EXHIBIT 99.2
FORM OF ADDITIONAL INVESTMENT RIGHT
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED TO AN
ACCREDITED INVESTOR (AS DEFINED IN THE RULES AND REGULATIONS UNDER THE
SECURITIES ACT) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
AVANEX CORPORATION
ADDITIONAL INVESTMENT RIGHT
(Subject to Adjustment)
NO.__
THIS CERTIFIES THAT, for value received, [______________], or its
permitted registered assigns ("Holder"), is entitled, subject to the terms and
conditions of this Additional Investment Right, at any time or from time to time
after February __, 2004 (the "Effective Date"), and before 5:00 p.m. Pacific
Time on the Expiration Date (as defined below), to purchase from Avanex
Corporation, a Delaware corporation (the "Company") [_________] (___________)
shares of Common Stock of the Company (each such share as adjusted from time to
time as provided herein, an "Underlying Share" and all such shares, the
"Underlying Shares") at a price per share of Five Dollars and Forty Nine Cents
($5.49) (the "Purchase Price"). Both the number of shares of Common Stock
issuable upon exercise of this Additional Investment Right and the Purchase
Price are subject to adjustment and change as provided herein. This Additional
Investment Right is one of a series of such rights (the "Additional Investment
Rights") issued pursuant to that certain Securities Purchase Agreement, dated as
of February 11, 2004 (the "Agreement"), between the Company and the Purchasers
identified therein. Unless otherwise provided for herein, all capitalized terms
in this Additional Investment Right shall have the meanings set forth in the
Agreement.
1. CERTAIN DEFINITIONS. As used in this Additional Investment Right the
following terms shall have the following respective meanings:
"Additional Investment Right" as used herein, shall include this
Additional Investment Right and any Additional Investment Right delivered in
substitution or exchange therefor as provided herein.
"Common Stock" shall mean the Common Stock of the Company, par value
$0.001 per share, and any other securities at any time receivable or issuable
upon exercise of this Additional Investment Right.
"Exercise Date" shall mean the date of delivery by the Holder of the
Notice of Exercise together with the applicable Exercise Amount pursuant to
Section 2.1.
"Expiration Date" shall mean the date that is 60 Trading Days after the
effective date of the Registration Statement; provided that the Registration
Statement covers all of the Registrable Securities as of the effective date of
the Registration Statement; and provided further that the Expiration Date shall
be extended for each day following the effective date of the Registration
Statement that (i) the Registration Statement is not effective or (ii) the
Company has suspended sales under the Registration Statement pursuant to Section
6.1(e) of the Agreement.
"Fair Market Value" of a share of Common Stock as of a particular date
shall mean the average of the Closing Prices of the Common Stock over the five
Trading Days ending immediately prior to the applicable date of valuation.
"Registered Holder" shall mean any Holder in whose name this Additional
Investment Right is registered upon the books and records maintained by the
Company.
2. EXERCISE OF ADDITIONAL INVESTMENT RIGHT.
2.1 Payment. Subject to compliance with the terms and conditions of
this Additional Investment Right and applicable securities laws, this Additional
Investment Right may be exercised, in whole or in part at any time or from time
to time, on or before the Expiration Date by the delivery (including, without
limitation, delivery by facsimile) of the form of Notice of Exercise attached
hereto as Exhibit 1 (the "Notice of Exercise"), duly executed by the Holder, at
the principal office of the Company, and as soon as practicable after such date,
surrendering payment, (i) in cash by check or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder; or
(iii) by a combination of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the "Exercise Amount").
The Holder shall not be required to deliver the original Additional Investment
Right in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice shall have the same effect as cancellation of the original
Additional Investment Right and issuance of a New Additional Investment Right
evidencing the right to purchase the remaining number of Underlying Shares.
Within a reasonable period of time, but in no event more than 10 Trading Days,
following the exercise of this Additional Investment Right, the Holder shall
deliver to the Company this Additional Investment Right or an affidavit of loss
thereof reasonably acceptable to the Company.
2.2 Net Issue Exercise. In lieu of the payment methods set forth in
Section 2.1(b) above, the Holder may elect to exchange all or some of the
Additional Investment Right for a
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number of shares (rounded down to the nearest whole share) of Common Stock equal
to the value of the amount of the Additional Investment Right being exchanged on
the date of exchange. If Holder elects to exchange this Additional Investment
Right as provided in this Section 2.2, Holder shall tender to the Company the
Additional Investment Right for the amount being exchanged, along with written
notice of Xxxxxx's election to exchange some or all of the Additional Investment
Right, and the Company shall issue to Holder the number of shares (rounded down
to the nearest whole share) of the Common Stock computed as of the Exercise Date
using the following formula:
X = Y(A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Additional Investment Right being exchanged (as
adjusted to the date of such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Additional Investment
Right on the date the net issue election is made pursuant to
Section 2.2.
All references herein to an "exercise" of the Additional Investment Right
shall include an exchange pursuant to this Section 2.2.
2.3 Stock Certificates; Fractional Shares. As soon as practicable
after the exercise of this Additional Investment Right in whole or in part, but
in no event later than three Trading Days after the Exercise Date, the Company,
at its expense, shall instruct its transfer agent to issue and deliver the
Underlying Shares pursuant to Section 3 below. No fractional shares or scrip
representing fractional shares shall be issued upon an exercise of this
Additional Investment Right. If any fraction of an Underlying Share would,
except for the provisions of this Section, be issuable upon exercise of this
Additional Investment Right, the number of Underlying Shares to be issued will
be rounded up to the nearest whole share.
2.4 Partial Exercise; Effective Date of Exercise. In case of any
partial exercise of this Additional Investment Right, the Company shall cancel
this Additional Investment Right upon surrender hereof and shall execute and
deliver a new Additional Investment Right of like tenor and date for the balance
of the shares of Common Stock purchasable hereunder. This Additional Investment
Right shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date. The person entitled to receive the shares of
Common Stock issuable upon exercise of this Additional Investment Right shall be
treated for all purposes as the holder of record of such shares as of the close
of business on the Exercise Date.
3. DELIVERY OF UNDERLYING SHARES.
3.1 Upon exercise of this Additional Investment Right, the Company
shall promptly (but in no event later than three Trading Days after the Exercise
Date) issue or cause to
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be issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Underlying Shares issuable upon such exercise, free of restrictive legends
unless a registration statement covering the resale of the Underlying Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Underlying Shares are not freely transferable without volume restrictions
pursuant to Rule 144. The Holder, or any Person so designated by the Holder to
receive Underlying Shares, shall be deemed to have become holder of record of
such Underlying Shares as of the Exercise Date. The Company shall, upon request
of the Holder, use its best efforts to deliver Underlying Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
3.2 This Additional Investment Right is exercisable, either in its
entirety or, from time to time, for a portion of the number of Underlying
Shares. Upon surrender of this Additional Investment Right following one or more
partial exercises, the Company shall issue or cause to be issued, at its
expense, a New Additional Investment Right evidencing the right to purchase the
remaining number of Underlying Shares.
3.3 In addition to any other rights available to a Holder, if the
Company fails to deliver to the Holder a certificate representing Underlying
Shares on the date on which delivery of such certificate is required by this
Additional Investment Right, such Holder may notify the Company via facsimile,
mail or any other means, of its failure to deliver the certificate (a "Delivery
Failure Notice"). If the Company fails to deliver to the Holder a certificate
representing Underlying Shares by the third Trading Day after delivery of the
Delivery Failure Notice by the Holder and if after such third Trading Day after
the delivery of the Delivery Failure Notice the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Underlying Shares that the Holder
anticipated receiving from the Company (a "Buy-In"), then the Company shall,
within three Trading Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.
3.4 The Company's obligations to issue and deliver Underlying Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Underlying Shares. Nothing herein shall limit a Xxxxxx's right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a
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decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Additional Investment Right as required pursuant to
the terms hereof.
4. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Additional Investment Right shall be duly authorized, validly
issued, fully paid and non-assessable, and the Company shall pay all transfer or
stamp taxes and other similar governmental charges that may be imposed in
respect of the issue or delivery thereof. The Company shall not be required to
pay any tax or other charge imposed in connection with any transfer involved in
the issuance of any certificate for shares of Common Stock in any name other
than that of the Registered Holder of this Additional Investment Right.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares
of Common Stock issuable upon exercise of this Additional Investment Right (or
any shares of stock or other securities or property receivable or issuable upon
exercise of this Additional Investment Right) and the Purchase Price are subject
to adjustment upon occurrence of the following events:
5.1 Adjustment for Stock Splits, Stock Subdivisions or Combinations
of Shares. The Purchase Price of this Additional Investment Right shall be
proportionally decreased and the number of shares of Common Stock issuable upon
exercise of this Additional Investment Right (or any shares of stock or other
securities at the time issuable upon exercise of this Additional Investment
Right) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Additional
Investment Right shall be proportionally increased and the number of shares of
Common Stock issuable upon exercise of this Additional Investment Right (or any
shares of stock or other securities at the time issuable upon exercise of this
Additional Investment Right) shall be proportionally decreased to reflect any
reverse stock split or combination of the Company's Common Stock.
5.2 Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the
Additional Investment Right) payable in (a) evidences of indebtedness or other
securities of the Company, (b) rights or warrants to subscribe for or purchase
any security, or (c) any other asset, then, in each such case, the Holder of
this Additional Investment Right on exercise hereof at any time after the
consummation, effective date or record date of such dividend or other
distribution, shall receive, in addition to the shares of Common Stock (or such
other stock or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have been entitled upon
such date if such Holder had exercised this Additional Investment Right on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period giving effect
to all adjustments called for by this Section 5.
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5.3 Reclassification. If the Company, by reclassification of
securities or otherwise, shall change any of the securities as to which purchase
rights under this Additional Investment Right exist into the same or a different
number of securities of any other class or classes, this Additional Investment
Right shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Additional
Investment Right immediately prior to such reclassification or other change and
the Purchase Price therefore shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 5. No adjustment shall be made
pursuant to this Section 5.3 upon any conversion or redemption of the Common
Stock which is the subject of Section 5.5.
5.4 Adjustment for Capital Reorganization, Merger or Consolidation.
In case of any (i) capital reorganization of the capital stock of the Company
(other than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), (ii) merger or consolidation of the Company with
or into another corporation, (iii) sale of all or substantially all the assets
of the Company, (iv) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (v) reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 5.1 or
5.2 above) (in any such case, a "Fundamental Transaction"), then, and in each
such case, as a part of such Fundamental Transaction, the Company shall ensure
that lawful provision (in form and substance reasonably satisfactory to the
Holder) is made so that the Holder of this Additional Investment Right shall
thereafter be entitled to receive upon exercise of this Additional Investment
Right, during the period specified herein and upon payment of the Purchase Price
then in effect, the same amount and kind of shares of stock or other securities
or property of the Company or successor corporation resulting from such
Fundamental Transaction that a holder of the shares deliverable upon exercise of
this Additional Investment Right would have been entitled to receive in such
Fundamental Transaction if this Additional Investment Right had been exercised
in full for cash immediately before such Fundamental Transaction, all subject to
further adjustment as provided in this Section 5 (the "Alternate
Consideration"); provided, however, that with respect to a Fundamental
Transaction described in clause (iv) of this sentence, it shall be the option of
the Holder to either require the Company to ensure that such lawful provision is
made or retain this Additional Investment Right without giving effect to this
Section 5.4 with respect to such Fundamental Transaction. The aggregate Exercise
Price for this Additional Investment Right will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Additional Investment Right following such Fundamental
Transaction. At the Holder's request, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new
additional investment right consistent with the foregoing provisions and
evidencing the Holder's right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof. The terms of any agreement
pursuant to which a Fundamental
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Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 5.4 and insuring
that the Additional Investment Right (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. If any Fundamental Transaction constitutes or results in a Change
of Control (as defined below), then at the request of the Holder delivered
before the 90th day after such Fundamental Transaction, the Company (or any such
successor or surviving entity) will purchase the Additional Investment Right
from the Holder for a purchase price, payable in cash within five Trading Days
after such request (or, if later, on the effective date of the Fundamental
Transaction), equal to the Black-Scholes value (with such inputs as the parties
shall reasonably determine) of the remaining unexercised portion of this
Additional Investment Right on the date of such request. For the purposes of
this Section 5.4, "CHANGE OF CONTROL" means the occurrence of any of the
following in one or a series of related transactions: (i) an acquisition after
the date hereof by an individual or legal entity or "group" (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-half of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-half of the members of the Company's board of directors that is not approved
by those individuals who are members of the board of directors on the date
hereof (or other directors previously approved by such individuals); (iii) a
merger or consolidation of the Company or any Subsidiary or a sale of more than
one-half of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least a majority of the voting rights and equity interests in the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or equity interests in the Company; (v) consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
an agreement providing for or reasonably likely to result in any of the
foregoing events.
5.5 Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Additional
Investment Right, upon exercise hereof at any time after the date on which the
Common Stock is so redeemed or converted, reclassified or ceases to exist (the
"Termination Date"), shall receive, in lieu of the number of shares of Common
Stock that would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been received if
this Additional Investment Right had been exercised in full and the Common Stock
received thereupon had been simultaneously converted immediately prior to the
Termination Date, all subject to further adjustment as provided in this
Additional Investment Right. Additionally, the Purchase Price shall be
immediately adjusted to equal the quotient obtained by dividing (x) the
aggregate Purchase Price of the maximum number of shares of Common Stock for
which this Additional Investment Right was exercisable immediately prior to the
Termination Date by (y) the number of shares of Common Stock of the Company for
which this Additional Investment Right is exercisable immediately after the
Termination Date, all subject to further adjustment as provided herein.
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5.6 Calculations. All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company; provided that such
shares, upon disposition to a third party, shall then be considered outstanding.
5.7 Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 5, the Company at its expense will, at the written
request of the Holder, promptly compute such adjustment in accordance with the
terms of this Additional Investment Right and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Underlying Shares or other securities issuable upon
exercise of this Additional Investment Right (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of this
Additional Investment Right, an authorized officer of the Company shall compute
such adjustment in accordance with the terms of this Additional Investment Right
and prepare a certificate setting forth such adjustment and showing in detail
the facts upon which such adjustment is based, including a statement of the
adjusted Purchase Price. The Company shall promptly send (by facsimile and by
either first class mail, postage prepaid or overnight delivery) a copy of each
such certificate to the Holder.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or mutilation
of this Additional Investment Right, and of indemnity reasonably satisfactory to
it, and (in the case of mutilation) upon surrender and cancellation of this
Additional Investment Right, the Company will execute and deliver in lieu
thereof a new Additional Investment Right of like tenor as the lost, stolen,
destroyed or mutilated Additional Investment Right.
8. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise of this
Additional Investment Right such number of shares of Common Stock or other
shares of capital stock of the Company as are from time to time issuable upon
exercise of this Additional Investment Right and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of this
Additional Investment Right. Each of the Company and the Holder will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed. All such shares of
Common Stock shall be duly authorized, and when issued upon such exercise, shall
be validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights, except encumbrances or restrictions
arising under federal or state securities laws. Issuance of this Additional
Investment Right shall constitute full authority to the Company's officers who
are
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charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Additional Investment Right.
9. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Additional Investment Right and compliance with all applicable securities laws,
this Additional Investment Right and all rights hereunder may be transferred, in
whole or in part, only (a) to one or more of the Affiliates of the Registered
Holder and only if such Affiliate is an "accredited investor" under Regulation D
under the Securities Act and agrees to be bound by the terms and obligations of
this Additional Investment Right and the Agreement; provided that, solely with
respect to Deutsche Bank, AG London Branch and solely for purposes of Section 9
and Section 10, "Affiliate" shall include QVT Financial LP and any Affiliates of
QVT Financial LP, including without any limitation any accounts or entities
managed, advised or controlled by QVT Financial LP, regardless of its
relationship, if any, with Deutsche Bank, AG London Branch, (b) in a sale
effectuated pursuant to Rule 144 or (c) in an offering registered under Section
5 of the Securities Act. Any transfer of this Additional Investment Right shall
be made on the books of the Company maintained for such purpose at the principal
office of the Company referred to above, by the Registered Holder hereof in
person, or by duly authorized attorney, upon delivery of the form of Assignment
attached hereto as Exhibit 2, upon surrender of this Additional Investment Right
properly endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any permitted partial
transfer of the Additional Investment Right, the Company will issue and deliver
to the Registered Holder a new Additional Investment Right or Additional
Investment Rights ("New Additional Investment Rights"), in substantially the
form of this Additional Investment Right, with respect to the shares of Common
Stock not so transferred. Each taker and holder of this Additional Investment
Right, by taking or holding the same, consents and agrees that when this
Additional Investment Right shall have been so endorsed, the person in
possession of this Additional Investment Right may be treated by the Company,
and all other persons dealing with this Additional Investment Right, as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented hereby, any notice to the contrary notwithstanding; provided,
however that until a transfer of this Additional Investment Right is duly
registered on the books of the Company, the Company may treat the Registered
Holder hereof as the owner for all purposes. Upon any full or partial transfer
of the Additional Investment Right pursuant to clause (b) or clause (c), all
restrictions applicable to the transfer of the Additional Investment Right shall
cease.
10. SECURITIES LAW RESTRICTIONS ON TRANSFER. The Holder, by acceptance
hereof, agrees that, absent an effective registration statement filed with the
Commission under the Securities Act covering the disposition or sale of this
Additional Investment Right or the Underlying Shares, and registration or
qualification under applicable state securities laws, such Holder will not sell,
transfer, or otherwise dispose of any or all such Additional Investment Rights
or Underlying Shares, as the case may be, unless either (i) such transfer is to
an Affiliate and complies with the provisions of Section 9, (ii) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory to
the Company, to the effect that such registration is not required in connection
with such disposition or (iii) the sale of such securities is made pursuant to
Rule 144.
11. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Additional
Investment Right, the Holder hereby represents, warrants and covenants that any
shares of
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Common Stock purchased upon exercise of this Additional Investment Right or
acquired upon conversion thereof shall be acquired for its own account and not
with a view to, or for sale in connection with, any distribution thereof;
provided, however, that by making the representations herein, the Holder does
not agree to hold any of such Common Stock for any minimum or other specific
term and reserves the right to dispose of such Common Stock at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act; that the Holder has had such opportunity as such Holder has
deemed adequate to obtain from representatives of the Company such information
as is necessary to permit the Holder to evaluate the merits and risks of its
investment in the company; that the Holder is able to bear the economic risk of
holding such shares as may be acquired pursuant to the exercise of this
Additional Investment Right for an indefinite period; that the Holder
understands that the shares of Common Stock acquired pursuant to the exercise of
this Additional Investment Right will not be registered under the Securities Act
(unless otherwise required pursuant to the Agreement and will be "restricted
securities" within the meaning of Rule 144 under the Securities Act and that the
exemption from registration under Rule 144 will not be available for at least
one year from the date of exercise of this Additional Investment Right, except
as permitted by the Commission for exercise of this Additional Investment Right
pursuant to Section 2.2, and even then will not be available unless a public
market then exists for the Common Stock, adequate information concerning the
Company is then available to the public, and other terms and conditions of Rule
144 are complied with; and that all stock certificates representing shares of
Common Stock issued to the Holder upon exercise of this Additional Investment
Right may have affixed thereto a legend substantially in the form contained in
Section 4.1(b) of the Agreement.
12. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Additional Investment
Right shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by such Holder
to purchase Common Stock by exercise of this Additional Investment Right, no
provisions of this Additional Investment Right, and no enumeration herein of the
rights or privileges of the Holder hereof shall cause such Holder hereof to be a
stockholder of the Company for any purpose.
13. NOTICES. All notices and other communications from the Company to the
Holder shall be given in accordance with the Agreement.
14. HEADINGS. The headings in this Additional Investment Right are for
purposes of convenience in reference only, and shall not be deemed to constitute
a part hereof.
15. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The corporate laws of the
state of Delaware shall govern all issues concerning the relative rights of the
company and its stockholders. All questions concerning the construction,
validity, enforcement and interpretation of this Additional Investment Right
shall be governed by and construed and enforced in accordance with the laws of
the state of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the city of New York,
borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the transaction
documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not
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personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. The company hereby waives all rights to a trial
by jury.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
of Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Additional Investment Right, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Registered
Holder of this Additional Investment Right against impairment. Without limiting
the generality of the foregoing, the Company (a) will not increase the par value
of any shares of stock issuable upon the exercise of this Additional Investment
Right above the amount payable therefor upon such exercise, (b) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable shares of Common Stock
upon exercise of this Additional Investment Right, and (c) will not close its
shareholder books or records in any manner which interferes with the timely
exercise of this Additional Investment Right.
17. NOTICES OF RECORD DATE. In case:
17.1 the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Additional Investment Right), for the purpose of entitling them to receive
any dividend or other distribution of cash, securities or other property, or any
right to subscribe for or purchase any shares of stock of any class or any other
securities or to receive any other right; or
17.2 of any consolidation or merger of the Company with or into
another corporation, any capital reorganization of the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation or any other Fundamental Transaction; or
17.3 of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4 of any redemption or conversion of all outstanding Common
Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Additional Investment Right a notice specifying, as
the case may be, (i) the date on which a record is to be taken for the purpose
of such dividend, distribution or right, or (ii) the
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date on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption, conversion or
other Fundamental Transaction is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such stock or
securities as at the time are receivable upon the exercise of this Additional
Investment Right) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities), for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
twenty (20) days prior to the applicable record or effective date on which a
person or entity would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Additional Investment Right prior to such time so
as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Additional Investment Right is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated and the parties
shall attempt in good faith to agree upon a valid and enforceable provision
which shall be a commercially reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
19. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Additional Investment Right may be executed by the parties
hereto and each such executed counterpart shall be, and shall be deemed to be,
an original instrument. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Additional Investment Right enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holder of this
Additional Investment Right or otherwise conflicts with the provisions hereof.
The rights granted to the Holder hereof do not in any way conflict with and are
not inconsistent with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived.
21. EXPIRATION DATE. If this Additional Investment Right is not exercised
prior to the Expiration Date, it shall at such time become void and of no value
and be terminated and no longer outstanding; provided, however, that if the
Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration
Date shall automatically be extended until 5:00 p.m. the next Business Day.
22. AMENDMENT. This Additional Investment Right may be amended only in
writing signed by the Company and the Holder, or their respective successors and
assigns.
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23. ENTIRE AGREEMENT. This Additional Investment Right and the Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subjects thereof.
24. LIMITATION ON EXERCISE. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Additional Investment Right (or otherwise
in respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% (the "Maximum Percentage") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this paragraph and determined that
issuance of the full number of Underlying Shares requested in such Exercise
Notice is permitted under this paragraph. The Company's obligation to issue
shares of Common Stock in excess of the limitation referred to in this Section
shall be suspended (and shall not terminate or expire notwithstanding any
contrary provisions hereof) until such time, if any, as such shares of Common
Stock may be issued in compliance with such limitation. By written notice to the
Company, the Holder may waive the provisions of this Section or increase or
decrease the Maximum Percentage to any other percentage specified in such
notice, but (i) any such waiver or increase will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such waiver or
increase or decrease will apply only to the Holder and not to any other holder
of Additional Investment Rights.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Additional
Investment Right as of the Effective Date.
AVANEX CORPORATION
----------------------------------
(Name of Holder)
By: By:
------------------------------- ----------------------------------
Name: Name:
----------------------------- ---------------------------------
Title: Title:
---------------------------- --------------------------------
SIGNATURE PAGE TO ADDITIONAL INVESTMENT RIGHT
EXHIBIT 1
NOTICE OF EXERCISE
(TO BE EXECUTED UPON EXERCISE OF ADDITIONAL INVESTMENT RIGHT)
AVANEX CORPORATION NO. ___
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the Additional Investment Right for, and to purchase thereunder,
the securities of Avanex Corporation, as provided for therein, and (check the
applicable box):
[ ] Tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check in same-day funds in the amount of
$____________ for _________ shares of such securities.
[ ] Elects the Net Issue Exercise option pursuant to Section 2.2 of the
Additional Investment Right, and accordingly requests delivery of a net of
______________ shares of such securities, according to the following
calculation:
X = Y(A-B) ( ) = (____) [(_____) - (_____)]
----- --------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Additional Investment Right being exchanged (as
adjusted to the date of such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price in effect under this Additional Investment
Right on the date the net issue election is made pursuant to
Section 2.2.
Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name, address and
taxpayer identification number):
Name:
--------------------------------------------------
Address:
-----------------------------------------------
Taxpayer Identification Number:
------------------------
Signature:
---------------------------------------------
Title:
-------------------------------------------------
Note: The above signature should correspond exactly with the name on the
first page of this Additional Investment Right or with the name of the assignee
appearing in the assignment form below.
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If said number of shares shall not be all the shares purchasable under the
Additional Investment Right, a new Additional Investment Right is to be issued
in the name of said undersigned for the balance remaining of the shares
purchasable thereunder rounded up to the next higher whole number of shares.
-2-
EXHIBIT 2
ASSIGNMENT
(TO BE EXECUTED ONLY UPON ASSIGNMENT OF ADDITIONAL NO. ___
INVESTMENT RIGHT)
For value received, the undersigned hereby sells, assigns and transfers unto
________________ the within Additional Investment Right, together with all
right, title and interest therein, and does hereby authorize [transfer agent],
to transfer said Additional Investment Right on the books of Avanex Corporation
with respect to the number of shares set forth below, with full power of
substitution in the premises:
NAME(S) OF ASSIGNEE(S) ADDRESS # OF SHARES
---------------------- ------- -----------
If said number of shares shall not be all the shares represented by the
Additional Investment Right, a new Additional Investment Right is to be issued
in the name of said undersigned for the balance remaining of the shares covered
by said Additional Investment Right.
Dated:
------------------------------------
Signature:
--------------------------------
Notice: The signature to the foregoing Assignment must correspond to the
name as written upon the face of this security in every particular, without
alteration or any change whatsoever; signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.
-1-
