also covers those Warrants. - -------- (1) These Warrants were transferred. See "Business-Recent Acquisitions." 54 58 In July 1995, the Company entered into an agreement with an individual named Jacques Cory "Cory" pursuant to which Cory will provide certain financial and management services. In connection with this agreement the Company issued Cory Warrants to purchase up to 22,500 shares of Common Stock at the exercise price of $8.50 per share. The Warrants will vest in one third increments over a three year period and are exercisable for five years after each increment has vested. This Prospectus also covers those Warrants. In July 1995, the Company issued Warrants to GME Design, Inc. " GME Warrants" to purchase up to 18,000 shares of Common Stock at the exercise price of $8.50 per share. These Warrants were issued in connection with services to be rendered in the design of components for the Company's LAN products. The GME Warrants are exercisable for five years. This Prospectus also covers those Warrants. In January 1996, the Company issued Warrants to GME Design to purchase 5,000 shares at exercise price of $25.25 per share. These Warrants were for design services. These Warrants are included in this registration statement. In January 1996, the Company issued 143,330 Warrants to Ciambellini and Associates to purchase Common Stock at an exercise price of $25.25 per share for a term of five years. The Warrants were issued in exchange for the right to acquire 50% interes in an Italian networking business. This right was exercised in May 1996. The 50% interest in the assets and operating income of the acquired business amounted to less than 10% of the assets and operating loss of MRV for the December 31, 1995 fiscal year. The Warrants are included in the current registration statement. In January 1996, the Company issued 16,667 Warrants to purchase Common Stock to Israeli and European business consultants at an exercise price of $25.25, for a term of five years. The Warrants were issued for consulting services. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is American Stock Transfer & Trust Co., New York, New York. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have 10,827,364 shares of Common Stock outstanding, assuming the exercise of the Warrants in full. The 1,666,391 shares included in this Prospectus will be freely tradeable without further registration under the Securities Act. Of the 10,827,364 shares of Common Stock to be outstanding following this offering, assuming the exercise of the Warrants in full, 2,627,004 shares are "restricted securities" within the meaning of Rule 144 of the Securities Act. All of such shares are currently eligible for sale in the public market in reliance upon, and in accordance with, the provisions of Rule 144. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including a person who may be deemed to be an "affiliate" of the Company as that term is defined under the Securities Act, would be entitled to sell within any three month period a number of shares beneficially owned for at least two years that does not exceed the greater of (1) 1% of the then outstanding shares of Common Stock, or (11) the average weekly trading volume in the Common Stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain requirements as to the manner of sale, notice, and the availability of current public information about the Company. However, a person who is not deemed to have been an affiliate of the Company during the 90 days preceding a sale by such person and who has beneficially owned shares of Common Stock for at least three years may sell such shares without regard to the volume, manner of sale, or notice requirements of Rule 144. The Company cannot predict the effect, if any, that sales of shares of Common Stock pursuant to Rule 144 or otherwise, or the availability of such shares for sale, will have on the market price prevailing from time to time. Nevertheless, sales by the current stockholders of a substantial number of shares of Common Stock in the public market could adversely affect prevailing market prices for the Common Stock. In 55 59 addition, the availability for sale of a substantial number of shares of Common Stock acquired through the exercise of the Representative's Warrants could adversely affect prevailing market prices for the Common Stock. Up to 150,000 shares of Common Stock may be purchased by through the exercise of the Representative's Warrants. Any and all shares of Common Stock purchased upon exercise of the Representative's Warrants may be freely tradeable, provided that the Company satisfies certain securities registration and qualification requirements in accordance with the terms of the Representative's Warrants. 56 60 PLAN OF DISTRIBUTION Selling Stockholders and Selling Warrant Holders The Selling Stockholders and the Selling Warrant Holders may sell all or a portion of the Shares offered hereby from time to time in brokerage transactions in the over-the-counter market prices at terms prevailing at the times of such sales. The Selling Stockholders and the Selling Warrant Holders may also make private sales directly or through brokers or make sales pursuant to Rule 144 under the Securities Act. The Selling Stockholders and the Selling Warrant Holders may individually pay customary brokerage commissions and expenses. In connection with any sales, the Selling Stockholders and the Selling Warrant Holders and any brokers participating in such sales may be deemed to be underwriters within the meaning of the Securities Act, in which event commissions received by such brokers may be deemed underwriting commissions under the Securities Act. The Selling Stockholders and the Selling Warrant Holders may utilize Hampshire Securities as a broker to effectuate sales for them. Included in the 1,238,927 Shares being offered by the Selling Warrant Holders are 150,000 Shares (the "Warrant Shares") being offered by Hampshire Securities Corporation ("Hampshire Securities"). Hampshire Securities was the representative of the underwriters in the Company's public offering in January 1995 and the Company issued Hampshire Securities warrants (the "Representative's Warrants") to purchase the Warrant Shares at $11.20 per share, 140% of the initial public offering price. Hampshire Securities subsequently made an assignment of a portion of the Representative's Warrants covering 126,693 Warrant Shares among eight persons who are principals of Hampshire Securities. Under the Exchange Act and the regulations thereunder, any person engaged in a distribution of the Shares of the Company offered by this Prospectus (other than any broker-dealer qualifying as a "passive market-maker" and effecting transactions in accordance with Rule 10b-6A under the Exchange Act) may not simultaneously engage in market making activities with respect to the Shares of the Company during the applicable "cooling off" periods prior to the commencement of such distribution. In addition, without limiting the foregoing, each Selling Warrant Holders and Selling Stockholders will need to comply with the applicable provisions of the Exchange Act and the rules and regulations thereunder including, without limitation, Rules 10b-6 and 10B-7, which provisions may limit the timing of purchases and sales of Shares by such Selling Warrant Holders or Selling Stockholders. LEGAL MATTERS The validity of the Common Stock being offered hereby will be passed upon for the Selling Stockholders and Selling Warrant Holders by Freshman, Marantz, Orlanski, Cooper & Klein, Beverly Hills, California. EXPERTS The audited financial statements of the Company, ACE 400 Communications Ltd and Galcom Networking, Ltd., included in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, Ratzkovsky Fried and Co., and Almagor & Co., respectively, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firms as experts in giving said reports. 57 61 INDEX TO FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants F-2 Consolidated Balance Sheets as of December 31, 1994 and 1995, and March 31, 1996 (unaudited): Assets F-3 Liabilities and Stockholders' Equity F-4 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1995, and the unaudited three month periods ended March 31, 1995 and 1996 F-5 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1995, and the unaudited three month period ended March 31, 1996 F-6 Consolidated Statements of Cash Flows for each of the three F-7 years in the period ended December 31, 1995, and the and unaudited three month periods ended March 31, 1995 and 1996 F-8 Notes to Consolidated Financial Statements F-9 through F-21 The consolidated financial statements as of March 31, 1996, and for the three month periods ended March 31, 1995 and 1996, are unaudited. The information required by the applicable financial statement schedules has been disclosed in the financial statements and notes thereto and, accordingly, the schedules have been omitted.
F-1 62 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To MRV Communications, Inc.: We have audited the accompanying consolidated balance sheets of MRV COMMUNICATIONS, INC. (a Delaware corporation) and Subsidiaries as of December 31, 1994 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MRV Communications, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Los Angeles, California February 9, 1996 F-2 63 MRV COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, DECEMBER 31, MARCH 31, 1994 1995 1996 ------------ ------------ ------------ (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $ 4,045,000 $ 1,951,000 $ 2,678,000 Restricted cash - 6,272,000 4,714,000 Short-term investments 2,736,000 1,000,000 1,000,000 Accounts receivable, net of allowance of $300,000 in 1994, $825,000 in 1995 and $807,000 in 1996 4,446,000 10,780,000 12,942,000 Loans receivable from officers 42,000 10,000 - Inventories 2,666,000 8,382,000 9,882,000 Deferred income taxes 372,000 804,000 804,000 Other current assets 708,000 598,000 899,000 ------------ ------------ ------------ Total current assets 15,015,000 29,797,000 32,919,000 ------------ ------------ ------------ PROPERTY AND EQUIPMENT, at cost: Machinery and equipment 852,000 1,655,000 1,908,000 Furniture and fixtures 12,000 66,000 76,000 Computer hardware and software - 795,000 883,000 Leasehold improvements 27,000 102,000 109,000 ------------ ------------ ------------ 891,000 2,618,000 2,976,000 Less--Accumulated depreciation and amortization (295,000) (558,000) (641,000) ------------ ------------ ------------ 596,000 2,060,000 2,335,000 ------------ ------------ ------------ OTHER ASSETS: U.S. Treasury note 1,000,000 - - Deferred income taxes - 925,000 925,000 Goodwill, net of accumulated amortization of $42,000 in 1995 and $59,000 in 1996 - 525,000 508,000 Other 56,000 - - ------------ ------------ ------------ 1,056,000 1,450,000 1,433,000 ------------ ------------ ------------ $ 16,667,000 $ 33,307,000 $ 36,687,000 ============ ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. F-3 64 MRV COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, DECEMBER 31, MARCH 31, 1994 1995 1996 ----------- ----------- ----------- (UNAUDITED) CURRENT LIABILITIES: Current portion of capital lease obligations $ - $ 33,000 $ 31,000 Accounts payable 2,485,000 4,342,000 5,958,000 Accrued liabilities 422,000 2,188,000 1,621,000 Income taxes payable 790,000 1,215,000 1,484,000 Customer deposits 15,000 - - ----------- ----------- ----------- Total current liabilities 3,712,000 7,778,000 9,094,000 ----------- ----------- ----------- LONG-TERM LIABILITIES: Accrued severance pay - 191,000 249,000 Capital lease obligations, net of current portion - 34,000 30,000 Deferred rent 49,000 46,000 40,000 ----------- ----------- ----------- Total long-term liabilities 49,000 271,000 319,000 ----------- ----------- ----------- COMMITMENTS (Note 5) STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value: Authorized - 1,000,000 shares; no shares issued or outstanding - - - Common stock, $0.0067 par value: Authorized - 20,000,000 shares Issued and outstanding - 7,605,340 shares in 1994, 9,524,293 in 1995 and 9,587,714 in 1996 51,000 63,000 64,000 Capital in excess of par value 9,878,000 23,491,000 23,627,000 Retained earnings 2,977,000 1,704,000 3,583,000 ----------- ----------- ----------- 12,906,000 25,258,000 27,274,000 ----------- ----------- ----------- $16,667,000 $33,307,000 $36,687,000 =========== =========== ===========
The accompanying notes are an integral part of these consolidated balance sheets. F-4 65 MRV COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, 1993 1994 1995 1995 1996 ------------ ------------ ------------ ------------ ----------- (UNAUDITED) REVENUES, net: $7,426,000 $17,526,000 $39,202,000 $6,737,000 $15,529,000 COSTS AND EXPENSES: Cost of goods sold 3,936,000 10,328,000 22,608,000 4,260,000 8,989,000 Research and development expenses 1,103,000 2,144,000 4,044,000 702,000 1,684,000 Selling, general and administrative expenses 1,259,000 2,615,000 6,799,000 917,000 2,136,000 Purchased technology in progress - - 6,211,000 - - Restructuring costs - - 1,465,000 - - ---------- ----------- ----------- ---------- ----------- 6,298,000 15,087,000 41,127,000 5,879,000 12,809,000 ---------- ----------- ----------- ---------- ----------- Operating income (loss) 1,128,000 2,439,000 (1,925,000) 858,000 2,720,000 ---------- ----------- ----------- ---------- ----------- OTHER INCOME (EXPENSE): Interest income 198,000 210,000 641,000 227,000 80,000 Interest expense - - (102,000) - - Other - (48,000) 115,000 - - ---------- ----------- ----------- ---------- ----------- 198,000 162,000 654,000 227,000 80,000 ---------- ----------- ----------- ---------- ----------- Income (loss) before provision for income taxes 1,326,000 2,601,000 (1,271,000) 1,085,000 2,800,000 PROVISION FOR INCOME TAXES 487,000 983,000 2,000 380,000 921,000 ---------- ----------- ----------- ---------- ----------- NET INCOME (LOSS) $ 839,000 $ 1,618,000 $(1,273,000) $ 705,000 $ 1,879,000 ========== =========== =========== ========== =========== EARNINGS (LOSS) PER COMMON SHARE INFORMATION: Primary earnings (loss) per common share $ .14 $ .26 $ (.14) $ .08 $ .18 ========== =========== =========== ========== =========== Fully diluted earnings (loss) per common share $ .14 $ .25 $ (.14) $ .08 $ .18 ========== =========== =========== ========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Primary 6,025,084 6,284,001 9,188,737 8,834,375 10,706,357 ========== =========== =========== ========== =========== Fully diluted 6,025,084 6,357,741 9,188,737 8,834,375 10,706,357 ========== =========== =========== ========== ===========
The accompanying notes are an integral part of these consolidated statements. F-5 66 MRV COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CAPITAL IN SHARES COMMON EXCESS OF RETAINED OUTSTANDING STOCK PAR VALUE EARNINGS TOTAL --------- ------- ----------- ----------- ----------- BALANCE, December 31, 1992 5,885,625 $39,000 $ 4,393,000 $ 520,000 $ 4,952,000 Net income - - - 839,000 839,000 --------- ------- ----------- ----------- ----------- BALANCE, December 31, 1993 5,885,625 39,000 4,393,000 1,359,000 5,791,000 Issuance of common stock, due to exercise of stock warrants, net of related expenses 1,719,715 12,000 5,485,000 - 5,497,000 Net income - - - 1,618,000 1,618,000 --------- ------- ----------- ----------- ----------- BALANCE, December 31, 1994 7,605,340 51,000 9,878,000 2,977,000 12,906,000 Issuance of common stock in connection with the secondary public offering 1,350,000 9,000 9,346,000 - 9,355,000 Issuance of common stock in connection with the acquisition of ACE 400 Communications 427,465 2,000 3,908,000 - 3,910,000 Issuance of common stock, due to exercise of stock warrants and options 141,488 1,000 359,000 - 360,000 Net loss - - - (1,273,000) (1,273,000) --------- ------- ----------- ----------- ----------- BALANCE, December 31, 1995 9,524,293 63,000 23,491,000 1,704,000 25,258,000 Issuance of common stock, due to exercise of stock options 63,421 1,000 136,000 - 137,000 Net income - - - 1,879,000 1,879,000 --------- ------- ----------- ----------- ----------- BALANCE, March 31, 1996 9,587,714 $64,000 $23,627,000 $ 3,583,000 $27,274,000 ========= ======= =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-6 67 MRV COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,, 1993 1994 1995 1995 1996 ------------ ----------- ----------- ----------- ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 839,000 $ 1,618,000 $(1,273,000) $ 705,000 $ 1,879,000 Adjustments to reconcile net income (loss)to net cash provided by (used in) operating activities: Depreciation and amortization 68,000 97,000 305,000 41,000 77,000 Provision for losses on accounts receivable 50,000 270,000 525,000 75,000 - Gain on sale of property and equipment - - (6,000) - - Realized loss on investment - 48,000 - - - Purchased technology in progress - - 5,691,000 - - Amortization of premium paid for U.S. Treasury notes 12,000 8,000 8,000 - - Changes in assets and liabilities, net of effects from acquisitions: Decrease (increase) in: Accounts receivable (609,000) (3,417,000) (6,859,000) (1,008,000) (2,162,000) Inventories (439,000) (2,077,000) (5,397,000) (1,421,000) (1,500,000) Deferred income taxes (44,000) (282,000) (1,357,000) (7,000) - Other assets (51,000) (618,000) 166,000 433,000 (301,000) Increase (decrease) in: Accounts payable 111,000 1,584,000 1,457,000 (164,000) 1,616,000 Accrued liabilities 38,000 266,000 154,000 (55,000) (567,000) Income taxes payable 53,000 421,000 425,000 (90,000) 269,000 Customer deposits (46,000) (18,000) (15,000) - - Accrued severance pay - - (19,000) - 58,000 Deferred rent 36,000 13,000 (3,000) - (6,000) --------- ----------- ----------- ----------- ----------- Net cash provided by (used in) operating activities 18,000 (2,087,000) (6,198,000) (1,491,000) (637,000) --------- ----------- ----------- ----------- -----------
F-7 68
YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, 1993 1994 1995 1995 1996 ----------- ----------- ------------ ------------ ---------- (UNAUDITED) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (155,000) (410,000) (1,035,000) (212,000) (335,000) Proceeds from sale of property and equipment - - 14,000 - - Purchases of investments (2,965,000) (1,000,000) (22,013,000) (20,966,000) - Proceeds from sale of investments 2,474,000 1,676,000 24,741,000 10,713,000 - Restricted cash - - (6,272,000) - 1,558,000 Net cash used in acquisitions - - (1,000,000) - - ----------- ----------- ------------ ------------ ---------- Net cash provided by (used in) investing activities (646,000) 266,000 (5,565,000) (10,465,000) 1,223,000 ----------- ----------- ------------ ------------ ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock - 5,497,000 9,715,000 9,555,000 137,000 Principal payments on notes payable (92,000) (42,000) - - - Principal payments on capital lease obligations - - (78,000) - (6,000) Loans receivable from officers (79,000) 37,000 32,000 42,000 10,000 ----------- ----------- ------------ ------------ ---------- Net cash provided by (used in) financing activities (171,000) 5,492,000 9,669,000 9,597,000 141,000 ----------- ----------- ------------ ------------ ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (799,000) 3,671,000 (2,094,000) (2,359,000) 727,000 CASH AND CASH EQUIVALENTS, beginning of period 1,173,000 374,000 4,045,000 4,045,000 1,951,000 ----------- ----------- ------------ ------------ ---------- CASH AND CASH EQUIVALENTS, end of period $ 374,000 $ 4,045,000 $ 1,951,000 $ 1,686,000 $2,678,000 =========== =========== ============ ============ ==========
The accompanying notes are an integral part of these consolidated financial statements. F-8 69 MRV COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Background MRV Communications, Inc. (the Company) designs, manufactures, markets and sells semiconductor laser diodes, light emitting diodes ("LEDs") and fiber optic transmitting and receiving modules for the transmission of large amounts of information at high speeds over long distances. The Company assembles and integrates these devices into components that are sold primarily to Original Equipment Manufacturers ("OEMs") in the fiber optic market. Products incorporating these devices are used primarily in computer communication networks, voice communications devices, cable TV and fiber optic test instruments. The Company develops and markets three product lines: laser diodes and LED-based components, integrated transmitting and receiving modules, and stand-alone products. The Company markets and sells its products both domestically and internationally. In 1995, the Company acquired certain assets and the distribution business of two companies located in Israel (see Note 2). The results of operations of the acquired businesses since the acquisition dates have been included in the accompanying consolidated financial statements. The following summarized unaudited pro forma financial information assumes the acquisitions occurred on January 1, 1994 and 1995:
Year Ended December 31, --------------------------------- 1994 1995 ----------- ----------- Revenues, net $36,781,000 $47,005,000 Net income (loss) (8,627,000) 5,247,000 Earnings (loss) per common share $ (2.06) $ 0.85 =========== ===========
Pro forma net income (loss) and earnings (loss) per share amounts do not include the purchased technology in progress and restructuring costs included in the accompanying 1995 Statement of Operations. The pro forma net loss in 1994 primarily related to a non-recurring write-off of inventories and accounts receivable in the amount of $7.2 million relating to an acquisition of a company by ACE 400 Communications, Ltd., a company acquired by the Company in 1995 (see Note 2). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, N-Base Communications, Inc. and N-Base Communications Ltd. All significant intercompany transactions and accounts have been eliminated. F-9 70 Foreign Currency Translation N-Base Communication Ltd.'s (N-Base) financial statements have been prepared in U.S. Dollars as the currency of the primary economic environment in which the operations of N-Base are conducted is the U.S. dollar. Thus, the functional currency of N-Base is the U.S. dollar. Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are translated into U.S. dollars in accordance with Statement of Financial Accounting Standards NO. 52, and are included in determining net income or loss. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue upon shipment of products. Customer deposits represent advance payments from customers which are deferred until the related revenue has been earned. The Company's three largest customers together accounted for approximately 22 percent, 13 percent and 14 percent of the Company's revenues in 1993, 1994 and 1995, respectively. At December 31, 1994, there was one customer with a significant receivable balance, which was equal to 10 percent of total receivables. There were no significant receivable balances at December 31, 1993 and 1995. Sales to foreign countries approximated 18 percent, 19 percent and 45 percent of the Company's revenues in 1993, 1994 and 1995, respectively. There have been no significant sales to any one geographical area through 1995. Purchased Technology in Progress and Restructuring Costs In connection with the Company's acquisitions (see Note 2), the Company acquired incomplete research and development (R&D) projects that will be included in the current R&D activities of the Company. For projects that will have no alternative future use to the Company and where technological feasibility had not yet been established, the Company allocated $6,211,000 of the purchase price to technology in progress and recorded the expense during the year ended December 31, 1995. Also in connection with the Company's acquisitions, during the year ended December 31, 1995, the Company recorded $1,465,000 as restructuring costs, which primarily related to the closing of several Company facilities, a reduction of its workforce, and the settlement of distribution agreements. The reduction of the workforce related to 63 employees, of which six were upper management personnel. F-10 71 The following summarizes the major restructuring costs: Accrued termination benefits $ 221,000 Accrued legal and other 201,000 ---------- Total accrued costs 422,000 ---------- Closing of facilities 179,000 Settlement of distribution agreements 205,000 Termination benefits 427,000 Other costs 232,000 ---------- Total cash paid 1,043,000 ---------- $1,465,000 ==========
Restricted Cash Balances Cash balances include restricted deposits with a bank amounting to $6,272,000 at December 31, 1995, which are given as a security against letters of credit issued by the bank on behalf of the Company (see Note 5). Investments As of December 31, 1994 and 1995, short-term investments consisted of the following, at cost:
1994 1995 ---------- ---------- Time Deposit $ 28,000 $ - U.S. Treasury notes 2,708,000 1,000,000 ---------- ---------- $2,736,000 $1,000,000 ========== ==========
During 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of this standard did not have a material impact on the Company's results of operations in 1994. As defined by the new standard, the Company has classified all investments as "held-to-maturity" investments and all investments are recorded at their amortized cost basis, which approximated their fair value at December 31, 1995. All investments mature in 1996. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of material, labor and overhead. Inventories consisted of the following as of December 31, 1994 and 1995:
1994 1995 ---------- ---------- Raw materials $ 910,000 $4,750,000 Work-in-process 307,000 2,035,000 Finished goods 1,449,000 1,597,000 ---------- ---------- $2,666,000 $8,382,000 ========== ==========
F-11 72 Property and Equipment Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred, while significant replacements and betterments are capitalized. Depreciation and amortization are provided using the straight-line method based upon the estimated useful lives of the related assets. Useful lives range from five to fifteen years. Goodwill The Goodwill resulted from the Company's acquisitions during 1995. It is amortized on a straight-line basis over 8 years. Warranty The Company warrants its products against defects in materials and workmanship for one to three year periods. The estimated cost of warranty obligations is recognized at the time of revenue recognition. Statements of Cash Flows For the purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash paid for income taxes was $450,000 in 1993, $834,000 in 1994 and $932,000 in 1995. There was no cash paid for interest in 1993 and 1994. Cash paid for interest was $102,000 in 1995. During the year ended December 31, 1995, the Company purchased property and equipment with a cost of $100,000 through a capital lease agreement. This non-cash transaction, which has been recorded in the December 31, 1995 Balance Sheet, is excluded from the December 31, 1995 Statement of Cash Flows. The 1995 Statement of Cash Flows includes an amount of $5,691,000 that represents the fair value of consideration given and net liabilities assumed for the Company's acquisitions that was allocated to purchased technology in progress. This amount differs from the amount shown on the 1995 Statement of Operations by $520,000, which represents legal, consulting and other costs which were allocated to purchased technology in progress on the Statement of Operations (see Note 2). Earnings Per Common Share Earnings per common share are based on the weighted average number of shares of common stock and common stock equivalents (dilutive stock warrants and stock options) outstanding during the related periods (adjusted retroactively for the exchange of shares described in Note 6). The weighted average number of common stock equivalent shares includes shares issuable upon the assumed exercise of stock warrants and options, less the number of shares assumed purchased with the proceeds available from such exercise. The effect of dilutive common share equivalents is not included in the loss per common share calculation for 1995. Fully diluted earnings per share differs from primary earnings per share in 1994. Reclassifications Certain reclassifications have been made to prior years' amounts to conform to the current year presentation. F-12 73 2. ACQUISITIONS AND RESTRUCTURING On May 1, 1995, the Company acquired certain assets and the distribution business of Galcom Networking, Ltd. (Galcom), a network equipment company located in Israel. The purchase price paid by the Company was approximately $900,000 in cash and the assumption of approximately $1,800,000 in liabilities and debt. On June 29, 1995, the Company acquired certain assets and the distribution business of ACE 400 Communications, Ltd. (ACE), a network equipment company located in Israel. The purchase price paid by the Company was $100,000 in cash, the assumption of $466,667 in liabilities and debt, the issuance of 284,977 shares of the Company's common stock (valued at $3,910,000), and extended a right to ACE to sell to the Company up to $400,000 of ACE's inventory. Subsequent to the acquisition dates, the Company consolidated operations in Israel and formed a new subsidiary in Israel named N-Base Communications Ltd. Each of the businesses acquired also owned a subsidiary in the United States. These operations were also consolidated and the Company formed a new subsidiary in the United States named N-Base Communications, Inc. Both acquisitions were accounted for using the purchase method of accounting, and accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values, as follows: Inventory $ 319,000 Property and equipment 600,000 Current liabilities and debt (2,267,000) ----------- Net liabilities assumed (1,348,000) Cash paid for legal, consulting and other costs (395,000) Accrued legal, consulting and others costs (125,000) Common stock issued to sellers (3,910,000) Cash paid to sellers (1,000,000) ----------- Paid or accrued (6,778,000) Allocated to purchased technology in progress 6,211,000 ----------- Goodwill $ 567,000 ===========
In connection with the acquisition of certain assets from Galcom, the Company issued warrants to Galcom to purchase 75,000 shares of common stock at prices ranging from $14.75 to $22.13 per share. The Company also issued warrants to purchase 25,000 common shares to former employees of Galcom at prices ranging from $12.75 to $14.25 per share, warrants to purchase 330,000 common shares at prices ranging from $12.75 to $14.25 per share to existing employees and consultants, warrants to purchase 15,000 common shares at $12.75 per share to an outside consultant, and warrants to purchase 10,000 common shares at $12.75 per share to a company for design services performed. All of these warrants are exercisable over a five year period. In connection with the acquisition of certain assets from ACE, the Company issued warrants to the trustee of ACE to purchase 100,000 common shares at $13.72 per share, and issued warrants to purchase 10,000 shares at $14.00 per share to an ACE employee. All of these warrants are exercisable over a five year period. F-13 74 3. INCOME TAXES In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 (SFAS 109), which was adopted by the Company in fiscal 1992. Under SFAS 109, deferred income tax assets or liabilities are computed based on temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. The components of the net deferred income tax asset at December 31, 1994 and 1995 are as follows:
1994 1995 -------- ---------- Allowance for bad debts $120,000 $ 298,000 Inventory reserve 124,000 141,000 Warranty reserve 40,000 80,000 Accrued restructuring costs - 213,000 State income taxes 79,000 84,000 Other, net 9,000 (12,000) -------- ---------- Current portion 372,000 804,000 Net operating loss carryforward - 1,350,000 Valuation reserve - (425,000) -------- ---------- - 925,000 -------- ---------- $372,000 $1,729,000 ======== ==========
The provision for income taxes for the years ended December 31, 1993, 1994 and 1995 is as follows:
1993 1994 1995 -------- ---------- ---------- Current - Federal $428,000 $1,051,000 $1,112,000 - State 103,000 214,000 247,000 - Foreign - - - -------- ---------- ---------- 531,000 1,265,000 1,359,000 -------- ---------- ---------- Deferred - Federal (37,000) (252,000) (333,000) - State (7,000) (30,000) (99,000) - Foreign - - (925,000) -------- ---------- ---------- (44,000) (282,000) (1,357,000) -------- ---------- ---------- Provision for income taxes $487,000 $ 983,000 $ 2,000 ======== ========== ==========
In 1995, the Company incurred a consolidated loss before the provision for income taxes of $1,271,000, but recorded pre-tax income from its United States operations in the amount of $2,616,000. The Company's foreign operations recorded a pre-tax loss of $3,887,000. F-14 75 Differences between the provision for income taxes and income taxes at the statutory federal income tax rate based on U.S. pre-tax income for the years ended December 31, 1993, 1994 and 1995 are as follows:
1993 1994 1995 --------------------- --------------------- -------------------- Amount Percent Amount Percent Amount Percent -------- --------- -------- --------- -------- --------- Income tax provision (benefit) at statutory federal rate $451,000 34.0% $884,000 34.0% $889,000 34.0% State and local income taxes, net of federal income tax effect 81,000 6.1 159,000 6.1 160,000 6.1 Research and development credit (94,000) (7.1) (138,000) (5.3) (173,000) (6.7) Effect of foreign net operating loss carryforwards - - - - (925,000) (35.4) Other items, net 49,000 3.7 78,000 3.0 51,000 2.0 -------- ---- -------- ---- -------- ---- $487,000 36.7% $983,000 37.8% $ 2,000 - % ======== ==== ======== ==== ======== ====
The Company's subsidiary in Israel, N-Base Communications Ltd. (N-Base), is subject to the provisions of the Income Tax Law of 1985. During 1995, N-Base incurred a taxable loss of approximately $3.8 million. According to Israeli tax law, this loss may be carried forward for an indefinite period of time. The taxable loss was due to the non-recurring write-off of research and development projects in progress in the amount of approximately $6.1 million in 1995. The Company has recorded a net long-term deferred tax asset relating to the loss carryforward in the amount of $925,000 at December 31, 1995. A full reserve has not been recorded against the asset due to the probability of its recoverability. The reserve that has been recorded reflects the Company's estimate of the amount that may not be realized due to the benefit period described below. In 1995, N-Base qualified for a program under which it will be eligible for a tax exemption on its income for a period of ten years from the beginning of the benefits period. The Company estimates that the benefit period will begin in 1996 or 1997. The Company does not provide U.S. federal income taxes on the undistributed earnings of its foreign operations. The Company's policy is to leave the income permanently invested in the country of origin. Such amounts will only be distributed to the United States to the extent any federal income tax can be fully offset by foreign tax credits. 4. LOANS RECEIVABLE FROM OFFICERS During 1994 and 1995, the Company loaned certain amounts to three of its officers. The total amounts due from the officers as of December 31, 1994 and 1995 was $42,000 and $10,000, respectively. F-15 76 5. COMMITMENTS Lease Commitments In March 1993, the Company entered into an agreement to lease office and manufacturing space. The lease term is for six years, terminating in March 1999, with an average base rent of $64,000 per year. The agreement includes lease incentives, with free rent for several months of the lease term, primarily in 1993. As of December 31, 1995, the Company has recorded a deferred rent liability of $46,000 to properly reflect straight-line rent expense. The Company leases all of its facilities and certain equipment under noncancelable capital and operating leases, expiring at various dates through 2003. Minimum future obligations under such agreements at December 31, 1995 are as follows:
Capital Operating Leases Leases ------- ---------- 1996 $35,000 $ 353,000 1997 25,000 314,000 1998 11,000 316,000 1999 - 194,000 2000 - 173,000 Thereafter - 270,000 ------- ---------- 71,000 $1,620,000 ========== Less--Amount representing interest (4,000) ------- 67,000 Less--Current portion (33,000) ------- $34,000 =======
Rent expense under noncancelable operating lease agreements for the years ended December 31, 1993, 1994 and 1995 was $90,000, $115,000 and $405,000, respectively. Employment Agreements In March 1992, the Company entered into three-year employment agreements with three key officers of the Company which became effective in December 1992. The agreements specify annual salaries of $100,000 to $110,000 for each of the officers, plus annual bonuses to be determined by the Board of Directors. Consulting Agreement In March 1993, the Company entered into an agreement with a company which is affiliated with the Company's former Chief Financial Officer, to provide financial and managerial services for a fee of $2,200 per month, plus reimbursement for travel, transportation and other authorized and necessary expenses. The term of the agreement is 29 months. In addition, the consulting company received a four-year warrant to purchase up to 12,500 shares of common stock at 120 percent of the initial public offering price ($4.80 per share) and a cash bonus of $75,000 at the time of the closing of the initial public offering. As of December 31, 1995, all of these common stock warrants had been exercised and none were outstanding. F-16 77 Royalty Commitment As part of the purchase agreements referred to in Note 2, the selling companies' commitments to pay royalties to the State of Israel were assigned to the Company. The commitments arose in consequence of the participation of the Israeli Government in product development through the payment of grants. The royalties are payable at a rate of between 1.5 percent and 3.0 percent of the sales proceeds of the products developed up to 150 percent of the amount of the grants received. The balance of the commitment for royalties at December 31, 1995 amounted to $6,150,000. Letter of Credit During 1995, the Company, in connection with its acquisitions in Israel (see Note 2), entered into a stand-by letter of credit arrangement with a bank in the amount of $4,935,000. The arrangement expires in 1997. 6. EQUITY TRANSACTIONS Merger/Exchange of Shares Effective April 7, 1992, MRV Technologies, Inc. (the predecessor company, which was incorporated in California in July 1988) was merged into MRV Communications, Inc., a new Delaware corporation. All of the 5,240 issued and outstanding shares of the predecessor company were exchanged for an aggregate of 2,457,500 shares of the common stock of the Company. The financial statements for all years presented give retroactive effect to this exchange of shares and merger. In addition, the articles of incorporation for the new Delaware corporation provide for the issuance of up to 1,000,000 shares of Preferred Stock, $0.01 par value. Secondary Public Offering In January 1995, the Company completed a secondary public offering of its common stock. The Company sold 900,000 shares at a price of $12.00 per share. The gross and net proceeds of the offering were $10,800,000 and $9,355,000, respectively. In connection with this offering, the Company sold to the representatives of the underwriters three-year warrants to purchase 100,000 shares of common stock at a price of $16.80 per share. The warrants may be exercised beginning in January 1996 and expire in January 1999. Initial Public Offering In December 1992, the Company completed an initial public offering of its common stock. The Company sold 488,750 units, each unit consisting of three shares of common stock and two redeemable common stock purchase warrants, at a price of $12.00 per unit. The gross proceeds of the initial public offering were $5,865,000. This amount, net of deferred underwriting commissions and other costs totaling $1,336,000, was recorded in common stock and capital in excess of par value in the accompanying financial statements. The two common stock purchase warrants included in the units (the IPO warrants) became immediately detachable and separately transferable. Each warrant entitled the registered holder to purchase, at any time over a five-year period, one share of common stock at a price of $5.00 per share, but were subject to redemption by the Company at $.05 per warrant on 30 days prior written notice. On October 27, 1994, the Company called for the redemption of all of these 977,500 outstanding warrants. As of November 25, 1994, the redemption date, 975,922 of these outstanding warrants were exercised at $5.00 per share, and the remaining 1,578 warrants were redeemed by the Company. F-17 78 In connection with the public offering, the Company issued to the representatives of the underwriters five-year warrants (the Underwriter warrants) to purchase 42,500 additional units (or 212,500 shares) at a price of $15.60 per unit. As of December 31, 1995, 204,380 shares relating to these warrants had been issued and warrants to purchase 8,120 shares were outstanding. These warrants expire in December 1997. The gross proceeds from the exercise of the IPO and Underwriter warrants was $5,754,000. This amount, net of underwriting fees and other costs of $257,000, was recorded in common stock and capital in excess of par value in the accompanying financial statements. Also, in connection with the public offering, the Company issued bridge loans with a face value of $140,000 and an interest rate equal to the prime rate plus two percent. During fiscal 1992, the Company repaid the bridge loans from the proceeds of the offering. In connection with the issuance of the notes, the Company issued 35,000 stock warrants to the holders of the notes. The amount attributed to the value of the warrants, $42,000, is recorded as capital in excess of par value in the accompanying financial statements. The warrants allow one share of common stock to be purchased for each $4.00 of notes. The exercise price of the warrants is $.80 per share or 20 percent of the public offering price. The warrants are exercisable for a five-year period, expiring in January 1997. As of December 31, 1995, 5,000 of these warrants were outstanding. Common Stock Purchase Warrants A summary of warrant activities is as follows:
Number Exercise of Shares Prices ---------- --------------- Balance, December 31, 1992 1,237,500 $ .80 to 5.12 and 1993 Issued - - Exercised (1,146,477) 5.00 to 5.12 Redeemed (1,578) 5.00 ---------- --------------- Balance, December 31, 1994 89,445 .80 to 5.12 Issued 700,000 12.75 to 22.13 Exercised (78,825) .80 to 5.00 Redeemed - - ---------- --------------- Balance, December 31, 1995 710,620 $ .80 to 22.13 ========== ===============
At December 31, 1995, warrants to purchase 710,620 shares were outstanding, of which 2,500 were exercisable at $.80 per share. There were no warrants issued, exercised or redeemed during 1993. F-18 79 Stock Option Plan In March 1992, the Board of Directors and stockholders of the Company adopted a stock option plan (the Plan) that provides for the granting of options to purchase up to 300,000 shares of common stock, consisting of both incentive stock options and non-qualified options. In June 1995, the Board of Directors and stockholders of the Company authorized options to purchase an additional 300,000 shares. Incentive stock options are issuable only to employees of the Company and may not be granted at an exercise price less than the fair market value of the common stock on the date the option is granted. Non-qualified stock options may be issued to non-employee directors, consultants and others, as well as to employees, with an exercise price established by the Board of Directors. All incentive stock options granted as of December 31, 1995 have been granted at prices equal to the fair market value of the common stock on the grant date, and all options granted expire five years from the date of grant. All of the incentive stock options granted become exercisable beginning one year from the date of grant in equal installments over a three year period, while the non-qualified options become fully exercisable beginning six months from the date of the grant. There were no options granted prior to December 31, 1993. A summary of option activities under the Plan is as follows:
Number Option of Shares Prices -------- ---------------- Balance, December 31, 1993 - $ - Granted 170,700 4.625 to 9.50 Exercised - - Canceled (40,500) 4.625 to 5.75 -------- ---------------- Balance, December 31, 1994 130,200 4.625 to 9.50 Granted 270,500 10.880 to 14.25 Exercised (15,500) 4.625 to 9.50 Canceled - - -------- ---------------- Balance, December 31, 1995 385,200 $ 4.625 to 14.25 ======== ================
Escrow Agreement In 1992, the Company entered into an agreement with certain of its employee/officer stockholders under which 875,000 shares of common stock held by the individuals were placed in escrow for a seven-year term. The agreement specifies that a certain number of the escrow shares may be released to the stockholders periodically if the Company achieves certain income goals or if the market price of the Company's common stock reaches certain levels. As of December 31, 1994, the Company had achieved the necessary levels and all of the shares in escrow were eligible to be released. F-19 80 7. UNAUDITED INFORMATION Basis of Presentation The unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These unaudited financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results of operations, changes in cash flows and financial position as of and for the periods presented. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes thereto, appearing elsewhere herein. The results for the interim periods presented are not necessarily indicative of results to be expected for the full year. Common Stock and Stock Split On March 5, 1996, the stockholders of the Company authorized an additional 10,000,000 common shares and a 3 for 2 stock split. All share amounts have been retroactively restated to give effect to the split. Investments As of March 31, 1996, short-term investments consisted primarily of a U.S. Treasury note. The investment is classified as a "held-to-maturity" investment and is recorded at its amortized cost basis. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of material, labor and overhead. As of March 31, 1996, inventories consisted of the following: Raw materials $5,080,000 Work-in-process 2,572,000 Finished goods 2,230,000 ---------- $9,882,000 ==========
Significant Customers During the three months ended March 31, 1996, the Company's three largest customers accounted for approximately 20 percent of the Company's revenues. Supplemental Cash Flow Information Cash paid for income taxes during the three month periods ended March 31, 1995 and 1996 was $475,000 and $640,000, respectively. There was no cash paid for interest during the three month periods ended March 31, 1995 and 1996. Income Taxes For the three months ended March 31, 1996, the provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate to the income before provision for income taxes as follows: Expected Federal tax benefit $ 952,000 34.0% State tax benefit, net of Federal tax benefit 171,000 6.1 Research and development credit (45,000) (1.6) Effect of foreign income tax benefits (157,000) (5.6) --------- ---- Total $ 921,000 32.9% ========= ====
Common Stock Purchase Warrants In January 1996, the Company issued warrants to purchase 143,330 shares of common stock at the exercise price of $25.25 per share in exchange for the right to acquire a 50 percent interest in an Italian networking company. The right was exercised in May 1996. Also in January 1996, the Company issued warrants to purchase 21,667 shares of common stock at the exercise price of $25.25 per share in exchange for consulting services performed. All of these warrants expire in January 2001. F-20 81 GALCOM NETWORKING LTD. CONSOLIDATED FINANCIAL STATEMENTS CONTENTS
Page ---- Report of the Auditors Consolidated Financial statements Balance Sheets as at December 31, 1994 and 1993 F-24 Statements of Operations for the years ended December 31, 1994, 1993 and 1992 F-26 Statements of Changes in Shareholders' Equity for the years ended December 31, 1994, 1993 and 1992 F-27 Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 F-28 Notes to the Consolidated Financial Statements F-30 Unaudited Interim Period F-41
F-21 82 [BDO LETTERHEAD] REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF GALCOM NETWORKING LTD. We have examined the consolidated balance sheets of GALCOM NETWORKING LTD. ("the Company") and its subsidiaries as at December 31, 1994 and 1993 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. Our responsibility is to express an opinion on these financial statements on the basis of our audits. The financial statements of consolidated subsidiaries, whose assets constitute approximately 4% and 9% of total consolidated assets at December 31, 1994, and 1993, respectively and whose total revenues constitutes approximately 18% and 8% of total consolidated revenues for the years ended December 31, 1994 and 1993, respectively, were audited by other certified public accountants whose reports thereon have been furnished to us. Our opinion expressed herein, insofar as it relates to the amounts included for the abovementioned subsidiaries, is based solely upon the reports of the other accountants. We conducted our audits in accordance with generally accepted auditing standards, including those prescribed by the Auditors' (Mode of Performance) Regulations (Israel), 1973. Such auditing standards are substantially identical to generally accepted auditing standards in the Unites States. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors and management of the Company, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based upon our examinations and the reports of the other accountants referred to above, the aforementioned consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries at December 31, 1994 and 1993 and their consolidated results of operations and cash flows for each of the three years in the period ended December 31, 1994, in conformity with accounting principles generally accepted in Israel. Such Israeli accounting principles differ in certain respects from those followed in the United States (see Note 21 to the consolidated financial statements). /s/ BDO ALMAGOR & CO. BDO Almagor & Co. Certified Public Accountants (Israel) Ramat-Gan, Israel June 7, 1995 F-22 83 [SNC & CO. LETTERHEAD] INDEPENDENT AUDITOR'S REPORT Board of Directors Galcom, Inc. Gaithersburg, Maryland We have audited the accompanying balance sheets of Galcom, Inc. (a wholly-owned subsidiary of Galcom Networking Ltd.) as of December 31, 1994 and 1993, and the related statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Galcom, Inc. as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ STERLING, NAPPEN, CHAVKIN & CO. Certified Public Accountants January 26, 1995 F-23 84 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, --------------------- 1994 1993 ----- ----- NOTE US$ US$ ---- ----- ----- (IN THOUSANDS) CURRENT ASSETS Cash and cash equivalents 477 139 Accounts receivable: Trade 2,287 1,704 Other 3 556 914 Short term investments 4,072 - Inventories 4 876 1,698 ------ ------ Total current assets 8,268 4,455 ------ ------ INVESTMENTS Investment in other company 5 519 778 ------ ------ LONG-TERM INVESTMENTS 1,409 - ------ ------ FIXED ASSETS Cost 7 2,361 1,871 Less: Accumulated depreciation 954 433 ------ ------ 1,407 1,438 ------ ------ OTHER ASSETS, NET 75 121 ------ ------ 11,678 6,792 ====== ======
The accompanying notes are an integral part of the financial statements. F-24 85
DECEMBER 31, --------------------- 1994 1993 ----- ----- NOTE US$ US$ ---- ----- ----- (IN THOUSANDS) CURRENT LIABILITIES Short-term credits 1,646 1,019 Accounts payable: Trade 2,014 1,532 Other 8 1,223 857 ------ ------ Total current liabilities 4,883 3,408 LONG-TERM DEBT 9 926 249 PROVISION FOR SEVERANCE PAY, NET 10 172 182 ------ ------ Total liabilities 5,981 3,839 ------ ------ COMMITMENTS AND CONTINGENT LIABILITIES 11 MINORITY INTEREST 3,461 - ------ ------ SHAREHOLDERS' EQUITY Share capital 12 6,288 6,138 Foreign currency translation adjustment 474 - Accumulated deficit (4,526) (3,185) ------ ------ 2,236 2,953 ------ ------ ------ ------ 11,678 6,792 ====== ======
The accompanying notes are an integral part of the financial statements. F-25 86 CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ----------------------- 1994 1993 1992 ------ ------ ------ NOTE US$ US$ US$ ---- ------ ------ ------ (IN THOUSANDS) Sales 15 8,677 6,964 4,860 Cost of sales 16 7,222 4,519 3,239 ----- ----- ----- GROSS PROFIT 1,455 2,445 1,621 Research and development expenses, net 17 577 948 415 Selling, general and administrative expenses, net 18 4,367 3,585 1,976 ------ ------ ----- OPERATING INCOME (LOSS) BEFORE FINANCIAL EXPENSES (3,489) (2,088) (770) Financial expenses, net (989) (288) (37) Other income, net 6 2,855 - - ------ ----- ----- INCOME (LOSS) BEFORE TAXES ON INCOME (1,623) (2,376) (807) Taxes on income 14 (14) (84) - Minority interest in net losses of consolidated subsidiary 373 - - ------ ------ ----- LOSS FROM CONTINUING OPERATIONS (1,264) (2,460) (807) Loss from discontinued operations (77) - - ------ ------ ----- Net loss (1,341) (2,460) (807) ====== ====== =====
The accompanying notes are an integral part of the financial statements. F-26 87 GALCOM NETWORKING LTD. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOREIGN RETAINED CURRENCY EARNINGS SHARE CAPITAL TRANSLATION (ACCUMULATED CAPITAL SURPLUS ADJUSTMENT DEFICIT) TOTAL ------- ------- ---------- ------------ ------- US$ US$ US$ US$ US$ ------- ------- ---------- ------------ ------- (IN THOUSANDS) BALANCE AS OF JANUARY 1, 1992 34 - - 135 169 Loss for the year (807) (807) Issue of bonus shares 53 - - (53) - Issue of ordinary shares 20 - - - 20 Issue of preferred shares 21 1,541 - - 1,562 --- ----- --- ------- ----- BALANCE AS OF DECEMBER 31, 1992 128 1,541 - (725) 944 Loss for the year - - - (2,460) (2,460) Issue of ordinary shares 31 4,438 - - 4,469 --- ----- --- ------- ----- BALANCE AS OF DECEMBER 31, 1993 159 5,979 - (3,185) 2,953 Loss for the year - - - (1,341) (1,341) Issue of ordinary shares - 150 - - 150 Foreign currency translation adjustment - - 474 - 474 --- ----- --- ------- ----- BALANCE AS OF DECEMBER 31, 1994 159 6,129 474 (4,526) 2,236 === ===== === ======= ===== The accompanying notes are an integral part of the financial statements.
F-27 88 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ----------------------- 1994 1993 1992 ------ ------ ------ US$ US$ US$ ------ ------ ------ (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net loss (1,341) (2,460) (807) Adjustments to reconcile net loss to cash used in operating activities (See Appendix A) (620) (585) (384) ------ ------ ------ NET CASH USED IN OPERATING ACTIVITIES (1,961) (3,045) (1,191) ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in subsidiaries and others (93) (778) - Purchase of fixed assets (797) (854) (553) Purchase of other assets (45) (134) Redemption of (investment in) bank deposit - 111 (111) Purchase of marketable securities and other investments not held for trading (1,057) - - Purchase of short-term securities (2,378) - - Grant of short-term loans (2,073) - - Proceeds from sale of fixed assets 248 9 14 ------ ------ ------ NET CASH USED IN INVESTING ACTIVITIES (6,150) (1,557) (784) ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue by subsidiary 6,253 - - Issue of shares 150 4,469 1,582 Increase in short-term bank credits, net 196 99 306 Long-term loans received 1,275 315 162 Repayment of long-term loans (266) (173) (44) ------ ------ ------ NET CASH PROVIDED BY FINANCING ACTIVITIES 7,608 4,710 2,006 ------ ------ ------ Effect of exchange rate changes on cash 841 - - ====== ====== ===== INCREASE IN CASH AND CASH EQUIVALENTS 338 108 31 BALANCE OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 139 31 - ------ ------ ------ BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 477 139 31 ====== ====== ======
The accompanying notes are an integral part of the financial statements. F-28 89 STATEMENTS OF CASH FLOWS (CONTD.)
YEAR ENDED DECEMBER 31, ----------------------- 1994 1993 1992 ------ ------ ------ US$ US$ US$ ------ ------ ------ (IN THOUSANDS) APPENDIX A ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOWS USED IN OPERATING ACTIVITIES ITEMS NOT INVOLVING CASH FLOWS: Capital loss - 2 3 Capital gain from issue to third party (2,883) - - Loss from marketable securities 379 - - Erosion of long-term debt 88 - (1) Depreciation of fixed assets and amortization of other assets 322 252 118 Increase (decrease) in provision for severance pay, net (16) 96 36 Minority interest in net income (373) - - Write-off of inventory 710 - - Write-off of fixed assets 343 - - CHANGES IN ASSETS AND LIABILITIES: Decrease (increase) in accounts receivable (72) (992) (476) Decrease (increase) in inventories 161 (463) (503) Increase in accounts payable 721 520 439 ------ ---- ---- (620) (585) (384) ====== ==== ====
The accompanying notes are an integral part of the financial statements. F-29 90 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - GENERAL GALCON NETWORKING LTD. ("the Company"), which commenced operations in March 1988, is engaged in the production of components and devices used in data communication. The Company became a public company in April 1992. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. FINANCIAL STATEMENTS IN U.S. DOLLARS The functional currency of the Company is the U.S. dollar. Transactions and balances denominated in dollars are presented at their dollar amounts. Non-dollar transactions and balances are remeasured into dollars in accordance with the principles set forth in Statement No. 52 of the Financial Accounting Standards Board (FASB) of the United States. The functional currency of the Company's subsidiary in the United Kingdom is the Pound sterling. The translation of the financial statements of this subsidiary was made according to the principles prescribed in Statement No. 52 of the FASB. Assets and liabilities have been translated at period-end exchange rates and statement of operation items have been translated at average rates prevailing during the period. Such translation adjustments are recorded as a component of shareholders' equity. The financial statement of the Company's subsidiary in Israel, whose functional currency is the new Israeli shekel have been adjusted for changes in the Israeli Consumer Price Index ("CPI") and translated at the representative rate of exchange of the shekel for the U.S. dollar as at the balance sheet date. With regard to the translation of the financial statements in accordance with accounting principles generally accepted in the United States, see Note 20. b. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the results of the Company's subsidiaries. All intercompany transactions and balances have been eliminated. The subsidiaries as at December 31, 1994 were as follows:
PERCENTAGE COUNTY OF SHAREHOLDING INCORPORATION ------------ ------------- Galcom Communication Systems 52.9% Israel (Israel) Ltd. Galcom Ltd. (1) 100% United Kingdom Galcom Inc. (1) 100% U.S.A. Faxcess Technologies Ltd. (2) 74% Israel
(1) The principal activity of both of the above subsidiaries is the marketing of the Company's products in their country of incorporation. (2) The principal activity of this company was research and development. Activities were discontinued during 1994. c. REVENUE RECOGNITION Sales are recognized upon shipment. d. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise bank balances whose original term to maturity is less than three months. F-30 91 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES e. INVENTORIES Inventories are valued as follows: Raw materials - Lower of cost or market value on a "moving average basis". Work-in-process and finished products - Lower of computed cost or market value. f. INVESTMENTS Investments in other companies are included at cost which does not exceed their value as estimated by management. g. FIXED ASSETS Fixed assets are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets. Annual rates of depreciation are as follows: Computers 20% Machinery and equipment 10 - 15% Office furniture and equipment 6 - 15% Motor vehicles 15%
Leasehold improvements are amortized over the term of the lease. Fixed assets include assets which are leased under capital leases. The balance of the liability in respect of capital leases is included in long-term debt. h. OTHER ASSETS Other assets, comprising patents and production and marketing rights (see Note 10b), are stated at cost and are amortized over 5 years. i. RESEARCH AND DEVELOPMENT COSTS Research and development costs, net of participation, are charged to income as incurred. j. BASIS OF LINKAGE AND EXCHANGE RATES Balances in, or linked to, currencies other than the dollar are stated on the basis of the representative exchange rates prevailing at the balance sheet date. The representative rate of exchange of the U.S. dollar for the new Israeli shekel as at December 31, 1994 was US$ 1 = NIS 3.018. Balances which are linked to the Israeli CPI are stated using the index known at the end of the respective year. The Israeli CPI increased by 14.5% in 1994 (1993 - 11.2%). k. DEFERRED INCOME TAXES Deferred income taxes are provided for temporary differences between the assets and liabilities, as measured in the financial statements, and for tax purposes at the tax rates expected to be in effect when these differences reverse, in accordance with Statement No. 109 of the FASB (Accounting for Income Taxes). F-31 92 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - OTHER ACCOUNTS RECEIVABLE Comprised as follows:
DECEMBER 31, --------------- 1994 1993 ------ ----- US$ US$ ------ ----- (IN THOUSANDS) Government of Israel 110 - Prepaid expenses 30 73 Advances to suppliers 38 23 Tax authorities 196 134 Shareholders (Balances linked to the Israeli CPI) 53 169 Others 129 515 --- --- 556 914 === ===
NOTE 4 - INVENTORIES Comprised as follows:
DECEMBER 31 ------------------ 1994 1993 ------ ------ US$ US$ ------ ------ (IN THOUSANDS) Raw materials 398 837 Work-in-process 187 361 Finished products 291 500 --- ----- 876 1,698 === =====
* NOTE 5 - INVESTMENT IN OTHER COMPANY As at December 31, 1994, the balance represents the cost of a 17% indirect holding in I.N.C. Communications Pty. Ltd. ("INC"), an Australian company, held through a 50%-held Singapore subsidiary (a dormant company). The Company does not control or exercise any significant influence in INC and, in accordance with Opinion No. 18 of the Accounting Principles Board, does not record this investment using the equity method. On the basis of available information, the management of the Company estimate that the value of the Company's investment is not lower than its cost, though it has not been able to obtain current financial statements of INC. NOTE 6 - INVESTMENT IN SUBSIDIARY IN ISRAEL During 1993, the Company established a wholly-owned subsidiary, Galcom Communication Systems (Israel) Ltd. ("GCS") to undertake the computer communication cable operations, previously carried out by the Company. GCS was incorporated in Israel originally as a private company on June 29, 1993, with the name, Galcom Communication Systems (1993) Ltd. (On October 8, 1993, the Company changed its name to its present name.) The transfer took place on September 30, 1993, when the Company transferred to its subsidiary, GCS, the assets and liabilities relating to its cabling operations at book value, in consideration of which GCS issued 100% of its share capital to the Company. In February 1994, GCS issued shares in a public offering on the Tel Aviv Stock Exchange and in a private placement for proceeds of US$ 6.5 million. As a result of the issue, the Company's holding in GCS was reduced to 53% and the Company recorded a capital gain of US$ 2,883,000. * Footnote 5 has been added, all subsequent footnotes have been renumbered. F-32 93 GALCOM NETWORKING, LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - FIXED ASSETS a. COMPRISED AS FOLLOWS:
December 31, ----------------------- 1994 1993 ---------- ---------- US$ US$ ---------- ---------- (In thousands) Cost: Land (see b. below) 432 214 Computers, machinery and equipment 889 843 Motor vehicles 414 375 Office furniture and equipment 220 190 Leasehold improvements 372 218 ----- ----- 2,327 1,840 Base stock 34 31 ----- ----- 2,361 1,871 ===== ===== Payments on account of equipment Accumulated depreciation: Computers, machinery and equipment 693 290 Motor vehicles 122 73 Office furniture and equipment 48 29 Leasehold improvements 91 41 ----- ----- 954 433 ===== =====
b. On December 22, 1993, the Company and GCS and a related company, in concert, undertook to purchase an interest in land in Caesarca of an area of 4.3 dunam for the construction of a plant for the manufacture of communication, computer and high-tech products. The total commitment is for an amount in new Israeli shekels equivalent of US$ 322,500. Of this, US$ 86,000 was paid on signing the agreement, the balance being due to be paid in 11 quarterly installments linked to the Israeli CPI, bearing interest at 3.5%. The companies agreed amongst themselves to share equally in any payment due under the agreement. The companies undertook that after the construction of the plant is completed, they will sign an agreement with the Caesarca Development Company for a sub-lease agreement, according to which they will lease the abovementioned plot for a period of 49 years, with an option for a further 49 years. When the sub-lease is signed, the deposit paid by the companies will be considered as full payment of the proceeds of the sub-lease and the rest of the liabilities of the companies pursuant to the sub-lease. c. The Company sold all of its interest in the land at cost to GCS and GCS undertook to pay the balance remaining on the loan (US$ 76,000) which the Company received from the Caesarca Development Company in respect of the land, under the same conditions. d. Charges - see Note 13. F-33 94 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - OTHER ACCOUNTS PAYABLE COMPRISED AS FOLLOWS:
DECEMBER 31, ------------------ 1994 1993 ----- ----- US$ US$ ----- ----- (IN THOUSANDS) Payroll and related accruals 462 329 Advanced from customers - 92 Tax authorities 45 93 Related party 119 - Subsidiary - - Other accrued expenses 597 343 ----- --- 1,223 857 ===== ===
NOTE 9 - LONG-TERM DEBT a. COMPRISED AS FOLLOWS:
DECEMBER 31, --------------------- INTEREST RATE 1994 1993 ------------- ---- ---- % US$ US$ ---- ---- ---- (IN THOUSANDS) Banks: In dollars 6.5 8 16 Other: In Israeli currency or linked to the Israeli CPI Unlinked-26%; 4.3-7 1,386 249 In dollars 6-10 62 87 ----- --- 1,456 352 Less: current maturities 530 103 ----- --- 926 249 ===== ===
b. AGGREGATE MATURITIES OF LONG-TERM DEBT, AS AT DECEMBER 31, 1994, ARE AS FOLLOWS: First year (current maturities) 530 ----- Second year 524 Third year 386 Fourth year 16 ----- 926 ----- 1,456 =====
c. The Company obtained a loan of US$ 1 million from a non-bank finance company, against a charge on part of its shares in GCS (which was previously charged to the bank). (These shares are "restricted securities" as defined by the Tel-Aviv Stock Exchange). The loan is linked to the Israeli CPI, bears interest at 8.5% per annum and is repayable quarterly over three years. d. Charges - see Note 13. F-34 95 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - PROVISION FOR SEVERANCE PAY, NET The net provision in the balance sheet represents the liability of the Company for severance pay to its employees that is not covered by managers' insurance policies. The custody and management of the amounts paid to the insurance company are independent of the Company and accordingly, such amounts and the related liabilities are not reflected in the balance sheet. NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES a. ROYALTIES Royalties are payable to the Office of the Chief Scientist of Israel ("OCS") at the rate of 3% on proceeds from the sale of products arising from the research and development activities for which the OCS has provided grants. Total royalties are not to exceed the grants received, linked to the U.S. dollar. b. MANUFACTURING AND MARKETING RIGHTS In June 1992, the Company signed an agreement with another company, pursuant to which the Company purchased the rights to manufacture and market a product that was the result of joint development between the two companies for an aggregate price of US$ 100,000. In addition, the Company undertook to pay to the other company up to US$ 10 for each product (as described in the agreement) sold through June 30, 1997. c. CLAIMS PENDING A number of claims have been made against the Company relating to severance compensation to employees and commission to a former agent. The amounts of the claims have not been finalized and the Company is not in a position to estimate the final outcome of the claims. No provisions have been made in respect of the said claims. NOTE 12 - SHARE CAPITAL a. COMPRISED AS FOLLOWS:
ISSUED FULLY PAID AUTHORISED ---------------------- ---------------------- NUMBER NUMBER N.I.S. NUMBER N.I.S. ---------- --------- -------- --------- -------- AS AT DECEMBER 31, 1994: Ordinary shares of NIS 0.3 par value each 2,500,000 1,273,334 382,000 1,273,334 382,000 Preferred shares of NIS 0.3 par value each - - - - - AS AT DECEMBER 31, 1993: Ordinary shares of NIS 0.3 par value each 2,500,000 1,273,334 382,000 1,265,789 379,737 Preferred shares of NIS 0.3 par value each - - - - -
b. CHANGES IN SHARE CAPITAL During 1993: i. The preferred shares were consolidated with the ordinary shares. The holders of the preferred shares exercised their option to purchase 58,334 ordinary shares for US$ 729,175. ii. The Company issued 240,000 ordinary shares, out of which 232,455 were fully paid. Share proceeds were US$ 3,875,025, net of issue expenses, totalling US$ 131,982. During 1984: i. The balance of 7,545 ordinary shares, which was issued but not paid in 1993, was paid. Share proceeds were US$ 150,000. F-35 96 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 - CHARGES The Company has registered fixed and floating charges on all of its assets (including shares in the subsidiary), share capital and goodwill to secure its liabilities to banks, non-bank finance company and others. NOTE 14 - TAXES ON INCOME a. TAX BENEFITS UNDER VARIOUS TAX LAWS: 1. Industrial Company: The Company is an "Industrial Company" as defined by the Law for the Encouragement of Industry (Taxes), 1969, and as such, is entitled to certain tax benefits. 2. Approved Enterprise: The Company's investment program for expansion has been granted "Approved Enterprise" status in accordance with the Law for Encouragement of Capital Investments, 1959. Pursuant to the said law, the Company has elected to adopt the "alternative benefits program" which entitles the Company to a complete exemption from taxes on its undistributed income arising from the revenue that will be derived from the expansion for a period of ten years from the year in which the Company first earns taxable income. During 1992, the Company received approval for an extension to the investment amounting to US$ 648,000 under the "alternative benefits program". Through the balance sheet date, the Company has made investments within this program amounting to approximately US$ 250,000. The Company has received approval from the Investment Center to assign the abovementioned approval to its subsidiary, Galcom Communication Systems (Israel) Ltd. ("GCS"). b. TAXATION UNDER INFLATIONARY CONDITIONS: All of the Company's income is subject to the provisions of the Income Tax Law (Adjustments for Inflation), 1985, pursuant to which the results for tax purposes are measured in real terms in accordance with changes in the Israeli CPI. c. INCOME TAX ASSESSMENTS: The Company has not yet received final tax assessments since incorporation. F-36 97 GALCOM NETWORKING LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 - INCOME TAXES (contd.) d. DEFERRED TAXES The main components of the Company's deferred tax assets, as at December 31, 1994, are as follows:
US$ ------- (IN THOUSANDS) Deferred tax assets: Accrued vacation pay, severance pay and other 453 Net operating loss carryforwards in Israel 4,285 Net operating loss carryforwards of non-Israeli subsidiaries 661 ------- 5,399 Loss - valuation allowance (5,399) ------- - ------- Deferred tax liabilities - ------- - =======
Under Statement No. 109 of the FASB, deferred tax assets are to be recognized for the anticipated tax benefits associated with net operating loss carryforwards and deductible temporary differences, unless it is more likely than not that some or all of the deferred tax asset will not be realized. The adjustment is made by a valuation allowance. Since the realization of the net operating loss carryforwards and deductible temporary differences of the non-Israeli subsidiaries and the Israeli companies is less likely than not, a valuation allowance has been established for the amounts of the related tax benefits. Tax loss carryforwards of the U.S. subsidiary, totalling US$ 1,945,000, expire between 2007-2009. Tax loss carryforwards of the Company and the Israeli subsidiaries are denominated in NIS and are linked to the Israeli CPI. e. TAXES ON INCOME:
YEAR ENDED DECEMBER 31, --------------------------- 1994 1993 ------ ------ US$ US$ ------ ------ (IN THOUSANDS) Current taxes 14 84 ====== ======
F-37 98 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15 - SALES
Year ended December 31, ----------------------- 1994 1993 1992 ---- ---- ---- US$ US$ US$ --- --- --- (In thousands) Classification by geographical distribution: Export 8,446 4,071 2,965 Israel 231 2,893 1,895 ----- ----- ----- 8,677 6,964 4,860 ===== ===== ===== Classification by major customer: Percentage of sales to customer exceeding 10% of sales: 14% 20% 36%
NOTE 16 - COST OF SALES
Year ended December 31, ----------------------- 1994 1993 1992 ---- ---- ---- US$ US$ US$ --- --- --- (In thousands) Write-off inventory and fixed assets 973 Materials and components 3,876 3,226 2,482 Salaries, wages and employee benefits 1,198 916 748 Sub-contractors 321 128 128 Depreciation and amortization 57 91 62 Other manufacturing costs 414 289 317 ----- ----- ----- 6,839 4,650 3,737 Decrease (increase) in work-in-process and finished products 383 ( 131) ( 498) ----- ----- ----- 7,222 4,519 3,239 ===== ===== =====
NOTE 17 - RESEARCH AND DEVELOPMENT EXPENSES, NET
Year ended December 31, ----------------------- 1994 1993 1992 ---- ---- ---- US$ US$ US$ --- --- --- (In thousands) Research and development expenses 787 1,174 567 Less - participation of the Government of Israel 210 226 152 ----- ----- ----- 577 948 415 ===== ===== =====
NOTE 18 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES, NET
Year ended December 31, ----------------------- 1994 1993 1992 ---- ---- ---- US$ US$ US$ --- --- --- (In thousands) Selling, net 1,552 1,743 1,135 General and administrative 2,815 1,842 841 ----- ----- ----- 4,367 3,585 1,976 ===== ===== =====
F-38 99 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 19 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES a. BALANCES DUE TO OR FROM RELATED PARTIES:
DECEMBER 31, -------------------- 1994 1993 US$ US$ ---- ---- (IN THOUSANDS) Accounts receivable - shareholders 53 169 Accounts payable - related party 119 -
b. INCOME FROM RELATED PARTIES
YEAR ENDED DECEMBER 31, ------------------------------------ 1994 1993 1992 US$ US$ US$ ---- ---- ---- (IN THOUSANDS) Sales - - 5 Interest from shareholders 14 - 6
c. EXPENSES TO RELATED PARTIES Cost of sales - - 29 Purchase of fixed assets - - 11
NOTE 20 - SUBSEQUENT EVENTS On March 21, 1995, the Company signed an agreement with a third party to sell its business and rights (including the manufacturing rights, know-how, technology, fixed assets, inventory, etc.) and its holdings in subsidiaries in the United States and the United Kingdom for consideration of US$ 900 thousand in cash and the assignment of its obligations up to an amount of US$ 1.8 million. In addition, the purchaser will act so that its parent company in the United States will issue to the Company an option (available for 5 years) to purchase 60,000 shares of the parent company, traded on a foreign stock exchange, at the price per shares at the date of closing of the contract ("the closing price") and a further option (available for five years) to purchase an additional 15,000 shares at 150% of the closing price. F-39 100 GALCOM NETWORKING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 21 - DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN ISRAEL ("ISRAELI GAAP") AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES ("U.S. GAAP") Translation of the financial statements of the Israeli subsidiary -- Galcom Communication Systems (Israel) Ltd. ("GCS") -- in which the Company has a 52.9% shareholding: In accordance with Israeli GAAP, the financial statements of GCS, adjusted for changes in the Israeli CPI, have translated according to the representative exchange rate of the U.S. dollar at the balance sheet date (see Note 2a). According to U.S. GAAP, the said statements should be translated without adjustment to the Israeli CPI, in accordance with the provisions of Statement No. 52 of the FASB (balance sheet items -- current rate, statement of operations items -- average rate.) The effect of translation according to U.S. GAAP on the consolidated statement of operations of the Company for the year ended December 31, 1994 is as follows (GCS was established in October 1993 and the effect of translation according to U.S. GAAP in 1993 is not material.):
YEAR ENDED DECEMBER 31, 1994 ---------------------------- US$ US$ ------ ----- (IN THOUSANDS) ISRAELI U.S. GAAP GAAP ------ ----- Sales 8,677 8,519 Cost of sales 7,222 7,067 ------ ----- GROSS PROFIT 1,455 1,452 Research and development expenses, net 577 577 Selling, general and administrative expenses, net 4,367 4,328 ------ ----- OPERATING LOSS BEFORE FINANCIAL EXPENSES (3,489) (3,453) Financial expenses, net (989) (180) Other income, net 2,855 2,855 ------ ----- LOSS BEFORE TAXES ON INCOME (1,623) (778) Taxes on income (14) - Minority interest in net losses (income) of consolidated subsidiary 373 (31) Company's share in losses of subsidiaries, net - - ------ ----- LOSS FROM CONTINUING OPERATIONS (1,264) (809) Loss from discontinued operations (77) (77) ------ ----- NET LOSS (1,341) (886) ====== =====
The effect of translation according to U.S. GAAP on most of the balance sheet items as at December 31, 1994 is not material. The items in the balance sheet on which the effect is material are as follows:
DECEMBER 31, 1994 ---------------------- US$ US$ ------ ----- (IN THOUSANDS) ISRAELI U.S. GAAP GAAP ------ ----- Capital surplus 474 10 ===== ===== Minority interests 3,461 3,398 ----- -----
F-40 101 UNAUDITED GALCOM NETWORKING, LTD. STATEMENT OF OPERATIONS For the Four months ended April 30, 1995
(In thousands US$) REVENUES, net $2,076 COSTS AND EXPENSES Cost of goods sold 1,285 Research and development expenses 28 Selling, general and administrative expense 964 ------ 2,227 ------ Operating loss (201) Other expense (222) Provision for income tax -- ------ Net loss $ (423) ======
F-41 102 GALCOM NETWORKING LTD. CONSOLIDATED STATEMENT OF CASH FLOWS
FOUR MONTHS ENDED APRIL 30, 1995 US$ (IN THOUSANDS) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (485) Adjustments to reconcile net loss to cash used in operating activities (See Appendix A) (2,914) Net cash used in operating activities (3,403) ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of marketable securities 255 Investment in subsidiary, net of cash acquired (Appendix B) (172) Purchase of fixed assets (129) Redemption of short-term loans 2,025 ------- Net cash provided by investing activities 1,979 CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term bank credits, net 1,392 Repayment of long-term loans (125) ------- Net cash provided by financing activities 1,267 ------- DECREASE IN CASH AND CASH EQUIVALENTS (157) BALANCE OF CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 477 ------- BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 320 ======= APPENDIX A ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FLOWS USED IN OPERATING ACTIVITIES ITEMS NOT INVOLVING CASH FLOWS: Gain from marketable securities (131) Depreciation of fixed assets and amortization of other assets 136 Increase in provision for severance pay, net 67 Minority interest in net loss (61) CHANGES IN ASSETS AND LIABILITIES: Decrease in trade receivables 143 Increase in other receivables (2,410) Increase in inventories (207) Decrease in trade payables (251) Decrease in other payables (200) ------- (2,914) ======= APPENDIX B INVESTMENT IN SUBSIDIARY, NET OF CASH ACQUIRED Working capital - excluding cash (375) Fixed assets 18 Goodwill 529 ------- 172 -------
F-42 103 GALCOM NETWORKING, LTD NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - The accompanying unaudited condensed financial statements have been prepared in accordance with the requirements of Regulation S-X and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the audited financial statements presented in the Company's Annual Report for the year ended December 31, 1995. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the period presented. The results of operations and cash flows for such period is not necessarily indicative of results to be expected for the full year. 2. SUBSEQUENT EVENT - On May 2, 1995 the Company sold, to a third party, its business and rights (including the manufacturing rights, know-how, technology, fixed assets, inventory, etc.) and its holdings in subsidiaries in the United States and the United Kingdom for consideration of US$900 thousand in cash and the assignment of its obligations up to an amount of US$1.8 million. In addition, the purchaser will act so that its parent company in the United States will issue to the Company an option (available for 5 years) to purchase 60,000 shares of the parent company, traded on a foreign stock exchange, at the price per share at the date of closing of the contract ("the closing price") and a further option (available for five years) to purchase an additional 15,000 shares at 150% of the closing price. F-43 104 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 TABLE OF CONTENTS
Page AUDITORS' REPORT F-45 CONSOLIDATED FINANCIAL STATEMENTS - IN U.S. DOLLARS: Consolidated balance sheets F-47 Consolidated statements of operations F-49 Statement of changes in shareholders' equity F-50 Consolidated statements of cash flows F-51 Notes to consolidated financial statements F-53 Unaudited interim period F-71
F-44 105 RATZKOVSKY FRIED & Co. CERTIFIED PUBLIC ACCOUNTANTS (ISR.) 43 HA'ATZMAUT ROAD HAIFA [LOGO] Ratzkovsky Fried P.O.B. 1497 ZIP CODE 31014 TELEPHONE (04)673120 FAX (04)674778 AUDITORS' REPORT To the Shareholders of ACE 400 COMMUNICATIONS LTD. We have examined the accompanying consolidated balance sheets of ACE 400 Communications Ltd. ("the Company") and its subsidiaries at December 31, 1994 and 1993, and the related statements of operations, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994. Except as discussed in the following paragraph, our examinations were made in accordance with generally accepted auditing standards in Israel and in the United States, including those prescribed by the Israeli Auditors' (Mode of Performance) Regulations, 1973, and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The financial statements of North Hills France (a consolidated subsidiary), whose net loss constitutes 9.5% and 33.3% of the total consolidated net loss for the years ended December 31, 1994 and 1993, respectively, have been audited by other auditors whose reports thereon have been furnished to us. These auditors disclaimed an opinion on the financial statements for the year ended December 31, 1994, due to certain scope limitations on their engagement, as a result of the subsidiary operating under a liquidator as discussed in note 1c. We were unable to satisfy ourselves as to the extent of North Hills France's liabilities and the Company's obligation to cover these liabilities. Due to the sale of most of its assets, as explained in note 1c, the Company will not be able to continue its operations on a "going concern" basis. These financial statements do not include certain additional adjustments required in such event. In our opinion, based on our examinations and the reports of the other auditors, except for the effects of such adjustments, if any, that might have been required as a result of the matters described in the preceding two paragraphs, the accompanying financial statements present fairly, in conformity with accounting principles generally accepted in Israel and in the United States (as applicable to these financial statements, such accounting principles are practically identical in all material respects), the consolidated financial position of the Company and its subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994. Without further qualifying our opinion, we refer to the uncertainty detailed in note 3 in respect of a final settlement with Porta. The final outcome of this matter cannot be determined or evaluated at this time. /s/ RATZKOVSKY FRIED & CO. -------------------------- Ratzkovsky Fried & Co. Certified Public Accountants (Isr.) Haifa, Israel November 22, 1995 F-45 106 [HLB LOGO] [LETTERHEAD] GROUPE FRANCE AUDIT S.A. REPORT OF STATUTORY AUDITORS Annual Accounts for 1994 In compliance with the assignment entrusted to us at the stockholders Annual General Meeting of June 20th, 1994, we hereby report to you on: - the audit of the accompanying annual account of NORTH HILLS EUROPE S.A. 21, avenue Edouard Belin - 92500 RUEIL MALMAISON - FRANCE, - the specific verification and information required by law for the year ended December 31st, 1994. OPINION ON THE ANNUAL ACCOUNT We have audited the financial statement on pages 2 to 5. Our audit was conducted in accordance with standards established by the French Professional body, except that the scope of our work was limited by the matter referred to in the following paragraph: The following accounts have never been approved by the company's Board. Indeed, the directors resigned in June. Then, the business went bankrupt and is now in the liquidator's hands. The liquidator (1) stopped our legal assignment in August. Therefore, the accompanying financial statements cannot be considered as the final accounts. If so we would make three qualifications namely: - lack of going concern - lack of depreciation on bad debtors (German subsidiary) - lack on information about turnover. SPECIFIC VERIFICATION AND INFORMATION We have no comments to make for the reasons exposed above. Pour SOFIDEEC Associee November 22, 1995 /s/ M.F. EL MGHAZLI --------------------------- M.F. EL MGHAZLI President Directeur General Expert-Comptable Commissaire aux Comptes, Associe (1) Liquidator's letter copy F-46 107 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands
At December 31, ----------------------------- Note 1994* 1993 -------- ------- ------- $ $ ------- ------- CURRENT ASSETS: 12 Cash and cash equivalents 337 652 Accounts receivable: Trade receivables 15a;14 2,278 6,496 a Other accounts receivable 14b 1,136 2,664 Inventories 14c 520 5,7O8 ------- ------- Total Current Assets 4,271 15,520 PROPERTY, EQUIPMENT AND OTHER ASSETS HELD FOR DISPOSITION: Assets under sale agreement 2c 4,317 - Other assets 1d;4 1,954 - ------- ------- PROPERTY AND EQUIPMENT: 5 Cost - 5,534 Less - accumulated depreciation - 983 ------- ------- - 4,551 OTHER ASSETS AND DEFERRED CHARGES - 8,097 ------- ------- 10,542 28,168 ======= =======
*See note 1c. The accompanying notes are an integral part of the financial statements. F-47 108 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands
At December 31, ----------------------------- Note 1994* 1993 -------- ------- ------- $ $ ------- ------- CURRENT LIABILITIES: 12 Short-term bank credit and loans 13;14d 13,209 8,347 Current maturities of long-term loans 6 180 229 Accounts payable - trade and other: Related parties 15a 3,218 1,785 Trade 14e 2,614 3,580 Other 14f 3,057 2,292 Liabilities for termination of the employee - employer relationship 1c;8 222 - --------- --------- Total current liabilities 22,500 16,233 LONG-TERM LIABILITIES: Long-term loans, not of current maturities 13;6 - 2,042 Convertible debenture 7 2,295 1,971 Long-term note 3 - 700 Liabilities for termination of the employee-employer relationship 8 - 231 --------- --------- COMMITMENTS AND CONTINGENT LIABILITIES Total liabilities 9 24,795 21,177 SHAREHOLDERS' EQUITY: 10 Share capital 46 46 Share premium 6,157 6,581 Capital reserves 420 420 Retained earnings (accumulated deficit) (20,876) 386 --------- --------- (14,253) 7,433 Less - loan receivable for shares issued - 442 --------- --------- 10,452 28,168 ======== =========
See note 1c. The accompanying notes are an integral part of the financial statements. F-48 109 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands
Year ended December 31, ---------------------------------------------- Note 1994* 1993 1992 -------- --------- -------- ------- $ $ $ --------- -------- ------- NET SALES 14g 13,777 15,009 8,791 COSTS AND EXPENSES: Cost of sales 14h 9,495 8,013 4,423 Research and development expenses - net 14i 2,045 1,343 429 Selling, general and administrative expenses - net 14j 6,553 5,262 2,384 Bad debts, write-off of inventories and other expenses 14k 7,204 2,310 86 --------- -------- ------ 25,297 16,928 7,322 INCOME (LOSS) FROM OPERATIONS (11,520) (1,919) 1,469 FINANCIAL EXPENSES - net 141 (2,034) (445) (60) --------- -------- ------ (13,554) (2,364) 1,409 LOSS ON DISPOSAL OF ASSETS 14m (7,708) - - --------- -------- ------ NET INCOME (LOSS) FOR THE YEAR (21,262) (2,364) 1,409 ========= ======== ======
See note 1c. The accompanying notes are an integral part of the financial statements. F-49 110 ACE 400 COMMUNICATIONS LTD. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY U.S. dollars in thousands
Loan Receipts Retained receivable on earnings for Share Share account Capital (accumulated shares capital premium of shares reserves deficit) issued Total ------- ------- --------- -------- ----------- --------- --------- $ $ $ $ $ $ $ ------- ------- --------- -------- ----------- --------- --------- BALANCE AT JANUARY 1, 1992 36 - 214 - 1,341 - 1,591 CHANGES DURING 1992: Share issuance to Adacom - 214 (214) - - - - Share Issuance to others 3 1,846 - - - - 1,849 Options to employees - - - 37 - - 37 Capital reserves from sales of goodwill and rights to company under common control - - - 280 - - 280 Net income - - - - 1,409 - 1,409 --------- --------- --------- --------- --------- --------- --------- BALANCE AT DECEMBER 31,1992 39 2,060 - 317 2,750 - - CHANGES DURING 1993: Shares issuance to the President of Adacom and the president of the Company 1 578 - - - (442) 137 Share issuance by way of rights 6 3,943 - - - - 3,949 Options to employees - - - 103 - - 103 Net loss - - - - (2,364) - (2,364) --------- --------- --------- --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1993 46 6,581 - 420 386 (442) 6,991 CHANGES DURING 1994: Exercise of options - 18 - - - - 18 Offset of loan - (442) - - - 442 - Net loss - - - - (21,262) - (21,262) --------- --------- --------- --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1994* 46 6,157 - 420 (20,876) - (14,253) ========= ========= ========= ========= ========= ========= =========
See note 1c. The accompanying notes are an integral part of the financial statements. F-50 111 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands
Year ended December 31, ------------------------------------ 1994* 1993 1992 -------- ------- ------- $ $ $ -------- ------- ------- CASH FLOWS - OPERATING ACTIVITIES: Net income (low) for the year (21,262) (2,364) 1,409 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,213 862 165 Loss on disposal of assets 7,708 - - Increase (decrease) in liability for termination of employee-employer relationship (9) 8 14 Compensation expense in respect of employee stock options - 103 37 Interest, erosion and write-off of long-term balances 324 106 (105) Decrease (increase) in trade receivables 4,218 (1,464) (2,668) Decrease (increase) in other receivables 1,528 (1,145) (558) Decrease (increase) in inventories 3,082 (2,461) 113 Increase in accounts payable 452 93 222 -------- -------- -------- Net cash used In operating activities (2,746) (6,262) (1,371) -------- -------- -------- CASH FLOWS - INVESTING ACTIVITIES: Purchase of North Hills Inc. - consolidated for the first time (a) - 62 (215) Purchase of fixed assets (358) (640) (298) Proceeds from sale of fixed assets - 107 - Increase In long-term balances and other assets - (55) - -------- -------- -------- Net cash used in investing activities (358) (526) (737) -------- -------- -------- CASH FLOWS - FINANCING ACTIVITIES: Proceeds from issuance of shares, net 18 1,086 1,849 Proceeds from issuance of convertible debenture, net - - 1,941 Receipt of long-term loans 54 2,035 - Repayment of long-term loans (145) (108) (44) Increase (decrease) in short-term bank credit 2,862 3,207 (491) -------- -------- -------- Net cash provided by financing activities 2,789 6,220 3,255 -------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (315) (568) 1,147 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 652 1,220 73 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR 337 652 1,220 -------- -------- --------
* See note 1c. The accompanying notes are an integral part of the financial statements. F-51 112 ACE 400 COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands
Year ended December 31, ------------------------------------ 1994* 1993 1992 ------- ------ ------ $ $ $ ------- ------ ------ (a) Purchase of North Hills Inc.: Assets and liabilities at acquisition date: Working capital (not including cash and cash equivalents) (6,907) Property and equipment - net 2,460 Long-term loans (260) Accrued severance pay (209) Excess of cost over fair value: Allocated to land and buildings 1,232 Goodwill that was transferred 100 to related company 8,237 ------ Unallocated goodwill 4,653 Notes furnished and balance to be paid to seller (4,500) Acquisition costs recorded in previous year (215) ------ (62) ====== (b) Non-cash transactions: Issuance of shares to Adacom against notes issued by Adacom in the purchase of North Hills Inc. - 3,000 - ===== ====== ===== Interest paid in cash 1,611 609 75 ===== ====== ===== Taxes paid in cash Income taxes primarily in respect of nondeductible expenses 277 28 - ===== ====== ======
* See note 1c. The accompanying notes are an integral part of the financial statements. F-52 113 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994 NOTE 1 - GENERAL. a. Definitions: ACE 400 Communications Ltd. - "the Company" - an Israeli Corporation. "ACE Inc." ACE Communications Inc., a U.S. corporation, a wholly owned subsidiary of the Company. "North Hills Inc." North Hills Electronics Inc., a U.S. corporation, a wholly owned subsidiary of ACE Inc., acquired on May 11, 1993. "North Hills North Hills International Inc., a U.S. corporation, International" a wholly owned subsidiary of North Hills Inc., whose sole activity is holding shares in North Hills Israel. "North Hills Israel" North Hills Israel Ltd., a wholly owned Israeli subsidiary of North Hills International. "North Hills France" North Hills Europe, a wholly owned subsidiary of North Hills Israel. "North Hills Germany" North Hills Edy Network Services GMBH, a wholly owned subsidiary of North Hills Israel. "North Hills Group" North Hills Inc. and its subsidiaries. "The Parent Company" Adacom Technologies Ltd-, which holds the majority of or "Adacom" the Company's shares. "Harris Adacom" "Harris Adacom Corporation", a U.S. corporation, which was the ultimate parent company of the parent company, until Adacom's shares were transferred to Harris Adacom B.V., a Dutch corporation. "Related companies Adacom's subsidiaries and affiliated companies of Adacom" (Adacom Group). "Related companies Harris Adacom's subsidiaries and affiliated companies of Harris Adacom" (Harris Adacom Group). The Group The Company and its subsidiaries. Related parties As defined in opinion No. 29 of the Institute of Certified Public Accountants in Israel (hereinafter the Institute).
F-53 114 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994 b. Description of business The company and North Hills Israel (which was acquired in 1993) were engaged in the development, manufacturing, marketing and servicing of computer communication equipment. Up to June 30, 1994, part of the manufacturing was done at Adacom's main plant. The foreign subsidiaries marketed the products of the Company and North Hills Israel. Part of the marketing and sales of the products was also effected through related companies of the parent company and of Harris Adacom. c. Developments during 1994 and 1995 During 1994, Adacom experienced financial difficulties and a receiver was appointed. During 1995, the Israeli court appointed a liquidator for Adacom. Harris Adacom and its subsidiaries also experienced financial difficulties and part or all of them are also under receivership or liquidation. The receivers of Adacom were appointed as directors of the Company. In 1994, the market in which the group was operating substantially decreased by volume and sale price, the competition in the market became stronger and the group did not succeed in developing new products in time. These matters, along with the changes in management and the situation of the Harris Adacom and Adacom Groups, affected the Company, and the Group also experienced financial difficulties. As a result of the above, Adacom's receiver decided prior to balance Sheet date to dispose of the Company's operations. In 1995, North Hills France and North Hills Germany ceased operations, and North Hills France is currently under liquidation. The excess of North Hills France's liabilities over its net assets cannot be determined at this stage, as well as the Company's obligation to cover these liabilities; however, management has provided $100,000, included in these statements, in respect of additional obligations of North Hills France, is sufficient. On June 29, 1995, the Company, Ace Inc., North Hills Israel and North Hills Inc. signed an agreement to sell most of their assets as described in d. below and the Group virtually discontinued its operations. As a result of the above, and the excess of the Group's liabilities over its assets, the Group ceased to operate on a going concern basis, except for selling or renting the North Hills Israel building (see note 4): therefore all of its assets to be disposed of under the sale agreement detailed in (d) below as well as other assets held for disposition are presented at their expected realization value, all the long-term loans to banks have been classified as short-term loans and the expected loss derived from the disposition of these assets is presented as a separate line item in the statement of operations as required under the provisions of APB 30. As to liabilities, most of which are in arrears, the Company and the receiver of Adacom are in negotiations with the creditors (mainly the banks) and a repayment plan has not been yet finalized. d. On June 29, 1995 the Company, Ace Inc., North Hills Inc. and North Hills Israel (hereafter "the Sellers") signed an agreement with N.N.H. computer Communications Ltd. and affiliates (hereafter "the Buyers"), including MRV Communications Inc. (hereafter "MRV"). The execution of the agreement was based on meeting several pre-conditions; which were substantially fulfilled. However, certain formal government authorizations are still in the process of being obtained. The main aspects of the agreement are as follows: The sellers will sell to the buyers goodwill, know-how, fixed assets (not including North Hills Israel's building), production files, research and development files, agreements with customers (including backlog) and suppliers and other agreements and contracts, the right to use software and the right to use North Hills Israel's building up to January 31, 1996 (including right of first refusal to continue to rent or buy the building). The total consideration for the above is expected to be $4,316,667, as follows: MRV will issue shares to the Company and North Hills Israel at a minimum guaranteed value of $3,000,000 (according to the share price as defined in the agreement) and shares at a minimum guaranteed value of $750,000 to Porta (see note 3). The buyers will also pay $100,000 in cash and will pay to suppliers of the sellers $466,667. F-54 115 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 The agreement also stipulates that: o The buyers may purchase certain items out of the sellers' inventories at 30% of their cost during a two-year period but not less than $400,000. o The buyers will collect the trade receivables (at June 30, 1995) for the sellers, for 10% commission. o MRV will issue to the Company and North Hills Israel options to purchase 100,000 MRV shares. The exercise price will be the same share price as defined in the agreement. o MRV took upon itself to pay the Company's commitment to the Chief Scientist as explained in note 9b. e. Financial statements in U.S. dollars The Company and North Hills Israel are Israeli corporations which maintain their books of account in nominal new Israeli shekels (NIS) and in U.S. dollars. The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar ("dollar"). Thus, the functional currency of the Group is the dollar. Transactions and balances originally denominated in dollars are presented at their original amounts. Transactions and balances in other currencies have been remeasured into dollars in accordance with the principles, set forth in Statement No. 52 of the Financial Accounting Standards Board of the United States ("FASB"). Exchange gains and losses from the remeasurement are carried to financial income or expenses. The exchange rates of the dollar prevailing at December 31, 1994 and 1993 were $1 = NIS 3.018 and $1 = NIS 2.986, respectively. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies that were applied in preparation of the financial statements, in a manner consistent with the previous year (except for adjustments recorded to present certain assets at net realizable value - see notes 1c and 1d) are as follows: a. Principles of consolidation: 1. The consolidated financial statements include the accounts of the Company and the consolidated financial statements of its subsidiaries, from the beginning of the year or from the acquisition date - (see also note 3). 2. Material intercompany balances and transactions have been eliminated. b. Inventories Inventories which may be purchased by the buyers subsequent to June 30, 1995 as mentioned in note 1c are valued at $400,000 (minimum amount to be paid by the buyers). The write-down is included in the loss on disposal of assets as detailed in note 14c. Inventories at December 31, 1993 and inventories consumed subsequent to the balance sheet date through June 30, 1995 are valued at the lower of cost or market value. Cost is determined as follows: Raw materials and components - on the moving average basis. Work in process and finished goods - at actual manufacturing cost. Purchased products - on the "first-in first-out" basis. F-55 116 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994 c. Property and equipment: 1. Fixed assets which were sold subsequent to the balance sheet date, as mentioned in note 1c, are valued, together with other intangible assets, at their expected realization value. The write-down of these assets is included in the loss on disposal of assets (see note 14m). 2. The building (which has not yet been sold) is stated at net realizable value. See also note 4. 3. At December 31, 1993, property and equipment were stated at cost, net of investment grants received, see note 5. 4. Depreciation is computed by the straight-line method, over the estimated useful lives of the assets. Annual depreciation rates are:
% ----- Buildings 2-4 Equipment (including computers) 10-20 Motor vehicles 15-20 Office furniture and equipment 6-20 Leasehold improvements 10
d. Other assets and deterred charges The goodwill (from the acquisition of North Hills Inc.) and the know-how (purchased from the parent company), which were disposed of subsequent to the balance sheet date together with fixed assets sold, are valued at December 31, 1994 at their net realizable value based on the sale price according to the sale agreement described in note 1d. Prior to that date, the goodwill was amortized over twenty years and the know-how over ten years. e. Deferred income taxes: The Group did not provide for deferred taxes, due to significant accumulated tax losses and other temporary differences representing net deferred tax asset, the realization of which is not considered likely. f. Revenue recognition Revenue from sale of products is recognized upon shipment. g. Research and development expenses Research and development expenses, net of participation by government ministries and others, are charged to income as incurred. h. Employee stock options The benefit from stock options granted to employees was charged to income through December 31, 1993. Since further exercise of the options is remote and amounts to be charged to income were not material, the Company did not record compensation expense in respect of options during 1994. i. Allowance for warranty costs As explained in note 9b, the Group companies provide warranties for their products. The allowance is computed based on management's estimation, and approximates actual costs. F-56 117 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 3 - INVESTMENT IN NORTH HILLS INC. The North Hills Group was acquired by Ace Inc. on May 11, 1993 from "Porta" (a U.S. Company). The final purchase price was $6,250 thousand. Acquisition expenses totaled $649 thousand. The excess of cost of the investment over net assets acquired amounted to $9,666 thousand, of which $1,231 thousand was allocated to land and buildings owned by North Hills Israel. The balance - $8,236 thousand - was defined as goodwill. The purchase was financed as follows:
$ thousands ----------------- Cash payment by Ace Inc. in May 1993 3,500 Notes furnished by Adacom to Porta in connection with the Company's issuance of rights to Adacom (see note 10a(3)): Note to be repaid on November 1994 1,200* Note to be repaid on November 1995 1,800* Cash payment to be made by Ace Inc. in April 1994 800* Note to be repaid by Ace Inc. in May 1995 700* ------- 8,000 Repayment of North Hills' bank loan (paid to the bank by Porta) 1,750 ------- 6,250 -------
o Part of the shares acquired were placed in trust as security for the repayment of the aggregate obligation of $4,500 thousand owed by Adacom and Ace to Porta. As Adacom and Ace Inc. failed to pay the amounts due in 1994 and 1995, the trustee to the transaction did not transfer the shares to the Company. Porta has several claims against the Group with regard to the following matters: Repayment of the notes amounting to $3,000 thousand (including interest) by Ace, even though the notes had been issued by Adacom. a. Repayment of the $1,750 thousand loan paid by Porta which, according to Porta, was not a part of the deal and therefore should be repaid to Porta. b. Repayment of the $1,500 thousand cash and notes to be paid by Ace. Management is of the opinion that the Group will not have to pay Porta any amounts over and above the amounts it has specifically committed as mentioned above. In the sale agreement mentioned in note id, Porta will receive MRV shares valued at $750 thousand. However, final settlement with Porta has not yet been set. F-57 118 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 4 - PROPERTY, EQUIPMENT AND OTHER ASSETS HELD FOR DISPOSITION: a. Composition of assets, grouped by major classifications at December 31, 1994: 1. Assets to be disposed under the sale agreement, see note 1c:
Accumulated depreciation Net and book Cost amortization value ------- ------------ ------- U.S. dollars in thousands ------------------------------------------- Equipment 1,624 768 856 Motor vehicles 339 130 209 Office furniture and equipment 498 252 246 ------- ------- ------- 2,461 1,150 1,311 Goodwill from purchase of North Hills 8,236 676 7,560 Know-how and other assets 220 172 48 ------- ------- ------- 8,456 848 7,608 ------- ------- ------- 10,917 1,998 8,919 ------- ------- ------- Write-down to net realizable value: Expected loss on disposal, based on the sale agreement (4,602) ------- Expected realization value 4,317 -------
2. Other assets to be disposed
Net Accumulated Write- Realizable Cost depreciation down value ------ ------------ ------ ---------- U.S. dollars in thousands -------------------------------------------------------- Land and building (see b. below) 3,216 355 1,000 1,861 Leasehold 25 25 - - improvements Vehicles 119 26 - 93 ------ ------ ------ ------ 3,360 406 1,000 1,954 ------ ------ ------ ------
b. In November 1995 North Hills received an offer to sell the building for $1,800 thousand. A creditor bank holding a mortgage on the property refused to allow the sale of the building at this price, expecting a better offer. Management is also considering the possibility of renting the building for the short-term. Nevertheless, as it appears likely that the building will be disposed of, the Company has provided $1,000 thousand in respect of a write-down for probable impairment of the asset. The land is leased from the Israel Lands Administration for 49 years, until 2035 to extend for another 49 years. c. As to charges on the assets, see note 13. F-58 119 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 5 - PROPERTY, EQUIPMENT AND OTHER ASSETS Composition by major classifications at December 31, 1993: Property and equipment:
Accumulated Depreciated Cost depreciation cost --------- ------------ ----------- U.S. dollars in thousands -------------------------------------------------- Land and building 3,127 262 2,865 Equipment 1,404 408 996 Motor vehicles 387 95 292 Office furniture and equipment 543 202 341 Leasehold improvements 73 16 57 --------- --------- --------- 5,534 983 4,551 ========= ========= =========
Other assets:
Accumulated Amortized Cost amortization balance -------- ------------ ----------- U.S. dollars in thousands -------------------------------------------------- Good-will originated to the purchase of North Hills 8,236 264 7,972 Know-how and other assets 220 95 125 --------- --------- --------- 8,456 359 8,097 ========= ========= =========
NOTE 6 - LONG-TERM LOANS: a. Composition of bank loans:
December 31 Interest -------------------------------- rate 1994 1993 -------- ----------- ----------- % U.S. dollars in thousands -------- -------------------------------- Loans linked to the U.S. dollar 8.2 180 271 Loan linked to the U.S. dollar Libor+1.8 - 2,000 --------- --------- 180 2,271 Less - current maturities 180 229 --------- --------- - 2,042 ========= =========
b. The loans mature in the following years subsequent to balance sheet dates:
December 31 -------------------------- 1994 1993 ------ ------ U.S. dollars in thousands -------------------------- First year - current maturities 180 229 Second year - 375 Third year - 222 Fourth year - 222 Fifth year and thereafter - 1,223 ------ ------ - 2,042 ------ ------ 180 2,271 ====== ======
c. As to collateral securing the loans, see note 13. F-59 120 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 7 - CONVERTIBLE DEBENTURE A debenture convertible into common shares with a par value of NIS 4,869,959 was issued in consideration for $1,989 thousand. The debenture bears interest of 3%, and the principal and interest are linked to the Israeli Consumer Price Index. Interest is payable only if the debenture is not converted into shares. The debenture holders have the right to elect one of the following alternatives: 1. To demand redemption of the debenture, principal and interest, in 16 equal quarterly installments. 2. To convert the debenture into common shares of the Company, at a price per share that is twice the "base price" ($286), linked to the Index. 3. To convert the shares issued and the debenture into common shares of Adacom Technologies Ltd., to be held in trust by Harris Adacom or its related company, at terms stipulated in the agreement between them. In this case, the Company will repay its liabilities under the terms of the debenture to Harris Adacom or to its related company. The debenture holders have not yet notified the Company as to the alternative chosen. The Company is obligated not to pay dividends before full conversion or full redemption of the debenture. The debenture balance at the balance sheet date includes accrued interest of $153 thousand (December 31, 1993 - $78 thousand). NOTE 8 - LIABILITY FOR TERMINATION OF EMPLOYEE-EMPLOYER RELATIONSHIP The liability of the Group for pension and severance pay to their employees is covered mainly by regular deposits with recognized pension and severance pay funds and by the purchase of insurance policies. The amounts funded as above are not reflected on the balance sheet since they are not under the control and management of the Group. The balance sheet accrual for severance pay reflects that part of the liability not covered by the above mentioned funds or insurance policies. F-60 121 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES: a. Commitments: 1. North Hills Israel leases a building in Yokneam, under an operating lease agreement expiring on June 30, 1996, and offices in Kfar Saba, under an operating lease agreement expiring on December 31, 1995. ACE Inc. leases office space and computer equipment, under operating lease agreements that expire on various dates through November 30, 1998. The aggregate minimum lease payments as of December 31, 1994, projected until the end of the lease periods are as follows:
$ In thousands ----------------- 1995 135 1996 96 1997 68 1998 58
The above-mentioned agreements have been assigned to the buyers, see note 1d. 2. Various agreements between the Group, Adacom Group and Harris Adacom Group, regarding sales, purchases and allocation of expenses, were signed during the years through December 31, 1993. Most of these agreements may not be relevant due to the financial situation of the Harris Adacom and Adacom groups. 3. The Company and North Hills Israel have agreements with distributors who are not related parties, whereby they are given discounts from the price list of up to 48%, or discounted commissions. These agreements are also being transferred to the Buyers. b. Contingent liabilities: 1. Under the distribution agreements, the Company and North Hills Israel provide a warranty for their products, limited to defective materials or workmanship, for periods ranging between one and three years. Based on past experience, management is of the opinion that the accrual included in the financial statements is sufficient to cover expenses to be incurred, if any, with respect to the warranties. 2. Under research and development contracts with the Government of Israel, the Company and North Hills are obligated to pay royalties of 2%-3% to the Government of Israel out of sale proceeds resulting from the research and development in whose financing the Government has participated. The total amount of the royalties is not to exceed the amount of the grants received as participation in the research and development projects. The total royalty-bearing grants received as of December 31, 1994 (net of royalties paid) is approximately $5,150 thousand. This contingent obligation was transferred under the sale agreement to the Buyers, see note 1d. F-61 122 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994 3. Under contracts with the Government of Israel, the company and North Hills have received grants in respect of marketing expenses outside Israel. They are contingently liable to pay 3% royalties to the Government of Israel out of the incremental sales resulting from the marketing program in which the Government participated, but not exceeding the grant received. The grants received through December 31, 1994 (net of royalties paid) amounted to $2,500 thousand. 4. A lawsuit for $435 thousand has been filed against North Hills Israel by the main contractor on its building in Yokneam. North Hills Israel has filed a counter suit for $985 thousand. On November 15, 1995 the district court rejected the contractor's claim against North Hills Israel and imposed payment of an immaterial amount in favor of North Hills Israel. The contractor has the right to appeal to the supreme court. No provision has been recorded in connection with this claim. 5. Two lawsuits by vendors in the aggregate amount of $110 thousand have been filed against North Hills Israel. No provision has been recorded. Management, supported by the opinion of its legal counsel, is of the opinion that North Hills Israel will not have to pay any amount as a result of these lawsuits. 6. The Company and two related companies of Adacom are guarantors, jointly and severally, to the customs authorities for any amounts owed that have not been paid by Adacom. 7. For amounts in dispute with Porta, see Note 3. NOTE 10 - SHARE CAPITAL: a. Authorized, issued, and outstanding share capital is composed as follows:
Common shares, NIS 1 par value shares ------------------------------ Issued and Authorized outstanding ---------- ----------- Number of shares ------------------------------- Balance as of January 1, 1993 1,000,000 77,162 Issuances on May 30, 1993(2) - 2,625 Issuance by way of rights in August 1993(3) - 12,478 ---------- ---------- Balance as of December 31, 1993 1,000,000 92,265 Exercise of options by employees 90 Balance as of December 31, 1994 1,000,000 92,355 ========== ==========
1. In August 1992, the Company issued shares and a debenture. The parties that handled negotiations related to the offering on behalf of the Company received commissions and options to acquire additional shares which have not been exercised to date. Such offering expenses were offset against the proceeds of the offering. 2. Represents the issuance of 700 shares to the President of Adacom at that time, in consideration for $137 thousand that he received as a loan from Adacom, and the issuance of 1,925 shares to the President of the Company at that time, in consideration for $442 thousand that he received as a loan from the Company. These issuances resulted from the exercise of previously granted options. See also b. below. Pursuant to an agreement, due to the fact that the loans have not been repaid, the shares passed to the control of Adacom. The loan to the former president of the Company was offset against the premium recorded at the time of issuance. F-62 123 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994 1. Represents the issuance of 12,478 shares by way of rights offering, in consideration for $3,993 thousand. 10,370 of these shares were issued to Adacom, in consideration for $3,317 thousand; $317 was paid in cash, and $3,000 was paid in capital notes that were transferred to Porta for the purchase of the shares of North Hills Inc. b. Employee stock options In consideration for services received, the Company decided to issue to its officers and employees and to its related companies, officers and employees, including certain service providers, options to purchase common shares. During 1994, $18 thousand were received in consideration for 90 shares issued from the exercise of 90 options. As the exercise price is high, the probability is remote that any further exercises will be made. NOTE 11 - TAXES ON INCOME: a. Benefits under - the Law for Encouragement of Capital Investments ("the Law") The Company's and North Hills Israel's production facilities have been granted "approved enterprise" status under the Law. Therefore, they are entitled to tax benefits, including reduced tax rates or full exemption. North Hills Israel has also received grants in connection with its investments. The benefits are contingent upon compliance with conditions stipulated in the Law, regulations enacted thereon, and the instruments of approval for the specific investments made in the approved enterprise. Due to the losses of the companies, utilization of the tax benefits is considered remote. b. As of December 31, 1994 the Company and North Hills Israel have approximately $7,000 thousand of tax loss carryforwards. Ace Inc. and North Hills Inc. have approximately $3,500 thousand of tax loss carryforwards. c. Tax assessments The Company has received final tax assessments through 1991, North Hills Israel received final tax assessments through 1993 inclusive; ACE Inc., North Hills France have not been assessed for tax purposes since their incorporation. F-63 124 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 12 - LINKAGE TERMS OF MONETARY BALANCES:
December 31, 1994 -------------------------------------------------------- In foreign currency or linked Linked thereto to index Unlinked Total ----------- -------- -------- ----- U.S. dollars in thousands --------------------------------------------------------- Cash and cash equivalents* 337 337 Trade receivables 2,171 107 2,278 Other receivables 829 21 286 1,136 --------- --------- --------- --------- 3,337 21 393 3,751 ========= ========= ========= ========= Short-term bank credit and loans 9,733 - 3,476 13,209 Related parties 3,218 - 3,218 Trade payables 1,327 - 1,287 2,614 Other payables 2,225 - 832 3,057 Long-term loans, including current maturities 180 - - 180 Convertible debenture - 2,295 - 2,295 --------- --------- --------- --------- 16,683 2,295 5,595 **24,573 ========= ========= ========= =========
* Cash of subsidiaries in the U.S. and in France. May only be used for payment of their liabilities and may not be transferred to Israel. ** Most of the liabilities are in arrears. NOTE 13 - LIABILITIES SECURED BY PLEDGES: To secure the commitments, guarantees discussed in Note 9b and commitments to the Israel Investment Center, the Company and North Hills Israel have registered fixed charges on the rights on the land and building, vehicles and the rights thereon, share capital, goodwill, cash, securities, deposits at banks, and insurance rights, as well as floating charges on the entire plant and assets, unlimited in amount. Liabilities to banks and debenture holders that are secured by charges at the balance sheet date are as follows:
December 31 ------------------------ 1994 1993 ------- ------- U.S. dollars in thousands ------------------------- Short-term bank credit and loans 13,209 8,347 ====== ===== Long-term liabilities (including current maturities) 180 2,271 ====== ===== Convertible debenture 2,295 1,971 ====== =====
F-64 125 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION Balance sheet: a. Trade receivables:
December 31 ------------------------- 1994 1993 ------- ------- U.S. dollars in thousands ------------------------- Foreign customers: U.S. 235 1,302 other (primarily Europe) 1,936 4,943 Domestic customers 107 251 ------- ------ 2,278 6,496 ======= ====== Customers are stated net of: Allowance for bad accounts 3,893 546 ======= ====== b. Accounts receivable - other Government of Israel, in respect of: Participation in research and development 235 557 V.A.T. and customs duties refundable 16 310 Income tax refundable 188 136 Marketing promotion fund - 702 Advances to suppliers 165 - Miscellaneous 72 286 Related parties 460 673 ------- ------ 1,136 2,664 ======= ====== c. Inventories: Raw materials and components 647 1,398 Work in process 777 2,067 Finished goods 1,202 2,243 ------- ------ 2,626 5,708 Write-down, see notes 1d and 14m 2,106 - ------- ------ 520 5,708 ======= ====== d. Short-term bank credit and loans: Banks: Short-term credit at average interest rates of 17% - 24% 2,017 2,879 Short-term loans (1) 11,192 5,468 ------- ------ (1) - Linked to the dollar at 13,209 8,347 average interest rate of 8% 9,868* 3,350 - Loans in NIS at average interest rate of 19.3% 1,324 2,118 ------- ------ 11,192 5,468 ======= ======
*Including a loan of $2,000 thousand which was presented as a long-term loan in the previous year which was not renewed by the bank in 1994. F-65 126 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994
December 31 ------------------------- 1994 1993 ------- ------- U.S. dollars in thousands ------------------------- e. Accounts payable - trade: Foreign suppliers 669 l,133 Domestic suppliers: Checks payable 514 40 Open accounts 1,431 2,407 ------- ------ 2,614 3,580 ======= ====== f. Other payables and accrued expenses: Porta 916 360 Accrued payroll and related expenses 267 373 Accrual for vacation and convalescence 111 152 Governmental institutions 281 223 Other 1,482 1,184 ======= ====== 3,057 2,292 ======= ======
Statement of operations: Year ended December 31 -------------------------------- 1994 1993 1992 ------- ------- ------- U.S. dollars In thousands -------------------------------- g. Sales - net: Sales - geographic distribution: Abroad - United States 2,947 4,116 4,269 Rest of the world (mainly Europe) 10,130 10,185 3,985 Domestic 700 708 537 ------- ------- ------- 13,777 15,009 8,791 ======= ======= ======= h. Cost of sales: Materials and components consumed (including work in process purchased from the parent company) 7,l64 8,834 4,081 Wages and employee benefits 678 428 26 Depreciation 48 29 7 Other manufacturing costs 194 287 50 Purchases of finished goods 263 225 163 ------- ------- ------- 8,347 9,803 4,327 Decrease (increase) in inventories: Work in process 593 (1,184) (136) Finished goods 555 (606) 232 ------- ------- ------- Total - cost of sales 9,495 8,013 4,423 ======= ======= =======
F-66 127 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994
Year ended December 31 ----------------------------------- 1994 1993 1992 ------- ------- ------- U.S. dollars in thousands ----------------------------------- i. Research and development expenses Expenses incurred 2,235 2,422 1,127 Less - royalty-bearing grants received from the Government of Israel 190 1,079 479 ------ ------ ----- 2,045 1,343 648 Less - capitalized development costs - - 219 ------ ------ ----- 2,045 1,343 429 ====== ====== ===== j. Selling, general and administrative expenses (income) - net: Payroll and related expenses 2,708 1,883 783 Other expenses - net 3,845 4,271 2,011 Participation by the Fund for the Promotion of Marketing Abroad - (892) (410) ------ ------ ----- 6,553 5,262 2,384 ====== ====== ===== k. Bad debts, write-off of inventories and other expenses: Write-off of certain assets, wages and other expenses as a result of the acquisition of North Hills - (1,331) - Provision for bad accounts (3,846) (378) (70) Amortization of goodwill (412) (264) - Compensation in respect of employee options - (103) (37) Write-off of inventories (1,647) - - Other expenses, net (1,299) (234) 21 ------ ------ ----- (7,204) (2,310) (86) ====== ====== ===== l. Financial expenses - net: Amortization of issue costs and interest on convertible debenture 87 65 24 Interest on long-term liabilities 186 64 9 Interest income from related companies - net (75) (60) (39) Interest on short-term credit and currency translation differences from monetary balances, net 1,836 376 66 ------- ------ ----- 2,034 445 60 ======= ====== =====
F-67 128 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994 m. Loss on disposal of assets Write-down of inventories to minimum value based on agreement 2,106 Loss on disposal of property, equipment and other assets, see note 4 4,602 ------ Expected loss on disposal based on the agreement, see note ld 6,708 Write-down of the building, see note 4 1,000 ------ Expected loss on disposal of assets 7,708 ------
NOTE 15 BALANCES AND TRANSACTIONS WITH RELATED PARTIES:
1994 1993 ------ ------ U.S. dollars in thousands ------------------------- a. Balances 1) Accounts receivable - trade Adacom Group 149 1,016 Harris Adacom Group 40 959 ------ ------ 189 1,975 ====== ====== 2) Accounts receivable - other Harris Adacom 460* 460* Adacom Group - 213 ------ ------ 460 673 ====== ====== 3) Accounts payable and credit balances Adacom Group 2,703 1,244 Harris Adacom Group 515* 541* ------ ------ 3,218 1,785 ====== ======
The Group has provided for most of the balances of the Adacom Group and Harris Adacom Group because of their financial situation, see note lb. * In 1993, Ace Inc. paid $460 thousand to Harris Adacom in connection with the purchase of North Hills. The Board of directors of the company did not approve the payment, so Ace Inc. debited Harris Adacom. As the amount is in dispute, Ace Inc. has provided for this amount. b. Transactions: The company purchased raw materials and products in process from Adacom at cost, up through the date of the appointment of Adacom's receiver (see note lc). Subsequent to that date, raw materials were purchased from Adacom, at 50% of their cost Sales to the Harris Adacom and Adacom Groups, after appointment of the receiver to Adacom, were made at the same prices as to non-related customers, for cash only. Reimbursement of expenses made by Adacom to third parties were at cost. F-68 129 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,1994
Year ended December 31 --------------------------------- 1994 1993 1992 ------- ------- ------- U.S. dollars in thousands --------------------------------- 1) Sales: In the U.S. - to: Harris Adacom Group 272 345 823 ====== ====== ====== Adacom Group - 155 333 ====== ====== ====== In rest of world (mainly Europe) to: Harris Adacom Group 684 1,025 1,475 ====== ====== ====== Adacom Group 895 408 - ====== ====== ====== In Israel Adacom Group 240 557 350 ====== ====== ====== 2) Cost of sales: Purchases from Adacom 3,279 3,869 3,997 ====== ====== ====== Expenses to (participation by) Adacom for wages 66 - (41) ====== ====== ====== 3) Research and development expenses: Expenses to (participation by) Adacom Group 19 - (52) ====== ====== ====== 4) Marketing, selling, general and administrative expenses Expenses to (participation by) Adacom Group - net 127 489 649 ====== ====== ====== Expenses to Harris Adacom - 60 120 ====== ====== ======
F-69 130 ACE 400 COMMUNICATIONS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1994
Year ended December 31 --------------------------------- 1994 1993 1992 ------- ------- ------- U.S. dollars in thousands --------------------------------- 5) Financial expenses - net: Interest income from Adacom Group (53) (57) - ====== ====== ====== Expenses to parent company - 134 - ====== ====== ====== Interest income from Harris Adacom Group (22) (137) (39) ====== ====== ====== 6) Other expenses: Provision for doubtful accounts and bad debts: Harris Adacom Group 1,270 290 - ====== ====== ====== Adacom Group 1,001 103 - ====== ====== ====== Participation by Adacom - (400) - Expenses to Harris Adacom in respect of the purchase of North Hills - 500 - ====== ====== ====== 7) With regard to a loan to the President of the company, see note 10.
F-70 131 UNAUDITED ACE 400 COMMUNICATIONS, LTD. STATEMENT OF OPERATIONS FOR THE PERIOD JANUARY 1, 1995 TO JUNE 29, 1995
(IN THOUSANDS US$) REVENUES, NET $5,727 COSTS AND EXPENSES Cost of goods sold 3,607 Research and development expenses 529 Selling, general and administrative expense 1,894 ------ 6,030 ------ Operating loss (303) Other expense (517) Provision for income tax -- ------ Net loss $ (820) ======
F-71 132 ACE 400 COMMUNICATIONS, LTD. FOR THE PERIOD JANUARY 1, 1995 TO JUNE 29, 1995 UNAUDITED
CONSOLIDATED STATEMENT OF CASH FLOWS (000'$) Net loss (820) Adjustment to reconcile net loss to net cash used in operation 211 --- Net cash used in operating activities (609) CASH FLOWS FROM INVESTING Purchases of property (30) CASH FLOWS FROM FINANCING Net proceeds from borrowing 632 NET DECREASE IN CASH (7) CASH, beginning of period 337 --- CASH, end of period 330 ===
F-72 133 ACE 400 COMMUNICATIONS, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - The accompanying unaudited condensed financial statements have been prepared in accordance with the requirements of Regulation S-X and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the audited financial statements presented in the Company's Annual Report for the year ended December 31, 1995. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the period presented. The results of operations and cash flows for such period is not necessarily indicative of results to be expected for the full year. 2. SUBSEQUENT EVENT - On June 29, 1995 the Ace Inc., North Hills Inc. and North Hills Israel (hereafter "the Seller") signed agreement with N.N.H. Computer Communications Ltd. and affiliates (hereafter "the Buyers"), including MRV Communications, Inc. (hereafter "MRV"). The execution of the agreement was based on meeting several pre-conditions which were substantially fulfilled. The main aspects of the agreement are as follows: The sellers will sell to the buyers goodwill, know-how, fixed assets (not including North Hills Israel's building), production files, research and development files, agreements with customers (including backlog) and suppliers and other agreements and contracts, the right to use software and the right to use North Hills Israel's building up to January 31, 1996 (including right of first refusal to continue to rent or buy the building). The total consideration for the above is expected to be $4,316,667, as follows: MRV will issue shares to the Company and North Hills Israel at a minimum guaranteed value of $3,000,000 (according to the share price as defined in the agreement) and shares at a minimum guaranteed value of $750,000 to Porta Systems. The buyers will also $100,000 in cash and will pay to suppliers of the sellers $466,667. F-73 134 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The following table sets forth the costs and expenses payable by the Registrant in connection with the sale of the Common Stock being registered hereby, other than underwriting commissions and discounts, all of which are estimated except for the SEC and NASD filing fees.
Item Amount ---- ------ SEC registration fee* ................................... $ 1,138 Nasdaq/National Market Filing Fee ....................... ------- Blue Sky fees and expenses .............................. 2,000 Printing and engraving expenses ......................... 55,000 ======= Legal fees and expenses ................................. Accounting fees and expenses ............................ ------- Transfer Agent and Registrar fees ....................... ------- Miscellaneous expenses .................................. ------- Total ............................................... $75,000 =======
- ------------------ * Based on an assumed public offering price of $33.00 per share. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law allows for the indemnification of officers, directors, and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article 8 of the Registrant's Certificate of Incorporation (Exhibit 3a hereto) and Article IX of the Registrant's Bylaws (Exhibit 3b hereto) provide for indemnification of the Registrant's directors, officers, employees, and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. The Registrant has also entered into agreements with its directors and executive officers that will require the Registrant, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors to the fullest extent not prohibited by law. II-1 135 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The Registrant has issued and sold the following unregistered securities(1) during the past three years: Between February 23, 1994 and September 1, 1994, the Registrant granted an aggregate of 111,700 stock options under its 1992 Stock Option Plan at exercise prices ranging from $4.625 to $7.00 per share and expiring between February 23, 1999 and September 1, 1999. On June 29, 1995, in connection with the acquisition, certain assets of ACE 400 Communication, Ltd., the Company issued 284,977 shares of Common Stock to certain persons affiliated with the seller. These shares were issued as part of the consideration for the purchase of the assets and are included in this registration statement for resale by the Selling Stockholders identified in the Prospectus. Also, in connection with the ACE 400 acquisition, the Company issued warrants, the ("ACE Warrants") to purchase 100,000 shares at $13.72 per share. The ACE Warrants are exercisable for a period of 5 years. In addition, in connection with the Acquisition, the Company issued 10,000 Warrants to an ACE employee at a price of $14.00 per share, exercisable for 5 years. These Warrants are included in the Selling Warrant Holders section. In connection with the acquisition of assets from Galcom Networking, Ltd., the Company in May 1995 issued Warrants, "Galcom Warrants" to purchase 75,000 shares of Common Stock at prices ranging from $14.75 to $22.125 per share. The Galcom Warrants are exercisable for a period of 5 years. Also, in connection with the Galcom Acquisition, the Company issued 25,000 Warrants to purchase Common Stock to certain individuals who were former employees of Galcom at prices ranging from $12.75 to $14.25 per share. These Warrants are exercisable over a period of 5 years. These Warrants are included in the Selling Warrant Holders section of the Prospectus. In July of 1995, the Company issued 33,000 Warrants to certain employees and consultants in Israel. The exercise price was $12.75 per share and the term was for five years. In July 1995, the Company issued Warrants, "Israel Warrants" in an incentive award plan for employees and consultants of its subsidiary in Israel. The plan called for the issuance of Warrants to purchase up to 330,000 shares at prices ranging from $12.75 to $14.25. These Warrants are included in the Selling Warrant Holders section. In July 1995, the Company issued Warrants to Jacques Cory to purchase 15,000 shares at $12.75 per share for a period of 5 years, for consulting services. These Warrants are included in the Selling Warrant Holders section. In July 1995, the Company issued Warrants to purchase 12,000 shares to GME Design, Inc., at price of $12.75 per share exercisable for 5 years. These Warrants were for design services and are included in the Selling Warrant Holders section. In January 1996, the Company issued Warrants to GME Design to purchase 5,000 shares at exercise price of $25.25 per share. These Warrants were for design services. These Warrants are included in this registration statement. - --------------------- (1) Does not give effect to the 3:2 stock split paid April 2, 1996. II-2 136 In January 1996, the Company issued 143,330 Warrants to Ciambellini and Associates to purchase Common Stock at an exercise price of $25.25 per share for a term of five years. The Warrants were issued in exchange for the right to acquire 50% interest in an Italian networking business. The right was exercised in May 1996. The 50% interest in the assets and operating income of the acquired business amounted to less than 10% of the assets and operating loss of MRV for the December 31, 1995 fiscal year. The Warrants are included in the current registration statement. In January 1996, the Company issued 16,667 Warrants to purchase Common Stock to Israeli and European business consultants at an exercise price $25.25, for a term of five years. The Warrants were issued for consulting services. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Act, or Regulation D promulgated thereunder. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. All recipients had adequate access to information about the Registrant. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits 1** Form of Underwriting Agreement. 2a* Agreement and Plan of Merger by and between MRV Technologies, Inc. (a California corporation) and MRV Technologies, Inc. (a Delaware corporation), as amended. 2b* Certificates of Merger by and between MRV Technologies, Inc. (a California corporation) and MRV Technologies, Inc. (a Delaware corporation). 3a* Certificate of Incorporation, as amended. 3b* Bylaws. 4b* Specimen Common Stock Certificate. 4c* Specimen Common Stock Purchase Warrant. 4d* Form of Warrant Agreement. 4f** Form of Underwriter's Warrant issued to Hampshire Securities. 4g Warrants of Selling Warrant Holders as follows: 4g(1)***** Galcom Warrants for 60,000 and 15,000 shares, dated May 1, 1995. 4g(2)***** Henry Tellner Warrant for 8,000 shares, dated July 16, 1995. II-3 137 4g(3)***** Phillipe Scwarc Warrant for 5,667 shares, dated August 3, 1995. 4g(4)***** Danny Yellin Warrant for 5,666 shares, dated August 8, 1995. 4g(5)***** Yakov Sfadya Warrant for 5,667 shares, dated August 6, 1995. 4g(6)***** Lippa Meir/Alon Cohen Trustees, Warrant for 100,000 shares, dated June 29, 1995. 4g(7)***** Benny Glazer Warrant for 10,000 shares, dated July 24, 1995. 4g(8)***** Nathan Shilo Trustee, Warrants for 330,000 shares, dated July 13 and 19, 1995. 4g(9)***** GME Design Warrant for 12,000 shares, dated October 19, 1995. 4g(10)***** Jacques Cory Warrants for 15,000 shares, dated November 17, 1995. 4g(11)+ Oscar Gruss & Sons 4g(12)+ Northview Trading Ltd. 4g(13)+ Heidron Engler 4g(14)+ Robert Coane 4g(15)+ Jeanette Coane Cust for Robert Coane Jr. 4g(16)+ Jeannete Coane Cust for Mary Coane 4g(17)+ Jeanette Coane Cust for Kevin Coane 4g(18)+ Daryl Hagler 4g(19)+ Timothy Essaye 4g(20)+ Oscar Gruss & Sons 4g(21)+ Dave Koch 4g(22)+ Bill Musser 4g(23)+ Isabelle Orlansky 4g(24)+ Isabelle Orlansky 4g(25)+ Northview Trading Ltd. 4g(26)+ Dara Kiely 4g(27)+ James Powers II-4 138 4g(28)+ Steven Rosner 4g(29)+ Terence Lambert 4g(30)+ Mark Riez 4g(31)+ James C. Powers 4g(32)++ Jay Tucker 4g(33)++ Barker Lee & Co. 4g(34)++ J.M.R. Barker Foundation 4g(35)++ Quaker Hill Associates 4g(36)++ Upland Associates, L.P. 4g(37)++ Namakagon Associates, L.P. 4g(38)++ David Koch 4g(39)++ Jean Michel Nahon 4g(40)++ Lucien Selle 4g(41)++ Perlman Associates 4g(42)++ JJ Newport 4g(43)++ James C. Powers 4g(44)++ Jay Tucker 4g(45)++ Daniel Perlman 4g(46)++ Bank of the West Trustee 4g(47)++ Tom Callahan 4g(48)++ CUS Trust 4g(49)++ Alvarado Partners 4g(50)++ Perlman & Associates 4g(51)++ The Excelsior Fund 4g(52)++ Jim Powers 4g(53)++ J. Steven Emerson II-5 139 4g(54)++ Banque de Gestion G De Rothschild Luxembourg 4g(55)++ Joel Packer 4g(56)++ Banque Privee Edmond de Rothschild S.A./Geneva 4g(57)++ Sergio Ciambellini 4g(58)++ Elio Bianchi 4g(59)++ Everest Capital International Ltd. (To be filed by later amendment) 4g(60)++ Everest Capital (To be filed by later amendment) + Issued with pre split quantity ++ Issued with post split quantity 5 Opinion of Freshman, Marantz, Orlanski, Cooper & Klein, to be filed by Amendment. 10a* Lease for premises at 8917 Fullbright Avenue, Chatsworth, CA dated August 5, 1991. 10a(1)* Lease for premises at 8943 Fullbright Avenue, Chatsworth, CA dated March 3, 1993. 10b(1)* Key Employee Agreement between the Company and Noam Lotan dated March 23, 1993. 10b(1)1* Letter amending Key Employee Agreement between the Company and Noam Lotan. 10b(1)2** Letter amending Key Employee Agreement between the Company and Noam Lotan. 10b(2)* Key Employee Agreement between the Company and Zeev Rav-Noy dated March 23, 1992. 10b(2)1* Letter amending Key Employee Agreement between the Company and Zeev Rav-Noy. 10b(2)2** Letter amending Key Employee Agreement between the Company and Zeev Rav-Noy. 10b(3)* Key Employee Agreement between the Company and Shlomo Margalit. 10b(3)1* Letter amending Key Employee Agreement between the Company and Shlomo Margalit. 10b(3)2** Form of Letter amending Key Employee Agreement between the Company and Shlomo Margalit. 10b(4)* Employment Letter between the Company and Khalid (Ken) Ahmad dated August 8, 1990. 10c(1)* Overview of Bridge Financing for the Company dated March 1992. 10c(2)* Form of Warrant issued in connection with Bridge Financing and to certain consultants. 10c(3)* Form of Promissory Note issued in connection with Bridge Financing. II-6 140 10c(5)* Schedule of Bridge Investors. 10d(1)* Agreement between the Company and Managerial Resources, Inc. dated January 15, 1992. 10d(2)* Agreement between the Company and the Department of the Navy dated November 21, 1991. 10d(4)* Agreement by and among the Company, Tritek International Company, China National Electronics Import & Export Corporation and Jiangxi Nancheng Tiangnan Radio Material Factory dated as of November 28, 1988. 10d(5)* Promissory Note in principal amount of $50,000 issued by the Company to An-Pin Chen dated December 18, 1989, as amended. 10d(6)* Promissory Note in principal amount of $50,000 issued by the Company to Pacific Tritek, Inc. Defined Benefit Plan dated December 18, 1989, as amended. 10e* Promissory Note in principal amount of $204,140 by the Company to Julian Cole and Stein dated February 28, 1992. 10f* Form of Stock Escrow Agreement between the American Stock Transfer & Trust Company and Certain Stockholders. 10g* 1992 Stock Option Plan. 10h* Form of Financial Consulting Agreement between the Company and Thomas James. 10i* Form of Mergers/Acquisition Agreement between the Company and Thomas James. 10j* Restricted Stock Agreement between the Company and Khalid (Ken) Ahmad. 10k* Development and Manufacturing Agreement between the Company and Laser Precision Corporation dated December 13, 1990. 10l* License Agreement between the Company and Laser Precision Corporation dated December 13, 1990. 10m* Form of Distributor Agreement and List of Current Distributors. 10n* Form of Sales Representative Agreement and List of Current Sales Representatives. 10o* Form of Warrant issued to Managerial Resources, Inc. 10p*** Agreement for Sale and Purchase of Assets of ACE dated June 29, 1995. 10q**** Agreement for Purchase of Galcom Assets dated March 21, 1995. 10r***** Agreement regarding Incentive Plan for 330,000 Warrants re ACE. 10s***** Letter of Agreement regarding Founders Agreement, Galcom. II-7 141 11***** Statement regarding computation of per share earnings. 21 List of subsidiaries (page II-11). 24a Consent of Arthur Andersen LLP (page II-12). 24b Consent of Freshman, Marantz, Orlanski, Cooper & Klein (contained in Exhibit 5). 24c Consent of Almagor & Co. (page II-13). 24d Consent of Sterling, Nappen, Chavkin & Co., LLC (page II-14) 24e Consent of Ratzkovsky Fried & Co. (page II-15). 24f Consent of Groupe France Audit s.a. (page II-16). 25***** Power of Attorney. - ----------- * Incorporated by reference from, and all such Exhibits have the same corresponding Exhibit number filed as part of, Registrant's Registration Statement on Form S-1 (File No. 33-48003) and the Amendments thereto as filed with the Commission on May 27, July 14, August 14, November 9, and December 2, 1992. ** Incorporated of reference from, and all such Exhibits have the same corresponding Exhibit Numbers filed as part of, Registrant's Registration Statement on Form S-1 (33-86516), effective January 11, 1995. *** Incorporated by reference to Registrant's Report on Form 8k (0-23452) dated June 29, 1995, with respect to the ACE Acquisition, Exhibit No. 2.1 & 2.1a. **** Incorporated by reference to Registrant's Report on Form 8k (0-23452), dated May 1, 1995 with respect to the Galcom Acquisition, Exhibit No. 2.1 and 2.1a. ***** Previously filed. (b) FINANCIAL STATEMENT SCHEDULES All schedules are omitted because they are inapplicable or the requested information is shown in the financial statements of the Registrant or related notes thereto. ITEM 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as, expressed in the Securities Act and will be governed by the final adjudication of such issue. II-8 142 The undersigned Registrant hereby undertakes to provide to the Underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (5) That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-9 143 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS PRE-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHATSWORTH, STATE OF CALIFORNIA, ON THE 29TH DAY OF MAY, 1996. MRV COMMUNICATIONS, INC. By: /s/ Noam Lotan ---------------------------- Noam Lotan, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-EFFECTIVE AMENDMENT NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. Names Title Date /s/ Noam Lotan President, Chief Executive May 29, 1996 - ------------------------------ Officer (Principal ------------ Noam Lotan Executive Officer), and a Director /s/ Zeev Rav-Noy Chief Operating Officer, May 29, 1996 - ------------------------------ Treasurer, and a Director ------------ Zeev Rav-Noy /s/ Shlomo Margalit Chairman of the Board, May 29, 1996 - ------------------------------- Chief Technical Officer, ------------ Shlomo Margalit Secretary, and a Director /s/ Edmund Glazer Vice President of Finance May 29, 1996 - ------------------------------- and Administration, ------------ Edmund Glazer Chief Financial Officer - ------------------------------- Director ------------ Leonard Mautner - ------------------------------- Director ------------ Milton Rosenberg *By /s/ Noam Lotan ------------------------- Noam Lotan, Attorney-in-fact II-10 144 EXHIBIT 21 LIST OF SUBSIDIARIES 1) Nbase Communications, Inc., a Maryland corporation 2) N.N.H. Computer Communications, Inc., a Kansas corporation 3) NBase Communications, Ltd., an Israeli corporation 4) NBase UK Ltd., a United Kingdom corporation II-11 145 EXHIBIT 24.a CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report and to all references to our Firm included in or made part of this registration statement. ARTHUR ANDERSEN LLP Los Angeles, California May 24, 1996 II-12 146 [BDO ALMAGOR & CO. CPA (ISR) LETTERHEAD] May 3, 1996 To: MRV Communications Inc. 8943, Fulbright Avenue, Chatsworth, CA 91311 U.S.A. Dear Sirs, Re: Galcom Networking Ltd. ("the Company") -------------------------------------- As independent auditors of the Company, we hereby consent to the inclusion of our report dated June 7, 1995 accompanying the consolidated financial statements of the Company as at December 31, 1994 and 1993 and for the three years in the period ended December 31, 1994, and all references to our name as auditors of Galcom Networking Ltd. in your company's prospectus to be published in May 1996. Yours faithfully, BDO Almagor & Co. BDO Almagor & Co. Certified Public Accountants II-13 147 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the registration statement on Form S-1 (No.:333-00210) of MRV Communications, Inc. of our report dated January 26, 1995 relating to the financial statements of Galcom, Inc. as of December 31, 1994 and 1993, and the related statements of operations and deficit and cash flows for the years then ended. Sterling, Nappen, Chavkin & Co., LLC STERLING, NAPPEN, CHAVKIN & CO., LLC Livingston, New Jersey May 14, 1996 II-14 148 [RATZKOVSKY FRIED LETTERHEAD] CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form S-1 and each prospectus constituting part of this Registration Statement of our report dated November 22, 1995 on the consolidated financial statements of Ace 400 Communications Ltd. included in the audited Pro Forma Balance Sheet and Statement of Income of MRV Communications Inc. as of December 31, 1994 and for the fiscal year ended December 31, 1994. We also consent to the reference to our firm under the caption "Experts" in each prospectus included in the Registration Statement. /s/ RATZKOVSKY FRIED & CO. ---------------------------------- Haifa, Ratzkovsky Fried & Co. May 2, 1996 Certified Public Accountants (Isr.) II-15 149 [HLB GROUPE FRANCE AUDIT S.A. LETTERHEAD] CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form S-1 and each prospectus constituting part of this Registration Statement of our report dated November 22, 1995 on the financial statements of North Hills Europe which have been consolidated in the financial statements of Ace 400 Communications Ltd. included in the unaudited Pro Forma Balance Sheet and Statement of Income of MRV Communications Inc. as of December 31, 1994 and for the fiscal year ended December 31, 1994. We also consent to the reference to our firm under the caption "Experts" in each prospectus included in the Registration Statement. Paris, May 1st, 1996 POUR SOFIDEEC, ASSOCIEE /s/ M.F. EL MGHAZLI ------------------------------------- M.F. EL MGHAZLI President Directeur General Expert-Comptable, Commissaire aux Comptes, Associe II-16 150 EXHIBIT INDEX
Sequentially Numbered Exhibit Description Page - ------- ----------- ------------ 1** Form of Underwriting Agreement. 2a* Agreement and Plan of Merger by and between MRV Technologies, Inc. (a California corporation) and MRV Technologies, Inc. (a Delaware corporation), as amended. 2b* Certificate of Merger by and between MRV Technologies, Inc. (a California corporation) and MRV Technologies, Inc. (a Delaware corporation). 3a* Certificate of Incorporation, as amended. 3b* Bylaws. 4b* Specimen Common Stock Certificate. 4c* Specimen Common Stock Purchase Warrant. 4d* Form of Warrant Agreement. 4e* Form of Warrant issued to Thomas James Associates, Inc. 4f** Form of Underwriter's Warrant issued to Hampshire Securities. 4g Warrants of Selling Warrant Holders as follows: 4g(1)***** Galcom Warrants for 60,000 and 15,000 shares, dated May 1, 1995. 4g(2)***** Henry Tellner Warrant for 8,000 shares, dated July 16, 1995. 4g(3)***** Phillipe Scwarc Warrant for 5,667 shares, dated August 3, 1995. 4g(4)***** Danny Yellin Warrant for 5,666 shares, dated August 8, 1995. 4g(5)***** Yakov Sfadya Warrant for 5,667 shares, dated August 6, 1995. 4g(6)***** Lippa Meir/Alon Cohen Trustees, Warrant for 100,000 shares, dated June 29, 1995. 4g(7)***** Benny Glazer Warrant for 10,000 shares, dated July 24, 1995. 4g(8)***** Nathan Shilo Trustee, Warrants for 330,000 shares, dated July 13 and 19, 1995. 4g(9)***** GME Design Warrant for 12,000 shares, dated October 19, 1995.
151
Sequentially Numbered Exhibit Description Page - ------- ----------- ------------ 4g(10)***** Jacques Cory Warrants for 15,000 shares, dated November 17, 1995. 4g(11)+ Oscar Gruss & Sons 4g(12)+ Northview Trading Ltd. 4g(13)+ Heidron Engler 4g(14)+ Robert Coane 4g(15)+ Jeanette Coane Cust for Robert Coane Jr. 4g(16)+ Jeanette Coane Cust for Mary Coane 4g(17)+ Jeanette Coane Cust for Kevin Coane 4g(18)+ Daryl Hagler 4g(19)+ Timothy Essaye 4g(20)+ Oscar Gruss & Sons 4g(21)+ Dave Koch 4g(22)+ Bill Musser 4g(23)+ Isabelle Orlansky 4g(24)+ Isabelle Orlansky 4g(25)+ Northview Trading Ltd. 4g(26)+ Dara Kiely 4g(27)+ James Powers 4g(28)+ Steven Rosner 4g(29)+ Terence Lambert 4g(30)++ Mark Riez 4g(31)++ James C. Powers 4g(32)++ Jay Tucker 4g(33)++ Barker Lee & Co.
152
Sequentially Numbered Exhibit Description Page - ------- ----------- ------------ 4g(34)++ J.M.R. Barker Foundation 4g(35)++ Quaker Hill Associates 4g(36)++ Upland Associates, L.P. 4g(37)++ Namakagon Associates, L.P. 4g(38)++ David Koch 4g(39)++ Jean Michel Nahon 4g(40)++ Lucien Selle 4g(41)++ Perlman Associates 4g(42)++ JJ Newport 4g(43)++ James C. Powers 4g(44)++ Jay Tucker 4g(45)++ Daniel Perlman 4g(46)++ Bank of the West Trustee 4g(47)++ Tom Callahan 4g(48)++ CUS Trust 4g(49)++ Alvarado Partners 4g(50)++ Perlman & Associates 4g(51)++ The Excelsior Fund 4g(52)++ Jim Powers 4g(53)++ J. Steven Emerson 4g(54)++ Banque de Gestion G De Rothschild Luxembourg 4g(55)++ Joel Packer 4g(56)++ Banque Privee Edmond de Rothschild S.A./Geneva 4g(57)++ Sergio Ciambellini
153
Sequentially Numbered Exhibit Description Page - ------- ----------- ----------- 4g(58)++ Elio Bianchi 4g(59)++ Everest Capital International Ltd. (To be filed by later amendment) 4g(60)++ Everest Capital (To be filed by later amendment) + Issued with pre split quantity ++ Issued with post split quantity 5 Opinion of Freshman, Marantz, Orlanski, Cooper & Klein, to be filed by Amendment. 10a* Lease for premises at 8917 Fullbright Avenue, Chatsworth, CA dated August 5, 1991. 10a(1)* Lease for premises at 8943 Fullbright Avenue, Chatsworth, CA dated March 3, 1993. 10b(1)* Key Employee Agreement between the Company and Noam Lotan dated March 23, 1993. 10b(1)1* Letter amending Key Employee Agreement between the Company and Noam Lotan. 10b(1)2** Letter amending Key Employee Agreement between the Company and Noam Lotan. 10b(2)* Key Employee Agreement between the Company and Zeev Rav-Noy dated March 23, 1992. 10b(2)1* Letter amending Key Employee Agreement between the Company and Zeev Rav-Noy. 10b(2)2** Letter amending Key Employee Agreement between the Company and Zeev Rav-Noy. 10b(3)* Key Employee Agreement between the Company and Shlomo Margalit. 10b(3)1* Letter amending Key Employee Agreement between the Company and Shlomo Margalit. 10b(3)2** Form of Letter amending Key Employee Agreement between the Company and Shlomo Margalit.
154
Sequentially Numbered Exhibit Description Page - ------- ----------- ----------- 10b(4)* Employment Letter between the Company and Khalid (Ken) Ahmad dated August 8, 1990 10c(1)* Overview of Bridge Financing for the Company dated March 1992. 10c(2)* Form of Warrant issued in connection with Bridge Financing and to certain consultants. 10c(3)* Form of Promissory Note issued in connection with Bridge Financing. 10c(5)* Schedule of Bridge Investors. 10d(1)* Agreement between the Company and Managerial Resources, Inc. dated January 15, 1992. 10d(2)* Agreement between the Company and the Department of the Navy dated November 21, 1991. 10d(4)* Agreement by and among the Company, Tritek International Company, China National Electronics Import & Export Corporation and Jiangxi Nancheng Tiangnan Radio Material Factory dated as of November 28, 1988. 10d(5)* Promissory Note in principal amount of $50,000 issued by the Company to An-Pin Chen dated December 18,1989, as amended. 10d(6)* Promissory Note in principal amount of $50,000 issued by the Company to Pacific Tritek, Inc. Defined Benefit Plan dated December 18, 1989, as amended. 10e* Promissory Note in principal amount of $204,140 by the Company to Julian Cole and Stein dated February 28, 1992. 10f* Form of Stock Escrow Agreement between the American Stock Transfer & Trust Company and Certain Stockholders. 10g* 1992 Stock Option Plan. 10h* Form of Financial Consulting Agreement between the Company and Thomas James. 10i* Form of Mergers/Acquisition Agreement between the Company and Thomas James. 10j* Restricted Stock Agreement between the Company and Khalid (Ken) Ahmad. 10k* Development and Manufacturing Agreement between the Company and
155 Sequentially Numbered Exhibit Description Page - ------- ----------- ------------ Laser Precision Corporation dated December 13, 1990. 101* License Agreement between the Company and Laser Precision Corporation dated December 13, 1990. 10m* Form of Distributor Agreement and List of Current Distributors. 10n* Form of Sales Representative Agreement and List of Current Sales Representatives. 10o* Form of Warrant issued to Managerial Resources, Inc. 10p*** Agreement for Sale and Purchase of Assets of ACE dated June 29, 1995. 10q**** Agreement for Purchase of Galcom Assets dated March 21, 1995. 10r***** Agreement regarding Incentive Plan for 330,000 Warrants re ACE. 10s***** Letter of Agreement regarding Founders Agreement, Galcom. 11***** Statement regarding computation of per share earnings. 21***** List of subsidiaries. 24a Consent of Arthur Andersen LLP (page II-12). 24b Consent of Freshman, Marantz, Orlanski, Cooper & Klein (contained in Exhibit 5). 24c Consent of Almagor & Co. (page II-13). 24d Consent of Sterling, Nappen, Chavkin & Co., LLC (page II-14). 24e Consent of Ratzkovsky Fried & Co. (page II-15). 24f Consent of Groupe France Audit s.a. (page II-16). 25***** Power of Attorney. - ------------- * Incorporated by reference from, and all such Exhibits have the same corresponding Exhibit number filed as part of, Registrant's Registration Statement on Form S-1 (File No. 33-48003) and the amendments thereto as filed with the Commission on May 27, July 14, August 14, November 9, and December 2, 1992. ** Incorporated of reference from, and all such Exhibits have the same corresponding Exhibit Numbers filed as part of, Registrant's Registration Statement on Form S-1 (33-86516), effective 156
SEQUENTIALLY NUMBERED EXHIBIT DESCRIPTION PAGE - ------- ----------- ------------ January 11, 1995. *** Incorporated by reference to Registrant's Report on Form 8k (0-23452) dated June 29, 1995, with respect to the ACE Acquisition, Exhibit No. 2.1 and 2.1a. **** Incorporated by reference to Registrant's Report on Form 8k (0-23452), dated May 1, 1995, with respect to the Galcom Acquisition, Exhibit No. 2.1 and 2.1a. ***** Previously filed.
EX-4.G 2 WARRENTS OF SELLING WARRENT HOLDERS 1 EXHIBIT 4(g)11 2 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 2,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 3 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 4 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ Noam Lotan --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ Shlomo Margalit - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 2,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: OSCAR GRUSS & SONS - ------------------------------------------------------------------------------- ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - --------------------------------------- ------------------------------ Title Date Galcom Networking Ltd. 5 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder,___________________shares of MRV Communications, Inc., and herewith makes payment of $______________therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to________________________, whose address(es) is(are): ______________________________dated __________________________________ - ------------------------ signature - ------------------------ address 6 EXHIBIT 4(g)12 7 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 1,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 8 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 9 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By Noam Lotan --------------------------------- Noam Lotan, President Corporate Seal ATTEST: Shlomo Margalit - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 1,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: NORTHVIEW TRADING - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ------------------------------ Title Date Galcom Networking Ltd. 10 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder,____________ shares of MRV Communications, Inc., and herewith makes payment of $______________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _________________________ , whose address(es) is(are): ________________________________ dated__________________________ - ------------------------ signature - ------------------------ address 11 EXHIBIT 4(g)13 12 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 2,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 13 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 14 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ Noam Lotan --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ Shlomo Margalit - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 2,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: HEIDRON ENGLER - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ------------------------------ Title Date Galcom Networking Ltd. 15 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder,____________ shares of MRV Communications, Inc., and herewith makes payment of $_________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to_______________________, whose address(es) is(are):____________________ dated ____________________ - ------------------------ signature - ------------------------ address 16 EXHIBIT 4(g)14 17 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 2,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 18 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 19 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ Noam Lotan --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ Shlomo Margalit - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 2,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: ROBERT COANE - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 20 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder,____________ shares of MRV Communications, Inc., and herewith makes payment of $_________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________, whose address(es) is(are):____________________ dated_____________________ - ------------------------ signature - ------------------------ address 21 EXHIBIT 4(g)15 22 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 1,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 23 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 24 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 1,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: JEANETTE COANE CUST FOR ROBERT COANE JR - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 25 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder,____________ shares of MRV Communications, Inc., and herewith makes payment of $_________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _________________________, whose address(es) is(are): ____________________dated____________________ - ------------------------ signature - ------------------------ address 26 EXHIBIT 4(g)16 27 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 1,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 28 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend OR distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 29 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 1,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: JEANETTE COANE CUST FOR MARY COANE - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ------------------------------ Title Date Galcom Networking Ltd. 30 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, _________shares of MRV Communications, Inc., and herewith makes payment of $_________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _________________________, whose address(es) is(are):____________________ dated_____________________ - ------------------------ signature - ------------------------ address 31 EXHIBIT 4(g)17 32 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 1,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 33 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 34 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 1,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: JEANETTE COANE CUST FOR KEVIN COANE - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/7/96 1/7/96 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 35 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________ shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _______________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 36 EXHIBIT 4(g)18 37 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 17,500 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets, of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 38 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 39 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duty authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 17,500 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: DARYL HAGLER - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 40 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 41 EXHIBIT 4(g)19 42 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 5,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 43 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock Which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 44 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 5,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: TIMOTHY ESSAYE - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 45 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _________________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 46 EXHIBIT 4(g)20 47 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 2,500 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 48 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 49 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------- Shlomo Margalit Assignment This warrant for the purchase of 2,500 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: OSCAR GRUSS & SONS - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 50 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to _________________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 51 EXHIBIT 4(g)21 52 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 1,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 53 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 54 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ---------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------ Shlomo Margalit Assignment This warrant for the purchase of 1,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: DAVID KOCH - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 55 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________, whose address(es) is (are): ____________________dated____________________ - ------------------------ signature - ------------------------ address 56 EXHIBIT 4(g)22 57 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 20,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 58 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 59 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ---------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------ Shlomo Margalit Assignment This warrant for the purchase of 20,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: BILL MUSSER - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 60 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant,, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 61 EXHIBIT 4(g)23 62 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $14 3/4 during the period of "exercisability", as hereinafter defined up to 4,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 63 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 64 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ---------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------ Shlomo Margalit Assignment This warrant for the purchase of 4,000 shares at $14.75 of MRV Communications, Inc. Common Stock is hereby assigned to: ISABELLE ORLANSKY - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 12/5/95 12/30/95 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 65 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, ____________shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ______________________whose address(es) is(are):_____________________ dated____________________ - ------------------------ signature - ------------------------ address 66 EXHIBIT 4(g)24 67 GALCOM WARRANT This Warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated April 19, 1995 by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. ("Galcom"). The exercisability of the Warrant is expressly contingent upon the continued and faithful performance by Galcom of its obligations under the Agreement. MRV hereby grants: 1. Galcom the right to purchase from MRV at a price of $22.125 during the period of "exercisability", as hereinafter defined up to 15,000 shares of MRV Commons Stock. The period of exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof at close of business on the last date which is the fifth anniversary date from the date hereof. 2. The rights granted hereunder to Galcom may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement and understands that the exercisability of this Warrant is contingent upon the full and faithful performance by Galcom of its obligations under the Agreement. Provided such conditions are met, MRV shall not unreasonably withhold its consent to any such assignment or transfer. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Galcom shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the exercisability period, at any time in whole or in part be the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the abovementioned Purchase Form together with applicable stock transfer taxes, if any and delivery to MRV of a duly executed agreement signed by the person(s) designated in the Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Galcom within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. 68 MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require and increase or decrease of at least five cents in such price. Galcom acknowledges that the Warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State of Delaware. 69 In witness whereof MRV Communications, Inc. has caused this Warrant to be signed by its duly authorized officers under its Corporate Seal and this Warrant to be dated May 1, 1995. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN --------------------------- Noam Lotan, President Corporate Seal ATTEST: /s/ SHLOMO MARGALIT - ------------------------ Shlomo Margalit Assignment This warrant for the purchase of 15,000 shares at $22.125 of MRV Communications, Inc. Common Stock is hereby assigned to: ISABELLE ORLANSKY - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY JOSEPH ADIR 1/23/96 1/23/96 - -------------------------------------- ----------------------------- Title Date Galcom Networking Ltd. 70 Purchase Form (to be signed only upon exercise of Warrant) The undersigned, the holder of the forgoing Warrant, hereby irrevocably elects to exercise the purchase rights represented by such Warrant for, and to purchase thereunder, _____________shares of MRV Communications, Inc., and herewith makes payment of $____________ therefore, and requests that the Warrants and certificates for shares of Common Stock be issued in the name(s) of, and delivered to ________________________, whose address(es) is(are):____________________ dated____________________ - ------------------------ signature - ------------------------ address 71 EXHIBIT 4(g)25 72 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. MRV hereby grants: 1. Henry Telner the right to purchase from MRV at a price of $14.25 during the period of "Exercisability", as hereinafter defined up to 2,500 shares of MRV Common Stock. The period of Exercisability shall commence on July 13, 1995 and shall terminate (5) years from July 13, 1995. 2. The rights granted hereunder to Henry Telner may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, the Warrantholder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of 73 Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Warrantholder acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. MRV agrees to register with the Securities Exchange Commission, at MRV's expense, the shares underlying the warrants prior to January 13, 1996. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. 74 This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ----------------------------- Noam Lotan, President Corporate Seal Attest: /s/ SHLOMO MARGALIT - -------------------------------------- Shlomo Margalit, Chairman of the Board Assignment This Warrant for the purchase of 2,500 shares at $14.25 of MRV Communications, Inc. Common Stock is hereby assigned to: NORTHVIEW TRADING - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY HENRI TELNER 1/23/96 1/23/96 - ----------------------------- ----------------- Henri Telner Date 75 EXHIBIT 4(g)26 76 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. MRV hereby grants: 1. Henry Telner the right to purchase from MRV at a price of $14.25 during the period of "Exercisability", as hereinafter defined up to 1,000 shares of MRV Common Stock. The period of Exercisability shall commence on July 13, 1995 and shall terminate (5) years from July 13, 1995. 2. The rights granted hereunder to Henry Telner may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, the Warrantholder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder, MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of 77 Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Warrantholder acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. MRV agrees to register with the Securities Exchange Commission, at MRV's expense, the shares underlying the warrants prior to January 13, 1996. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. 78 This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ----------------------------- Noam Lotan, President Corporate Seal Attest: s/ SHLOMO MARGALIT - -------------------------------------- Shlomo Margalit, Chairman of the Board Assignment This Warrant for the purchase of 1,000 shares at $14.25 of MRV Communications, Inc. Common Stock is hereby assigned to: DARA KIELY - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY HENRI TELNER 1/23/96 1/23/96 - ----------------------------- ----------------- Henri Telner Date 79 EXHIBIT 4(g)27 80 WARRANT This warrant is given in consideration of the entering Agreement, hereinafter referred to as the "Agreement", by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. MRV hereby grants: 1. Henry Telner the right to purchase from MRV at a price of $14.25 during the period of "Exercisability", as hereinafter defined up to 1,500 shares of MRV Common Stock. The period of Exercisability shall commence on July 13, 1995 and shall terminate (5) years from July 13, 1995. 2. The rights granted hereunder to Henry Telner may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, the Warrantholder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of of that certain Asset Purchase 81 Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, lie would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Warrantholder acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. MRV agrees to register with the Securities Exchange Commission, at MRV's expense, the shares underlying the warrants prior to January 13, 1996. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. 82 This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. MRV COMMUNICATIONS, INC. By s/ NOAM LOTAN ----------------------------- Noam Lotan, President Corporate Seal Attest: /s/ SHLOMO MARGALIT - -------------------------------------- Shlomo Margalit, Chairman of the Board Assignment This Warrant for the purchase of 1,500 shares at $14.25 of MRV Communications, Inc. Common Stock is hereby assigned to: JAMES POWERS - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY HENRI TELNER 1/23/96 1/23/96 - ----------------------------- ----------------- Henri Telner Date 83 EXHIBIT 4(g)28 84 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. MRV hereby grants: 1. Henry Telner the right to purchase from MRV at a price of $14.25 during the period of "Exercisability", as hereinafter defined up to 2,500 shares of MRV Common Stock. The period of Exercisability shall commence on July 13, 1995 and shall terminate (5) years from July 13, 1995. 2. The rights granted hereunder to Henry Telner may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, the Warrantholder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of 85 Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Warrantholder acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. MRV agrees to register with the Securities Exchange Commission, at MRV's expense, the shares underlying the warrants prior to January 13, 1996. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. 86 This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ----------------------------- Noam Lotan, President Corporate Seal Attest: /s/ SHLOMO MARGALIT - -------------------------------------- Shlomo Margalit, Chairman of the Board Assignment This Warrant for the purchase of 2,500 shares at $14.25 of MRV Communications, Inc. Common Stock is hereby assigned to: STEVEN ROSNER - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY HENRI TELNER 1/23/96 1/23/96 - ----------------------------- ----------------- Henri Telner Date 87 EXHIBIT 4(g)29 88 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", by and between MRV Communications, Inc. ("MRV") and Galcom Networking, Ltd. MRV hereby grants: 1. Henry Telner the right to purchase from MRV at a price of $14.25 during the period of "Exercisability", as hereinafter defined up to 500 shares of MRV Common Stock. The period of Exercisability shall commence on July 13, 1995 and shall terminate (5) years from July B, 1995. 2. The rights granted hereunder to Henry Telner may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, the Warrantholder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of 89 Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and tile exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, lie would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents In such price. Warrantholder acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. MRV agrees to register with the Securities Exchange Commission, at MRV's expense, the shares underlying the warrants prior to January 13, 1996. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. 90 This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. MRV COMMUNICATIONS, INC. By /s/ NOAM LOTAN ----------------------------- Noam Lotan, President Corporate Seal Attest: /s/ SHLOMO MARGALIT - -------------------------------------- Shlomo Margalit, Chairman of the Board Assignment This Warrant for the purchase of 500 shares at $14.25 of MRV Communications, Inc. Common Stock is hereby assigned to: TERRENCE P. LAMBERT - ------------------------------------------------------------------------------ ASSIGNED FROM WARRANTS ASSIGNED BY HENRI TELNER 1/23/96 1/23/96 - ----------------------------- ----------------- Henri Telner Date 91 EXHIBIT 4(g)30 92 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 1,500 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 93 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 1,500 shares at $9.15 of MRV Communications. Inc. Common Stock is hereby assigned to: MARK RIEZ - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG./ , CFO 4/28/96. - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 94 EXHIBIT 4(g)31 95 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 2,450 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 96 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 2,450 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: JAMES C. POWERS - ------------------------------------------------------------------------------ The Receivers: Original Assignment on file with MRV, /SIG./, CFO 4/23/96. - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 97 EXHIBIT 4(g)32 98 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 1,500 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 99 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 1,500 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: JAY TUCKER - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG./, CFO 4/23/96 - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 100 EXHIBIT 4(g)33 101 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 2,550 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this Warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 102 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 2,550 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: BARKER LEE & CO - ------------------------------------------------------------------------------ The Receivers: Original Assignment on file with MRV, /SIG/ , CFO 4/28/96 - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 103 EXHIBIT 4(g)34 104 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 2,250 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 105 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 2,250 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: J.M.R. BARKER FOUNDATION - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/ , CFO 4/23/96 - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 106 EXHIBIT 4(g)46 107 EXHIBIT 4(g)35 108 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 600 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 109 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 600 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: QUAKER HILL ASSOCIATES, L.P. - ------------------------------------------------------------------------------ The Receivers: Original Assignment on file with MRV, /SIG/ , CFO 4/23/96. - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 110 EXHIBIT 4(g)36 111 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others. MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 1,350 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above- mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the wan-ant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 112 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- -------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- -------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 1,350 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: UPLAND ASSOCIATES, L.P. - ------------------------------------------------------------------------------ The Receiver: Original Assignment on file with MRV, /SIG/ , CFO 4/23/96. - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 113 EXHIBIT 4(g)37 114 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 3,750 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 115 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR. SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr. Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 3,750 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: NAMAKAGON ASSOCIATES, L.P. - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/ , CFO 4/23/96 - ----------------------------------------------------- --------------- Name Title Date - ----------------------------------------------------- --------------- Name Title Date 116 EXHIBIT 4(g)38 117 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 750 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 118 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 750 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: DAVID KOCH - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/ , CFO MRV Communications, Inc. - ----------------------------------------------------- --------------- Name Title Date 4/23/96 - ----------------------------------------------------- --------------- Name Title Date 119 EXHIBIT 4(g) 39 120 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 7,500 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 121 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 7,500 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: JEAN MICHELE NAHON - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/ , CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 122 EXHIBIT 4(g)40 123 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 2,250 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 124 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 2,250 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: LUCIEN SELLE - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/ , CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 125 EXHIBIT 4(g)41 126 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 30,000 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 127 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO [Corporate Seal] DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 30,000 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: PERLMAN ASSOCIATES - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, [SIG] , CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 128 EXHIBIT 4(g)42 129 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 15,000 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Wan-ant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other fights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the wan-ant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 130 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR. SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 15,000 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: J.J. NEWPORT - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG./, CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 131 EXHIBIT 4(g)43 132 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 3,750 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The fights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 133 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 3,750 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: JAMES C. POWERS - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/, CFO MRV Communications, Inc. 4/23/96 - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 134 EXHIBIT 4(g)44 135 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 3,000 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 136 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 3,000 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: JAY TUCKER - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, /SIG/, CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 137 EXHIBIT 4(g)45 138 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 1,200 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 139 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 1,200 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: DANIEL PERLMAN - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, [SIG] , CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 140 EXHIBIT 4(g)46 141 EXHIBIT 4(g)57 142 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others MRV hereby grants: 1. Dr Lipa Meir & Alon Cohen ("The Receivers") the right to purchase from MRV at a price of $9.15 during the period of "Exercisability", as hereinafter defined up to 600 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date hereof. 2. The rights granted hereunder to The Receivers may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Receivers shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to GME within a reasonable time, not exceeding ten (10) days after the rights represented by this Wan-ant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 143 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Receivers acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of 600 shares at $9.15 of MRV Communications, Inc. Common Stock is hereby assigned to: BANK OF THE WEST TRUSTEE ACCT: MIXON - ------------------------------------------------------------------------------ The Receivers: Original assignment on file with MRV, [SIG] , CFO MRV Communications, Inc. - -------------------------------------------------- --------------- Name Title Date 4/23/96 - -------------------------------------------------- --------------- Name Title Date 144 EXHIBIT 4(g)47 145 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others ("ACE") MRV hereby grants: 1. Tom Callahan the right to purchase from MRV at a price of $9.147 during the period of "Exercisability", as hereinafter defined up to 1,500 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Tom Callahan may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Tom Callahan shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Tom Callahan within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 146 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Tom Callahan acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of___________ shares at $9.147 of MRV Communications, Inc. Common Stock is hereby assigned to: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 147 EXHIBIT 4(g)48 148 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others ("ACE") MRV hereby grants: 1. CUS Trust the right to purchase from MRV at a price of $9.147 during the period of "Exercisability", as hereinafter defined up to 10,000 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to CUS Trust may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Everest Capital International, Ltd shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to CUS Trust within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this Warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 149 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. CUS Trust acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of____________shares at $9.147 of MRV Communications, Inc. Common Stock is hereby assigned to: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 150 EXHIBIT 4(g)49 151 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others ("ACE") MRV hereby grants: 1. Alvarado Partners L.P. the right to purchase from MRV at a price of $9.147 during the period of "Exercisability", as hereinafter defined up to 10,000 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Alvarado Partners L.P. may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Alvarado Partners L.P. shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Alvarado Partners L.P. within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind 152 of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Alvarado Partners L.P. acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of___________ shares at $9.147 of MRV Communications, Inc. Common Stock is hereby assigned to: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 153 EXHIBIT 4(g)50 154 WARRANT This warrant is given in consideration of the entering into of that certain Asset Purchase Agreement, hereinafter referred to as the "Agreement", dated 29 June, 1995 by and between MRV Communications, Inc. ("MRV") and ACE 400 Communications, Ltd; North Hills Israel, Ltd and others ("ACE") MRV hereby grants: 1. Perlman Associates the right to purchase from MRV at a price of $9.147 during the period of "Exercisability", as hereinafter defined up to 7,500 shares of MRV Common Stock. The period of Exercisability shall commence six (6) months from the date hereof and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Perlman Associates may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Perlman Associates shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this Warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Perlman Associates within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind 155 of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Perlman Associates acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 6/29/95 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 6/29/95 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of____________shares at $9.147 of MRV Communications, Inc. Common Stock is hereby assigned to: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 156 EXHIBIT 4(g)51 157 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. The Excelsior Fund (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 50,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to The Excelsior Fund(Transferred from Ciambelini & Associates) may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, The Excelsior Fund (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to The Excelsior Fund (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, 158 reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. The Excelsior Fund (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of_____________ shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ The Excelsior Fund - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 159 EXHIBIT 4(g)52 160 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Jim Powers (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 1,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Jim Powers (Transferred from Ciambelini & Associates) may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Jim Powers (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Jim Powers (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, 161 reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Jim Powers (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of__________shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Jim Powers - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 162 EXHIBIT 4(g)53 163 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. J. Steven Emerson (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 5,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to J. Steven Emerson (Transferred from Ciambelini & Associates) may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, J. Steven Emerson (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to J. Steven Emerson (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder off MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, 164 reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. J. Steven Emerson (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of_______________ shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ J. Steven Emerson - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 165 EXHIBIT 4(g)54 166 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Banquede Gastion G De Rothschild Luxembourg (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 5,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to J. Steven Emerson (Transferred from Ciambelini & Associates) may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Banquede Gastion G De Rothschild Luxembourg (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Banquede Gastion G De Rothschild Luxembourg (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such 167 dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Banquede Gastion G De Rothschild Luxembourg (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of______________ shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Banque de Gastion G De Rothschild Luxenbourg - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 168 EXHIBIT 4(g)55 169 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Joel Packer (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 3,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Joel Packer (Transferred from Ciambelini & Associates) may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Joel Packer (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Joel Packer (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, 170 reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Joel Packer (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of________________ shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Joel Packer: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 171 EXHIBIT 4(g)56 172 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Banque Privee Edmond de Rothschild S.A./Geneva (Transferred from Ciambelini & Associates) the right to purchase from MRV at a price of $16.833 during the period of "Exercisability", as hereinafter defined up to 50,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Banque Privee Edmond de Rothschild S.A./Geneva may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Banque Privee Edmond de Rothschild S.A./Geneva (Transferred from Ciambelini & Associates) shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Banque Privee Edmond de Rothschild S.A./Geneva (Transferred from Ciambelini & Associates) within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such 173 dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Banque Privee Edmond de Rothschild S.A./Geneva (Transferred from Ciambelini & Associates) acknowledge that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates, This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of____________ shares at $16.833 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Banque Privee Edmond de Rothschild S.A./Geneva - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 174 EXHIBIT 4(g)57 175 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Sergio Ciambelini the right to purchase from MRV at a price of $25.25 during the period of "Exercisability", as hereinafter defined up to 10,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Sergio Ciambelini may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Sergio Ciambelini shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Sergio Ciambelini within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind 176 of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Sergio Ciambelini acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this the Agreement to which it attaches. /s/ NOAM LOTAN 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal /s/ DR SHLOMO MARGALIT 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of________________ shares at $25.25 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Ciambelini and Associates: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date 177 EXHIBIT 4(g)58 178 WARRANT This warrant is given in consideration of certain rights and the recognition of certain business relationships by and between MRV Communications, Inc. ("MRV") and Sergio Ciambelini, Elio Bianchi, Barbara Pedrazzani and Rodolfo Casieri ("Ciambelini and Associates"). MRV hereby grants: 1. Elio Bianchi has the right to purchase from MRV at a price of $25.25 during the period of "Exercisability", as hereinafter defined up to 10,000 shares of MRV Common Stock. The period of Exercisability shall commence on the date of the granting of this warrant and shall terminate five (5) years from the date thereof. 2. The rights granted hereunder to Elio Bianchi may be assigned or transferred to any assignee or transferee approved by MRV provided that such assignee or transferee agrees to be bound by the provisions of this Warrant Agreement as indicated by their signature below. In the event of any merger, consolidation or sale of substantially all of the assets of MRV as an entirety, Elio Bianchi shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which the Warrant might have been exercisable immediately prior to such merger, consolidation or sale of substantially all of the assets of MRV as an entirety. The rights represented by this warrant may be exercised during the Exercisability period, at any time in whole or in part by the surrender of this Warrant with the Purchase Form at the end hereof properly executed, at the principal executive office of MRV, payment to MRV of the exercise price then in effect for the number of shares specified in the above-mentioned Purchase Form. The Common Stock and the certificates for the Common Stock so purchased shall be delivered to Elio Bianchi within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall have been so exercised. This warrant may be subdivided into smaller denominations as requested by the warrant holder. MRV covenants and agrees that all shares of Common Stock which may be issued as part of this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and no personal liability will attach to the holder thereof. MRV further covenants and agrees that, during the Exercisability period, MRV will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the Warrant. The Warrant shall not entitle the Warrant holder to any voting rights or other rights as a shareholder of MRV. The exercise price in effect at any time and the number and kind of securities purchasable upon the exercise of the warrant shall be subject to adjustment from time to time upon the happening of certain events as described below: In case MRV shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, then the appropriate adjustments in the number and kind of such securities subject to this warrant shall be made and the exercise price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares of MRV Common Stock which, if this Warrant had been exercised by such holder immediately 179 prior to such date, he would have owned upon such exercise and been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation or recapitalization. Provided however no adjustment in the exercise price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price. Elio Bianchi acknowledges that the warrant and the shares underlying the Warrant of MRV Common Stock have not been registered with the Securities and Exchange Commission and that it is taking the shares for investment purposes in the event it exercises this Warrant and not with a view towards distribution. Upon exercise of this Warrant a legend to this effect will be placed upon the certificates. This Agreement shall be governed by and in accordance with the laws of the State Of Delaware. The undersigned acknowledges receipt of this warrant and agrees to be bound by the terms of this document and the Agreement to which it attaches. 1/10/96 - ----------------------------- ----------------------- Noam Lotan Date President & CEO Corporate Seal 1/10/96 - ----------------------------- ----------------------- Dr Shlomo Margalit Date Chairman of the Board - ------------------------------------------------------------------------------ ASSIGNMENT This warrant for the purchase of_________________ shares at $25.25 of MRV Communications, Inc. Common Stock is hereby assigned to: - ------------------------------------------------------------------------------ Ciambelini and Associates: - -------------------------------------------------- --------------- Name Title Date - -------------------------------------------------- --------------- Name Title Date -----END PRIVACY-ENHANCED MESSAGE-----