EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
February 11, 2004 between Avanex Corporation, a Delaware corporation (the
"COMPANY"), and the purchasers identified on the signature pages hereto (each, a
"PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Company desires to issue and sell to the Purchasers, and
the Purchasers, severally and not jointly, desire to purchase from the Company,
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"ADDITIONAL INVESTMENT RIGHTS" means the Additional Investment
Rights issued and sold by the Company under this Agreement in the form of
Exhibit A.
"ADVICE" has the meaning set forth in Section 6.5.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144.
"BUSINESS DAY" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"CLOSING" means the closing of the purchase and sale of the Shares
and the Additional Investment Rights pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on an Eligible Market or any other national
securities exchange, the closing price per share of the Common Stock for
such date (or the nearest preceding date) on the primary Eligible Market
or exchange on which the Common Stock is then listed or quoted; (b) if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
closing bid price per share of the Common Stock for such date (or the
nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices),
the most recent closing bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good
faith by Purchasers holding a majority of the Securities.
"COMPANY COUNSEL" means Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation, counsel to the Company.
"COMPANY SECURITIES" means the Company Shares, the Additional
Investment Rights and the Underlying Shares.
"COMPANY SHARES" means an aggregate of 7,319,761 shares of Common
Stock, which are being issued and sold by the Company to the Purchasers at
the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value
$0.001 per share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and
Convertible Securities.
"CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"DISCLOSURE MATERIALS" has the meaning set forth in Section 3.1(g).
"EFFECTIVE DATE" means the date that the Registration Statement is
first declared effective by the Commission with respect to all the
Registrable Securities.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section 6.1(b).
"8-K FILING" has the meaning set forth in Section 4.5.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market or the NASDAQ SmallCap
Market.
"EVENT" has the meaning set forth in Section 6.1(d).
"EVENT PAYMENTS" has the meaning set forth in Section 6.1(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCLUDED EVENTS" means any event pursuant to which the Company is
involved in a merger or consolidation of the Company or a sale of more
than one-half of the assets
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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 50% of the voting rights and equity interests of the surviving
entity or acquirer.
"EXCLUDED STOCK" shall mean any shares of capital stock of the
Company or the Subsidiaries issued or issuable (A) upon exercise,
conversion or exchange of any Common Stock Equivalents described in
Schedule 3.1(f) (provided that such exercise or conversion occurs in
accordance with the terms thereof, without amendment or modification, and
that the applicable exercise or conversion price or ratio is described in
such schedule); (B) to officers, directors or employees of the Company or
the Subsidiaries pursuant to a stock-based plan duly approved by the
Company's board of directors; (C) in connection with the acquisition of
stock or assets of other entities by the Company or other strategic
transactions, in each case not primarily for the purpose of raising
capital.
"FILING DATE" means thirty (30) calendar days following the Closing
Date.
"FORM 10-K" has the meaning set forth in Section 3.1(a).
"FORM 10-Q" means the SEC Report on Form 10-Q filed on November 14,
2003, as amended January 16, 2004.
"GAAP" has the meaning set forth in Section 3.1(g).
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.4(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 6.4(c).
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
3.1(t).
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LEAD PURCHASER" means Mainfield Enterprises, Inc.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
investigation and preparation, and reasonable attorneys' fees.
"LP COUNSEL" means Proskauer Rose LLP.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
3.1(b).
"MATERIAL PERMITS" has the meaning set forth in Section 3.1(u).
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"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities, including without
limitation all Additional Investment Rights.
"PERSON" means any individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or any court or other federal, state, local or other
governmental authority or other entity of any kind.
"PRIOR AGREEMENT" has the meaning set forth in Section 4.9.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus including post effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"REGISTRATION STATEMENT" means each registration statement required
to be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"RELATED PERSON" has the meaning set forth in Section 4.7.
"REQUIRED EFFECTIVENESS DATE" means ninety (90) days following the
Closing Date.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" has the meaning set forth in Section 3.1(g).
"SHARES" means shares of the Company's Common Stock.
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"SUBSIDIARY" means any "significant subsidiary", as defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission pursuant to the
Exchange Act)
"TRADING DAY" means (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, (b) if the Common
Stock is not then listed or quoted and traded on any Eligible Market, then
(i) a day on which trading occurs on the NASDAQ National Market (or any
successor thereto), or (ii) if trading ceases to occur on the NASDAQ
National Market (or any successor thereto), any Business Day.
"TRADING MARKET" means the Nasdaq National Market or any other
Eligible Market, or any national securities exchange, market or trading or
quotation facility on which the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Additional
Investment Rights, the Transfer Agent Instructions and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
"TRANSFER AGENT INSTRUCTIONS" means the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D, executed by the Company and
delivered to the Company's transfer agent.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
exercise of the Additional Investment Rights.
"UNIT" means one Share and an Additional Investment Right to acquire
0.20 of a share of Common Stock.
"VWAP" means, with respect to a Trading Day, the average of the
daily volume weighted average trading price (the total dollar amount
traded on each day divided by trading volume for such day) of the Common
Stock for the regular Trading Day session as reported by Bloomberg, LP.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units set forth opposite such Purchaser's name on Schedule A
hereto under the headings "Units." The Closing shall take place at the offices
of Company Counsel as soon as practicable following the execution hereof but in
any event within three (3) Business Days of the date hereof, or at such other
location or time as the parties may agree.
2.2 Closing Deliveries.
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(a) At the Closing, the Company shall deliver or cause to be delivered to
each Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Company Shares equal to the
number of Shares set forth opposite such Purchaser's name on Schedule A
hereto under the heading "Purchased Shares," registered in the name of
such Purchaser;
(ii) an Additional Investment Right, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to
acquire such number of Underlying Shares set forth opposite such
Purchaser's name on Schedule A hereto under the heading "Investment Right
Shares;"
(iii) a legal opinion of Company Counsel, in the form of Exhibit B,
executed by such counsel; and
(iv) duly executed Transfer Agent Instructions acknowledged by the
Company's transfer agent.
(b) At the Closing, each Purchaser shall deliver or cause to be delivered
to the Company the aggregate purchase price set forth opposite such Purchaser's
name on Schedule A hereto under the heading "Purchase Price" in United States
dollars and in immediately available funds by wire transfer to an account
designated in writing by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows (which
representations and warranties shall be deemed to apply, where appropriate, to
each Subsidiary of the Company):
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in the SEC Report on Form 10-K for the year ended June
30, 2003 (the "FORM 10-K") or Schedule 3.1(a). Except as disclosed in the Form
10-K or in Schedule 3.1(a), the Company owns, directly or indirectly, the
capital stock or comparable equity interests of each Subsidiary free and clear
of any Lien and all the issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter
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documents. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (i) adversely affect the legality, validity or enforceability
of any Transaction Document, (ii) reasonably be expected to have or result in a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which it is a party and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company, its Board
of Directors or its stockholders. Each of the Transaction Documents to which it
is a party has been (or upon delivery will be) duly executed by the Company and
is, or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, to general
principles of equity and to limitations on the rights to indemnity and
contribution for securities law violations that exist by virtue of public
policy.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby do not and
will not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, except to the extent that such conflict, default or
termination right could not reasonably be expected to have a Material Adverse
Effect or (iii) to the Company's knowledge, result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject), or by which any property or asset of the Company
or a Subsidiary is bound or affected. Except as set forth on Schedule 3.1(d), no
consent of any third party is required in connection with the execution,
delivery and performance of the Transaction Documents to which the Company is a
party or the
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consummation by the Company of the transactions contemplated hereby and thereby,
except for such consents which, if not obtained, could not reasonably be
expected to have a Material Adverse Effect.
(e) Issuance of the Company Securities. The Company Securities
(including the Underlying Shares) are duly authorized and, when issued and paid
for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens (except for
restrictions under federal and state securities laws) and shall not be subject
to preemptive rights or similar rights of stockholders. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon exercise of the Additional Investment Rights.
(f) Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 310,000,000 shares, 300,000,000 shares of which are
common stock, $0.001 par value per share, and 10,000,000 shares of which are
preferred stock, $0.001 par value per share. As of February 6, 2004, there were
135,220,459 shares of common stock issued and outstanding, and there has been no
material change in the Company's outstanding capitalization since that date. As
of the date hereof, there are no shares of preferred stock outstanding. All
outstanding shares of capital stock are duly authorized, validly issued, fully
paid and nonassessable and have been issued in compliance with all applicable
securities laws. Except as disclosed in Schedule 3.1(f), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, or plans providing for the
issuance of, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The issue and sale of
the Securities (including the Underlying Shares) will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in the proxy statement for the Company's annual meeting of
stockholders held on November 6, 2003, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act),
or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the
foregoing materials (together with any materials filed by the Company under the
Exchange Act, whether or not required) being collectively referred to herein as
the "SEC REPORTS" and, together with this Agreement and the Schedules to this
Agreement, the "DISCLOSURE MATERIALS") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration
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of any such extension. The Company has informed each Purchaser in writing prior
to the date hereof of any filing by the Company of any SEC Reports within the 10
days preceding the date hereof. Except as set forth on Schedule 3.1(g), as of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except as set forth on Schedule 3.1(g),
the financial statements of the Company included in the SEC Reports comply in
all material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Except as set forth on Schedule 3.1(g), such financial statements have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved ("GAAP"),
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or specifically identified as
exhibits in the SEC Reports to the extent required by the rules and regulations
of the Commission as in effect at the time of filing.
(h) Material Changes. Since the date of the audited financial
statements included in the Form 10-K, and except as set forth on the Form 10-Q
and the current reports on Form 8-K dated as of November 21, 2003 and February
2, 2004, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that could reasonably be expected
to result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, except as disclosed in its SEC
Reports, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock-based plans approved by the
stockholders of the Company and listed on Schedule 3.1(f).
(i) Absence of Litigation. Except as disclosed in the Form 10-Q, there
is no action, suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
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(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.
(k) Title to Assets. Except as set forth on Schedule 3.1(k), the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to the business of the Company and
the Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens that do not materially
affect the value of such property, do not materially interfere with the use made
and proposed to be made of such property by the Company and the Subsidiaries and
could not, individually or in the aggregate, have or result in a Material
Adverse Effect. To the Company's knowledge, any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance except, in each case, as could not reasonably be
expected to result in a Material Adverse Effect.
(l) Certain Fees. Other than fees to Citigroup Global Markets Inc., as
previously disclosed in writing to each Purchaser, no brokerage or finder's fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement, and the
Company has not taken any action that would cause any Purchaser to be liable for
any such fees or commissions pursuant to any agreement or arrangement to which
the Company is a party.
(m) Private Placement. Neither the Company nor any Person acting on the
Company's behalf has sold or offered to sell or solicited any offer to buy the
Company Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale by the Company of the Company Securities
as contemplated hereby or (ii) cause the offering of the Company Securities
pursuant to the Transaction Documents to be integrated with prior offerings by
the Company for purposes of any applicable law, regulation or stockholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market.
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The Company is not, and is not an Affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. The Company is
not a United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980. No consent, license,
permit, waiver approval or authorization of, or designation, declaration,
registration or filing with, the Securities and Exchange Commission or any state
securities regulatory authority is required in connection with the offer, sale,
issuance or delivery of the Company Securities or the Underlying Shares, other
than the possible filing of a Form D with the Securities and Exchange
Commission.
(n) Form S-3 Eligibility. The Company is eligible to register the
Shares for resale by the Purchasers using Form S-3 promulgated under the
Securities Act.
(o) Listing and Maintenance Requirements. Since May 1, 2003, the
Company has been in compliance with all listing and maintenance requirements for
the Trading Market(s) on which the Common Stock is listed or quoted.
(p) Registration Rights. Except as described in Schedule 3.1(p), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
expired.
(q) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers solely as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Company Securities and the Purchasers' ownership of
the Company Securities.
(r) Disclosure. The Company confirms that neither it nor, to its
knowledge, any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information. The Company understands and
confirms that each of the Purchasers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company, taken as a whole, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or condition (financial or otherwise) which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which not has been so publicly announced or disclosed. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or
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warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2.
(s) Acknowledgment Regarding Purchasers' Purchase of Company
Securities. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Company Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(t) Patents and Trademarks. Except as disclosed in the Form 10-K, to
the Company's knowledge, the Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
(collectively, the "INTELLECTUAL PROPERTY RIGHTS") that are necessary for use in
connection with their respective businesses as described in the Form 10-K and
which the failure to so have could have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates or infringes upon
the rights of any Person except as may be described in the Form 10-K or as could
not reasonably be expected to result in a Material Adverse Effect. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights, in each case except as may be described in the
Form 10-K or as could not reasonably be expected to result in a Material Adverse
Effect.
(u) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports ("MATERIAL PERMITS"),
except where the failure to possess such permits could not, individually or in
the aggregate, have or result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any written notice of proceedings
relating to the revocation or modification of any Material Permit except as
described in the SEC Reports or as could not reasonably be expected to result in
a Material Adverse Effect.
(v) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors) exceeding $60,000, including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the
12
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(w) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business.
(x) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(y) Financial Press Releases. Each press release publicly issued by the
Company during the six months preceding the date of this Agreement which
contained results of operations or financial condition information of the
Company for a completed quarterly or annual fiscal period did not, at the time
of release, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statement therein, in light of the circumstances under which they were made, not
misleading.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, limited liability
company or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The purchase by such Purchaser of
the Shares and the Additional Investment Rights hereunder has been duly
authorized by all necessary action on the part of such Purchaser. This Agreement
has been duly executed and delivered by such Purchaser and constitutes the valid
and binding obligation of such Purchaser, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, to general principles of
equity and to limitations on the rights to indemnity and contribution for
securities law violations that exist by virtue of public policy.
(b) Investment Intent. Such Purchaser is acquiring the Company
Securities as principal for its own account and not with a view to or for
distributing or publicly reselling such Company Securities or any part thereof,
without prejudice, however, to such Purchaser's right,
13
subject to the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such Company Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold Company Securities for any period of time.
(c) Purchaser Status. At the time such Purchaser was offered the Shares
and the Additional Investment Rights, it was, and at the date hereof it is, an
"accredited investor" as defined in Rule 501(a) under the Securities Act. Since
February 10, 2004, such Purchaser has not sold any shares of Common Stock or
other securities of the Company or entered into any Short Sales, as defined in
Section 4.8 below.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Company Securities,
and has so evaluated the merits and risks of such investment. Such Purchaser is
able to bear the economic risk of an investment in the Company Securities and,
at the present time, is able to afford a complete loss of such investment. The
Purchaser understands that its investment in the Company Securities involves a
high degree of risk.
(e) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Company Securities and the merits and risks of investing in the
Company Securities; (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(f) Certain Fees. Except for the fees that will be payable by the
Company under Section 3.1(l), such Purchaser has not entered into any agreement
or arrangement that would entitle any broker or finder to compensation by the
Company in connection with the sale of the Company Securities to such Purchaser.
14
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Company Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Company Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144, except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel, selected by the transferor and reasonably acceptable to
the Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Company Securities by a Purchaser to an Affiliate of such Purchaser, provided
that such Affiliate transferee agrees to be bound by all of the applicable
provisions of the Transaction Documents, including the representations of the
Purchaser, and certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act; provided that, solely with
respect to Deutsche Bank, AG London Branch and solely for purposes of this
Section 4.1(a), "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) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Company Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE] HAVE [NOT] 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 LAWS 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 SUCH TERM IS DEFINED IN RULES AND REGULATIONS
PROMULGATED UNDER THE SECURITIES ACT) IN CONNECTION WITH A BONA FIDE
MARGIN
15
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Company Securities shall not be required to contain such
legend or any other legend (i) while a Registration Statement covering the
resale of such Company Securities is effective under the Securities Act, or (ii)
following any sale of such Company Securities pursuant to Rule 144, or (iii) if
such Company Securities are eligible for sale under paragraph (k) of Rule 144,
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause Company Counsel to issue
the legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the Effective Date. Following the Effective Date or at such
earlier time as a legend is no longer required for certain Company Securities,
the Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a legended
certificate representing such Company Securities (and all other documents
reasonably required by the Company's transfer agent in connection therewith),
deliver or cause to be delivered to such Purchaser a certificate representing
such Company Securities that is free from all restrictive and other legends.
Following the Effective Date and upon the delivery to any Purchaser of any
certificate representing Company Securities that is free from all restrictive
and other legends, such Purchaser agrees that any sale of such Company
Securities shall be made pursuant to the Registration Statement and in
accordance with the plan of distribution described therein or pursuant to an
available exemption from the registration requirements of the Securities Act.
The Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. At all times prior to the 60th Trading Day following the
Effective Date, the Company will not effect or publicly announce its intention
to effect any exchange, recapitalization or other transaction that effectively
requires or rewards physical delivery of certificates evidencing the Common
Stock.
(c) The Company acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Securities to
a pledgee or secured party that is an "accredited investor" (as defined in Rule
501(a) under the Securities Act) in connection with a bona fide margin agreement
or other loan or financing arrangement secured by the Securities and, if
required under the terms of such agreement, loan or arrangement, such Purchaser
may transfer pledged or secured Securities to such pledgees or secured parties
pursuant to applicable law. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities pursuant to this Section 4.3(c), including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders in the Prospectus.
16
4.2 Filing of Information. As long as any Purchaser owns Company
Securities, the Company covenants to use its best efforts to timely file all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as any Purchaser owns Company Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Company Securities under Rule 144. The Company further covenants that
it will take such further action as any holder of Company Securities may
reasonably request to satisfy the provisions of Rule 144 applicable to the
issuer of securities relating to transactions for the sale of securities
pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its commercially
reasonably efforts to ensure that no Affiliate thereof shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Company Securities in a manner that would require the
registration under the Securities Act of the sale of the Company Securities to
the Purchasers or that would be integrated with the offer or sale of the Company
Securities for purposes of the rules and regulations of any Trading Market.
4.4 Covenants Regarding Common Stock. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Securities Laws Disclosure; Publicity. The Company shall, on or before
9:30 a.m., Eastern Time on February 12, 2004, issue a press release reasonably
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. On or before 9:30 a.m., Eastern Time on February 13, 2004,
the Company shall file a Current Report on Form 0-X (xxx "0-X XXXXXX") with the
Commission describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to the 8-K Filing, this
Agreement, including the schedules hereto, and the form of the Additional
Investment Rights, in the form required by the Exchange Act. Thereafter, the
Company shall use its best efforts to timely file any filings and notices
required by the Commission or applicable law with respect to the transactions
contemplated hereby. Except with respect to the 8-K filing (a copy of which will
be provided to the Lead Purchaser and LP Counsel for their review as early as
practicable prior to its filing), the Company shall, at least two Trading Days
prior to the filing or dissemination of any disclosure required by this
paragraph, provide a copy thereof to the Lead Purchaser and LP Counsel for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement without
the prior consent of the other,
17
except if such disclosure is required by law, in which case the Company shall
provide the Lead Purchaser and LP Counsel with prior notice of such disclosure.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure (but not any
disclosure as to the controlling Persons thereof) is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure. The Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents not to, provide any Purchaser with, any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the
filing of the 8-K Filing without the express written consent of such Purchaser.
No purchaser shall request any material nonpublic information regarding the
Company unless it expressly acknowledges in advance in writing that it is
requesting material nonpublic information. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to require the Company to as promptly as practicable, but in any
event within one (1) Business Day, make a public disclosure, in the form of a
press release or otherwise, of such material nonpublic information, and if the
Company fails to make such public disclosure as promptly as practicable, but in
any event within one (1) Business Day, such Purchaser may make such public
disclosure without the prior approval of the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents. No Purchaser shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders
or agents for any such disclosure. Subject to the foregoing, neither the Company
nor any Purchaser shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Purchaser, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). The Company agrees to file a Form D
with respect to the Company Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital and general corporate purposes.
4.7 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling person, employee or agent of a Purchaser
or any of its Affiliates (a "RELATED PERSON") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents (other than
(i) transactions brought by the investors or shareholders of such Purchaser
against such Purchaser or (ii) relating to the Registration Statement,
Prospectus or other matter contemplated by Article VI hereof), the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the reasonable
18
costs of any investigation, preparation and travel) and for any Losses incurred
in connection therewith, as such expenses or Losses are actually incurred,
excluding only Losses that arise directly out of or result directly from such
Purchaser's or Related Person's gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as actually incurred,
arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company arise directly out of or relate
directly to any breach by a Purchaser of any of the representations, warranties
or covenants made by such Purchaser in this Agreement. If the Company breaches
its obligations under any Transaction Document, then, in addition to any other
liabilities the Company may have under the Transaction Documents or applicable
law, the Company shall pay or promptly reimburse the Purchasers on demand for
all costs of collection and enforcement (including reasonable attorneys fees and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to promptly reimburse the Purchasers on demand for all costs
of enforcing the indemnification obligations in this paragraph.
4.8 Certain Trading Limitations. Each Purchaser agrees that beginning on
the date hereof until the earlier to occur of (a) 90 days from the Closing Date
and (b) the effective date of the Registration Statement to be filed in
connection with the sale of the Company Shares, it will not enter into any Short
Sales. For purposes of this Section 4.8, a "SHORT SALE" by a Purchaser means a
sale of Common Stock that is marked as a short sale and that is executed at a
time when such Purchaser has no equivalent offsetting long position in the
Common Stock. For purposes of determining whether a Purchaser has an equivalent
offsetting long position in the Common Stock, all Common Stock issued or
issuable pursuant to this Agreement and all Common Stock that would be issuable
upon conversion or exercise in full of all Options then held by or issuable to
such Purchaser (whether or not such Options were then fully convertible or
exercisable and giving effect to any conversion or exercise price adjustments
scheduled to take effect in the future) shall be deemed to be held long by such
Purchaser. Solely with respect to Deutsche Bank, AG London Branch and solely for
purposes of applying the restrictions contained in this Section 4.8, the term
"Purchaser" shall mean the Quantitative Value Trading (or QVT) group of DB
Advisors LLC and any accounts managed, advised or controlled by such group. The
foregoing sentence shall have no future application after the date on which
Deutsche Bank, AG London Branch has transferred all of its rights under the
Transaction Documents.
4.9 Blockout Period.
19
(a) Except with the consent of the Purchasers pursuant to Section 7.5,
from the date hereof until the Effective Date (the "FIRST BLOCKOUT PERIOD"), the
Company will not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or the Subsidiaries'
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for Common Stock or Common Stock Equivalents (any such offer, sale,
grant, disposition or announcement being referred to as a "SUBSEQUENT
PLACEMENT").
(b) Except with the consent of the Purchasers pursuant to Section 7.5,
from the Effective Date until the 60th Trading Day following the Effective Date,
the Company will not, directly or indirectly, effect any Subsequent Placement
(the "SECOND BLOCKOUT PERIOD").
(c) The First Blockout Period and Second Blockout Period set forth in
Sections 4.9(a) and 4.9(b), respectively, shall be extended for the number of
Trading Days during such period in which (x) trading in the Common Stock is
suspended by any Trading Market, (y) the Registration Statement is not effective
after the Required Effectiveness Date, or (z) the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of all
of the Registrable Securities.
(d) The restrictions contained in paragraph (a) of this Section 4.9
shall not apply to Excluded Stock. The restrictions contained in paragraph (b)
of this Section 4.9 shall not apply to Excluded Stock or an offering of bona
fide convertible debt of the Company on or after the date which is fifteen (15)
Trading Days following the Effective Date with a conversion price (i) in excess
of the Purchase Price (as defined in the Additional Investment Right) and (ii)
in excess of the greater of (x) the arithmetic average of each of the 5 Trading
Day VWAP prior to the closing date of such offering and (y) the VWAP on the
Trading Day immediately prior to the closing date of such offering.
(e) The undersigned Purchasers, constituting the holders of at least
two-thirds (2/3) of the Company Securities, as defined in that certain
Securities Purchase Agreement between the Company and the purchasers identified
on the signature pages thereto (the "PRIOR Agreement"), hereby waive Section 4.9
of the Prior Agreement for purposes of the purchase and sale of Company
Securities, as defined in this Agreement, pursuant to this Agreement.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Company Securities at the Closing is
subject to the satisfaction or waiver by such Purchaser, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when
20
made and as of the Closing as though made on and as of such date (except for
representations and warranties that address matters only as of a particular
date); and
(b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Company Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of the Purchasers contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration.
(a) As promptly as reasonably practicable, and in any event on or prior
to the Filing Date, the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the resale of all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith as Purchasers holding a majority of the Registrable Securities may
consent) and shall contain (except if otherwise directed by Purchasers holding a
majority of the Registrable Securities) the "Plan of Distribution" attached
hereto as Exhibit C.
(b) Subject to the receipt by the Company of the legal name of each
Purchaser and the number of Company Securities beneficially owned by each such
Purchaser, the Company shall use its commercially reasonable efforts to cause
the Registration Statement to be declared effective by the Commission as
promptly as possible after the filing thereof, but in any event on or prior to
the Required Effectiveness Date, and shall use its reasonable best efforts to
keep the Registration Statement continuously effective under the Securities Act
until the earlier of (i) the date that all Registrable Securities covered by
such Registration Statement have been sold or (ii) such time as all the
Registrable Securities held by the Purchasers can be sold pursuant to paragraph
(k) of Rule 144 (the "EFFECTIVENESS PERIOD").
21
(c) The Company shall notify each Purchaser in writing (which may be by
electronic mail) promptly (and in any event within one Business Day) after
receiving notification from the Commission that the Registration Statement has
been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on every
monthly anniversary thereof until the applicable Event is cured, as partial
relief for the damages suffered therefrom by the Purchasers (which remedy shall
not be exclusive of any other remedies available under this Agreement, at law or
in equity), the Company shall pay to each Purchaser an amount in cash, as
liquidated damages and not as a penalty, equal to 1.0% of the aggregate purchase
price paid by such Purchaser for the first month and 1.5% for each month
thereafter for all the Company Securities. The payments to which a Purchaser
shall be entitled pursuant to this Section 6.1(d) are referred to herein as
"EVENT PAYMENTS." Any Event Payments payable pursuant to the terms hereof shall
apply on a pro rata basis for any portion of a month prior to the cure of an
Event. In the event the Company fails to make Event Payments in a timely manner,
such Event Payments shall bear interest at the rate of 1.0% per month (prorated
for partial months) until paid in full. Notwithstanding anything to the contrary
contained in this Section 6.1(d), for the first month after the occurrence of an
Event described in Section 6.1(d)(i) below, the sole and exclusive relief for
the damages suffered therefrom by the Purchasers shall be the payment of Event
Payments pursuant to this Section 6.1(d); provided, that after the expiration of
such one month period, the Purchasers shall be entitled to any other remedy
available under this Agreement, at law or in equity for any damages suffered
arising out of or as a result of the occurrence of such Event; provided;
further; that in no event shall the limitations provided in this sentence apply
to the occurrence of any Event other than the Event described in Section
6.1(d)(i) below.
For such purposes, each of the following shall constitute an "EVENT":
(i) the Registration Statement is not filed on or prior to the
Filing Date, provided, that such an Event shall be deemed "cured" for
purposes of this Section 6.1(d) upon the filing of the Registration
Statement;
(ii) the Registration Statement is not declared effective on
or prior to the Required Effectiveness Date; provided, however, that
for the purposes of the Event Payment under this Section 6.1(d) only,
the Company shall have an additional 30 days to cure the failure of the
Registration Statement to be declared effective on or prior to the
Required Effectiveness Date before such Event Payment shall be due to
the Purchasers under this Section 6.1(d), and, provided further, that
such an Event shall be deemed "cured" for purposes of this Section
6.1(d) upon the filing or declaration of effectiveness of the
Registration Statement, as the case may be; or
(iii) except as provided for in Section 6.1(e), after the
Effective Date and during the Effectiveness Period, a Purchaser is not
permitted to sell Registrable Securities under the Registration
Statement (or a subsequent Registration Statement filed in replacement
thereof) for any reason for a period of at least five consecutive
Trading
22
Days, provided that such an Event shall be deemed "cured" for purposes
of this Section 6.1(d) upon the termination of such period;
(iv) the Common Stock is not listed or quoted, or is suspended
from trading, on an Eligible Market for a period of at least three
consecutive Trading Days at any time during the first 12 months after
the Effective Date, provided that such an Event shall be deemed "cured"
for purposes of this Section 6.1(d) upon the termination of such
period;
(v) the Company fails for any reason to deliver a certificate
evidencing any Company Securities to a Purchaser within three Trading
Days after delivery of such certificate is required pursuant to any
Transaction Document, provided that such an Event shall be deemed
"cured" for purposes of this Section 6.1(d) upon the delivery of such
certificate; or
(vi) the Company fails to have available a sufficient number
of authorized but unissued and otherwise unreserved shares of Common
Stock available to issue Underlying Shares upon any exercise of the
Additional Investment Rights or, at any time following the Effective
Date and during the Effectiveness Period, any Shares or Underlying
Shares are not listed on an Eligible Market.
(e) The Company may, by written notice to the Purchasers, suspend sales
under a Registration Statement after the Effective Date thereof and/or require
that the Purchasers immediately cease the sale of shares of Common Stock
pursuant thereto and/or defer the filing of any subsequent Registration
Statement if the Company's Board of Directors determines in good faith, by
appropriate resolutions, that continued use of the Registration Statement would
require disclosure of material, nonpublic information regarding the Company
which at such time would be materially detrimental to the Company; provided,
however, that such notice shall not disclose such material nonpublic
information. Upon receipt of such notice, each Purchaser shall immediately
discontinue any sales of Registrable Securities pursuant to such registration
until such Purchaser has received copies of a supplemented or amended Prospectus
or until such Purchaser is advised in writing by the Company that the
then-current Prospectus may be used and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus. In no event, however, shall this right be exercised to
suspend sales beyond the period during which (in the good faith determination of
the Company's Board of Directors) the failure to require such suspension would
be materially detrimental to the Company. The Company's rights under this
Section 6(e) may not be exercised (x) more than twice in the 60 Trading Days
immediately subsequent to the Effective Date or for a period of greater than 10
Trading Days during such period, or (y) more than twice or for a period greater
than 45 days in any twelve-month period after the 60 Trading Days immediately
subsequent to the Effective Date. Immediately after the end of any suspension
period under this Section 6(e), the Company shall take all necessary actions
(including filing any required supplemental prospectus) to restore the
effectiveness of the applicable Registration Statement and the ability of the
Purchasers to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.
23
(f) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than one or more
registration statements on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued in connection with any acquisition of any entity or business or equity
securities issuable in connection with a stock option or other employee benefit
plan.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference (other than any documents containing material
non-public information)), the Company shall (i) furnish to the Purchasers and LP
Counsel copies of all such documents proposed to be filed, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object in
writing within two Trading Days of receipt.
(b) (i) Subject to Section 6.1(e), prepare and file with the Commission
such amendments, including post-effective amendments, to each Registration
Statement and the Prospectus used in connection therewith as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) use its best efforts to respond as promptly as reasonably practicable to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably practicable
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement (other than
correspondence containing material nonpublic information); and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold and LP
Counsel as promptly as reasonably practicable, and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day thereafter,
of any of the following events: (i) the Commission notifies the Company whether
there will be a "review" of any Registration
24
Statement; (ii) the Commission comments in writing on any Registration Statement
(in which case the Company shall deliver to the Lead Purchaser a copy of such
comments and of all written responses thereto (other than any correspondence
containing material nonpublic information)); (iii) any Registration Statement or
any post-effective amendment is declared effective; (iv) the Commission or any
other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus; (v) the Commission
issues any stop order suspending the effectiveness of any Registration Statement
or initiates any Proceedings for that purpose; (vi) the Company receives notice
of any suspension of the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the initiation or threat
of any Proceeding for such purpose; or (vii) the financial statements included
in any Registration Statement become ineligible for inclusion therein or the
Company has actual knowledge that any statement made in any Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference is untrue in any material respect or that any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of or, if
issued, obtain the withdrawal as promptly as practicable of (i) any order
suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, as soon as possible.
(e) Furnish to each Purchaser and LP Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
and all exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission.
(f) Promptly deliver to each Purchaser and LP Counsel, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. Subject to the terms hereof, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Purchasers in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities laws
and regulations.
(g) In the time and manner required by each Trading Market, if at all,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as reasonably practicable thereafter; (iii) to the
extent available to the Company, provide to the Purchasers evidence of such
listing; and (iv) except as a result of the Excluded Events, maintain the
listing of such Registrable Securities on each such Trading Market or another
Eligible Market until the date which is one year after the date as of which the
Purchasers (or any transferees) may sell all of the Company Securities without
restriction pursuant to paragraph (k) of Rule 144.
25
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Purchasers and LP Counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other reasonable acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
(i) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by this Agreement and applicable law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii),
as promptly as reasonably practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any reasonable due diligence investigation
undertaken by the Purchasers in connection with the sale of Registrable
Securities, including, without limitation, by making available at reasonable
times and upon reasonable advance notice any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing and, if requested by the
Company, such Purchaser agrees in writing to treat such information
confidentially.
(l) Comply with all applicable rules and regulations of the Commission
in all material respects.
(m) At the reasonable request of any Purchaser and at such Purchaser's
expense, the Company shall furnish to such Purchaser, on the date of the
effectiveness of the Registration Statement and thereafter from time to time
upon any change or addition (including by way of incorporation by reference) to
the financial statements or financial information included in the Registration
Statement (i) a letter, dated such date, from the Company's
26
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to such Purchaser and the Company, and
(ii) an opinion, dated as of such date, of counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to such
Purchaser.
(n) At the reasonable request of any Purchaser, the Company shall make
available for inspection by (i) any Purchaser, (ii) legal counsel to any
Purchaser and (iii) one firm of accountants or other agents retained by the
Purchasers (collectively, the "INSPECTORS"), all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to a Purchaser) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement of
which the Inspector has knowledge. Each Purchaser agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. The fees and expenses of the Inspectors
and any out-of-pocket expenses incurred by the Company as a result of its
cooperation under this Section 6.2(n) shall be borne by the applicable
Purchaser.
(o) The Company shall make generally available to its security holders
as soon as practical, but not later than 90 days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning
after, but not later than the first day of the Company's fiscal quarter next
following, the effective date of the Registration Statement.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with Article VI of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without
limitation those related to filings with the Commission, any Trading Market and
in connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses incurred by the
Company, (d) fees and disbursements of counsel for the Company and up to $10,000
in the aggregate for the LP Counsel, (e) fees and expenses of all other Persons
27
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement, and (f) all listing fees to be paid by the
Company to the Trading Market. Notwithstanding the foregoing, each Purchaser
shall pay all selling commissions and brokerage fees, if any, applicable to the
sale of Registrable Securities by such Purchaser.
6.4 Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser,
the officers, directors, partners, members, agents, investment advisors and
employees of each Purchaser, each Person who controls any such Purchaser (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, partners, members, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all Losses, as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements, alleged untrue statements,
omissions or alleged omissions (i) are based solely upon information regarding
such Purchaser furnished in writing to the Company by such Purchaser or on
behalf of such Purchaser by such Purchaser's legal counsel expressly for use
therein, or solely upon information that relates to such Purchaser or such
Purchaser's proposed method of distribution of Registrable Securities and that
was reviewed and expressly approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (ii) in the case of an occurrence of
an event of the type specified in Section 6.2(c)(v)-(vii), resulted solely from
the use by such Purchaser of an outdated or defective Prospectus after such
Purchaser has received notice in writing that the Prospectus is outdated or
defective and prior to the receipt by such Purchaser of the Advice contemplated
in Section 6.5. The Company shall notify the Purchasers promptly of the
institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, notwithstanding any termination of this Agreement, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against any and all Losses incurred arising solely
out of any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not
28
misleading to the extent, but only to the extent, that such untrue statement or
omission (i) is based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or solely
upon information that relates to such Purchaser or such Purchaser's proposed
method of distribution of Registrable Securities and that was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), resulted solely from the use
by such Purchaser of an outdated or defective Prospectus after such Purchaser
has received notice in writing that the Prospectus is outdated or defective and
prior to the receipt by such Purchaser of the Advice contemplated in Section
6.5. In no event shall the liability of any selling Purchaser hereunder be
greater in amount than the dollar amount of the gross proceeds in respect of the
sale by such Purchaser of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its indemnification obligations pursuant to this Section
6.4, except (and only) to the extent that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party, and shall not relieve the
Indemnifying Party from any other liability which it may have to the Indemnified
Party for contribution or otherwise.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all Indemnified Parties, which firm shall be appointed by a majority of the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without
29
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder.
(d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the total
dollar amount of the gross proceeds in respect of the sale by such Purchaser of
the Registrable Securities giving rise to such contribution obligation. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
30
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement, except to settle
transactions made prior to Purchaser's receipt of such notice, until such
Purchaser's receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 6.2(j), or until it is advised in
writing (the "ADVICE") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within ten days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or the
Lead Purchaser, by written notice to the other parties, if the Closing has not
been consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to LP Counsel
an aggregate of $2,500 for its legal fees and expenses incurred in connection
with its due diligence and the preparation and negotiation of the Transaction
Documents. In lieu of the foregoing payment, Lead Purchaser may retain such
amount at the Closing or require the Company to pay
31
such amount directly to LP Counsel. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all fees of its transfer agent, stamp taxes and other taxes and duties
levied in connection with the sale and issuance by the Company of Company
Securities hereunder.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, each party hereto will
execute and deliver to any other party hereto such further documents as may be
reasonably requested in order to give practical effect to the intention of the
parties under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and, except
as otherwise provided herein, shall be deemed given and effective on the
earliest of (a) the date of transmission, if such notice or communication is
delivered via facsimile at a facsimile number specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is not
a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of deposit with a nationally recognized
overnight courier service, (d) the third Trading Day after the date of deposit,
first class postage prepaid, in the U.S. mails, or (e) upon actual receipt by
the party to whom such notice is required to be given. The addresses and
facsimile numbers for such notices and communications are those set forth on the
signature pages hereof, or such other address or facsimile number as may be
designated in writing hereafter, in the same manner, by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding (or, in the case of an amendment prior to the
Closing Date, committing to hold) two-thirds (2/3) of the Company Securities or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Purchasers under Article VI and that does
not directly or indirectly affect the rights of other Purchasers may be given by
Purchasers holding at least two-thirds (2/3) of the Registrable Securities to
which such waiver or consent relates.
32
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign any Transaction Document or any rights or obligations
thereunder without the prior written consent of the Purchasers. Any Purchaser
may assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Company Securities, provided such transferee delivers a
statement to the Company in which it agrees in writing to be bound, with respect
to the transferred Company Securities, by the provisions hereof that apply to
the "Purchasers." Notwithstanding anything to the contrary herein, Securities
may be assigned to any Person in connection with a bona fide margin account or
other loan or financing arrangement secured by such Securities, provided such
Person is an "accredited investor" as such term is defined in the rules and
regulations under the Securities Act.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.7 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, 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
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT OR 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
33
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 AND PURCHASERS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Company Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 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.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Company Securities. If any certificate or instrument
evidencing any Company Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Company Securities.
7.15 Remedies. Subject to the fifth sentence of Section 6.1(d) hereof, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the
34
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
35
[SIGNATURE PAGES TO FOLLOW]
36
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
AVANEX CORPORATION
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: V.P., Corporate Affairs
Address for Notice:
00000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxxxx
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
BAYSTAR CAPITAL II, LP, a Delaware limited
partnership
By: BayStar Capital Management, LLC, its general
partner
By: /s/ XXXXX XXXXX
--------------------------------------------
Title: Managing Member
Record
Address: 00 X. Xxx Xxxxxxx Xxxxx Xxxx. Xxxxx, 0X
---------------------------------------
Xxxxxxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 800,000
--------------------------------
Aggregate Purchase Price: $4,392,000
----------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
CITADEL EQUITY FUND LTD.
By: Citadel Limited Partnership its Portfolio
Manager
By: GLB Partners,L.P. its General Partner
By: Citadel Investment Group, L.L.C. its General
Partner
By: /s/ XXXXX X. XXXXXXX
--------------------------------------
Title: Vice President
Record
Address: 000 X. Xxxxxxxx Xxxxxx
---------------------------------------
Xxxxxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
---------------------------------
Number of Units: 1,000,000
--------------------------------
Aggregate Purchase Price: $5,490,000
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
DEEPHAVEN SMALL CAP GROWTH FUND, LLC
By: /s/ XXXXX XXXXXXXXX
--------------------------------------------
Title: Director of Private Placements
Record
Address: 000 Xxxxxxxx Xxxx, Xxxxx 000
---------------------------------------
Xxxxxxxxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 364,298
--------------------------------
Aggregate Purchase Price: $2,000,000
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
DEUTSCHE BANK, AG LONDON BRANCH
By: /s/ XXXXX XX
--------------------------------------------
Title: Authorized Signatory
By: /s/ XXXXX XXXXXX
--------------------------------------------
Title: Authorized Signatory
Record
Address: 000 Xxxx Xxx. (0xx Xxxxx)
---------------------------------------
Xxx Xxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 1,821,493
--------------------------------
Aggregate Purchase Price: $9,999,996.57
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
HEIMDALL INVESTMENTS LTD.
By: /s/ XXXXX X. XXXXX
--------------------------------------------
Title: Authorized Signatory
Record
Address: 000 Xxxxxxxx Xxxxx, Xxxxx 000
---------------------------------------
Xxxxxx, XX 00000
----------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 1,000,000
--------------------------------
Aggregate Purchase Price: $5,490,000
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
SMITHFIELD FIDUCIARY LLC
By: /s/ XXXX X. CHILL
--------------------------------------
Title: Authorized Signatory
Record
Address: 0 Xxxx 00xx Xxxxxx, 27th Floor
---------------------------------------
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 455,373
--------------------------------
Aggregate Purchase Price: $2,499,997.80
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
PORTSIDE GROWTH AND OPPORTUNITY FUND
By: /s/ XXXX XXXXX
--------------------------------------------
Title: Director
Record
Address: 000 Xxxxx Xxxxxx, 00xx Xxxxx
---------------------------------------
Xxx Xxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 728,597
--------------------------------
Aggregate Purchase Price: $3,999,997.53
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
MAINFIELD ENTERPRISES INC.
By: /s/ AVI VIGDER
--------------------------------------------
Title: Authorized Signatory
Record
Address: 000 Xxxxxxx Xxxxxx, 00xx Floor
---------------------------------------
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 350,000
--------------------------------
Aggregate Purchase Price: $1,921,500.00
----------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
UBS X'XXXXXX LLC F/B/O X'XXXXXX GLOBAL
CONVERTIBLE ARBITRAGE MASTER LTD.
By: /s/ XXXXXX XXXXXXX
--------------------------------------
Title: Managing Director
Record
Address: One X. Xxxxxx Drive, 32nd Floor
---------------------------------------
Xxxxxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 640,000
--------------------------------
Aggregate Purchase Price: $3,513,600
---------------------
Purchaser Signature Page
By its execution and delivery of this signature page, the undersigned
Purchaser hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of February 11, 2004 (the "Purchase
Agreement") by and among Avanex Corporation and the Purchasers (as defined
therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or
counterparts thereof.
Name of Purchaser:
UBS X'XXXXXX LLC F/B/O PIPES CORPORATE
STRATEGIES LTD.
By: /s/ XXXXXX XXXXXXX
--------------------------------------------
Title: Managing Director
Record
Address: One X. Xxxxxx Drive, 32nd Floor
---------------------------------------
Xxxxxxx, XX 00000
---------------------------------------
Telecopy No.: (000) 000-0000
----------------------------------
Number of Units: 160,000
--------------------------------
Aggregate Purchase Price: $878,400
---------------------
Exhibits:
A Form of Additional Investment Right
B Opinion of Company Counsel
C Plan of Distribution
D Form of Transfer Agent Instructions
SCHEDULE A
SCHEDULE OF INVESTORS
Purchased Investment
Purchaser Units Shares Right Shares Purchase Price
--------- ----- ------ ------------ --------------
BayStar Capital II, LP 800,000 800,000 160,000 $ 4,392,000.00
c/o BayStar Capital II, LLC
00 X. Xxx Xxxxxxx Xxxxx Xxxx. Xxxxx, 0X
Xxxxxxxx, XX 00000
Tel: 000-000-0000
Citadel Equity Fund Ltd. 1,000,000 1,000,000 200,000 $ 5,490,000.00
c/o Citadel Limited Partnership
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
T: 312-395-2100
F: 000-000-0000
Deephaven Small Cap Growth Fund, LLC 364,298 364,298 72,860 $ 1,999,996.02
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax number: 000-000-0000
Deutsche Bank, AG London Branch 1,821,493 1,821,493 364,299 $ 9,999,996.57
000 Xxxx Xxx. (0xx Xxxxx)
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
T: 000-000-0000
F: 000-000-0000
Heimdall Investments Ltd. 1,000,000 1,000,000 200,000 $ 5,490,000.00
c/o HBK Investments L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: General Counsel
T: (000) 000-0000
F: (000) 000-0000
Smithfield Fiduciary LLC 455,373 455,373 91,075 $ 2,499,997.77
c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxx / Xxxx X. Chill
Fax: 000-000-0000
Tel: 000-000-0000
Purchased Investment
Purchaser Units Shares Right Shares Purchase Price
--------- ----- ------ ------------ --------------
Portside Growth and Opportunity Fund 728,597 728,597 145,720 $ 3,999,997.53
c/o Ramius Capital Group, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Fax (000) 000-0000
Mainfield Enterprises Inc. 350,000 350,000 70,000 $ 1,921,500.00
x/x Xxxx Xxxxxxx Xxxxxx, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Eldad Gal
UBS X'Xxxxxx LLC f/b/o X'Xxxxxx 640,000 640,000 128,000 $ 3,513,600.00
Global Convertible Arbitrage Master Ltd.
c/o UBS X'Xxxxxx LLC
Xxx X. Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
F: 000-000-0000
UBS X'Xxxxxx LLC f/b/o X'Xxxxxx 160,000 160,000 32,000 $ 878,400.00
PIPES Corporate Strategies Ltd.
c/o UBS X'Xxxxxx LLC
Xxx X. Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
F: 000-000-0000
TOTAL 7,319,761 7,319,761 1,463,954 $40,185,487.89
EXHIBIT A
FORM OF ADDITIONAL INVESTMENT RIGHT
(FILED AS EXHIBIT 99.2)
EXHIBIT B
OPINION OF COMPANY COUNSEL
February __, 2004
To the Purchasers listed on Schedule A to the
Avanex Corporation Securities Purchase Agreement dated as of February 11, 2004.
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement, dated as of
February 11, 2004 (the "Purchase Agreement"), by and among Avanex Corporation, a
Delaware corporation (the "Company") and the Purchasers listed on Schedule A to
the Purchase Agreement, which provides for the issuance by the Company to the
Purchasers of shares of Common Stock of the Company (the "Company Shares") and
Additional Investment Rights to purchase additional shares of the Company's
Common Stock (the "Rights"). This opinion is rendered to you pursuant to Section
2.2(a)(iii) of the Purchase Agreement, and all terms used herein have the
meanings defined for them in the Purchase Agreement unless otherwise defined
herein. Reference in this opinion to the Purchase Agreement excludes any
schedule or substantive agreement attached as an exhibit to the Purchase
Agreement, unless otherwise indicated herein.
We have acted as counsel for the Company in connection with the
negotiation of the Purchase Agreement and the issuance of the Company Shares and
the Rights. As such counsel, we have made such legal and factual examinations
and inquiries as we have deemed advisable or necessary for the purpose of
rendering this opinion. In addition, we have examined originals or copies of
such corporate records of the Company, certificates of public officials and such
other documents as we consider necessary or advisable for the purpose of
rendering this opinion. In such examination we have assumed (i) the genuineness
of all signatures on original documents, (ii) the authenticity and completeness
of all documents submitted to us as originals, (iii) the conformity to original
documents of all copies submitted to us as copies thereof, the legal capacity of
natural persons, (iv) the due execution and delivery of all documents (except as
to due execution and delivery by the Company) where due execution and delivery
are a prerequisite to the effectiveness thereof, and (v) the absence of any
evidence extrinsic to the provisions of the written agreements between the
parties that the parties intended a meaning contrary to that expressed by those
provisions.
As used in this opinion, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Purchase Agreement and the
Rights and the transactions contemplated thereby. Except to the extent expressly
set forth herein or as we otherwise believe to be necessary to our opinion,
we have not undertaken any independent investigation to determine the existence
or absence of any fact, and no inference as to our knowledge of the existence or
absence of any fact should be drawn from our representation of the Company or
the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that each Purchaser has all
requisite power and authority, and has taken any and all necessary corporate or
partnership action, to execute and deliver the Purchase Agreement and the
Rights, and we are assuming that the representations and warranties made by the
Purchasers in the Purchase Agreement and pursuant thereto are true and correct.
We are also assuming that the Purchasers have purchased the Units for value, in
good faith and without notice of any adverse claims within the meaning of the
California Uniform Commercial Code. We are also assuming that the
representations and warranties made by the Company in the Agreement and pursuant
thereto are true and correct as to matters of fact.
We are members of the Bar of the State of California and we express no
opinion as to any matter relating to the laws of any jurisdiction other than the
federal laws of the United States of America, the laws of the State of
California and the General Corporation Law of the State of Delaware. We express
no opinion with respect to the effect on the transactions contemplated in the
Purchase Agreement of noncompliance under the statutes, regulations, treaties or
common laws of any other nation, state or jurisdiction. We note that the parties
to the Purchase Agreement have designated the laws of the State of New York as
the laws governing the Purchase Agreement and the Rights. Our opinion in
paragraph 3 below as to the validity, binding effect and enforceability of the
Purchase Agreement and the Rights is premised upon the result that would be
obtained if a California court were to apply the internal laws of the State of
California (excluding conflicts of law principles) to the interpretation and
enforcement of the Purchase Agreement and the Rights.
In rendering the opinion in paragraph 7 below, we have relied, as to
factual matters, upon an inquiry of officers of the Company concerning the
Company's filing of all reports required to be filed by it under Sections 13(a)
and 15(d) of the Exchange Act and written representations made to us by officers
of the Company in certificates executed by such officers of the Company.
In rendering the opinion in paragraph 8 below, we note that we have not
conducted a docket search in any jurisdiction with respect to litigation that
may be pending against the Company. In addition, we have relied in part on an
inquiry of officers of the Company concerning pending or threatened legal and
governmental proceedings and written representations made to us by officers of
the Company in certificates executed by such officers of the Company.
In rendering the opinion in paragraph 9 below, we have relied solely on
the position paper of the Committee on Securities Regulations of the New York
State Bar Association with respect to our opinion that no filing is required in
the state of New York in connection with the valid execution and delivery of the
Purchase Agreement and the Rights, or the offer, sale or issuance of the Shares
or the consummation by the Company of any other transaction contemplated by the
Transaction Documents.
The opinions hereinafter expressed are subject to the following
qualifications:
(i) We express no opinion as to (a) the effect of applicable
bankruptcy, insolvency, reorganization, liquidation, conservatorship,
readjustment of debt, fraudulent conveyance, moratorium or other similar
federal or state laws relating to or affecting the rights of creditors
generally; (b) the effect of general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and
fair dealing, and the possible unavailability of specific performance or
injunctive relief, and other equitable remedies, regardless of whether
considered in a proceeding in equity or at law, or (c) the effect or
enforceability of the choice of law provision in the Purchase Agreement
and in the Rights;
(ii) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity);
(iii) We express no opinion as to compliance with the applicable
anti-fraud provisions of the federal and state securities laws;
(iv) We express no opinion as to the enforceability of the
indemnification and contribution provisions contained in the Purchase
Agreement to the extent the provisions thereof may be subject to
limitations of public policy and the effect of applicable statutes and
judicial decisions;
(v) This opinion is qualified by the limitations imposed by statutes
and principles of law and equity that provide that certain covenants and
provisions of agreements are unenforceable where such covenants or
provisions are unconscionable or contrary to public policy or where
enforcement of such covenants or provisions under the circumstances would
violate the enforcing party's implied covenant of good faith and fair
dealing.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own or lease its assets and
properties and to conduct its business as, to our knowledge, it is currently
conducted.
2. The Company has the requisite corporate power and authority to execute
and deliver the Purchase Agreement and the Rights, to sell and issue the Company
Shares to the Purchasers, to issue the Underlying Shares upon exercise of the
Rights, and to otherwise carry out and perform its obligations under the terms
of the Purchase Agreement and the Rights.
3. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution and delivery of the
Purchase Agreement and the Rights by the Company, the authorization, sale,
issuance and delivery of the Company Shares, and the reservation and issuance of
the Underlying Shares has been taken. The Purchase Agreement and the Rights have
been duly and validly executed and delivered by the Company and constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms.
4. The Company Shares, when issued and paid for in accordance with the
provisions of the Purchase Agreement, will be validly issued, fully paid and
nonassessable. The Underlying Shares, when issued and paid for in accordance
with the provisions of the Rights, will be validly issued, fully paid and
nonassessable.
5. Subject to the accuracy of the Purchasers' representations in Section
3.2 of the Purchase Agreement, we are of the opinion that the issuance of the
Company Shares and the Rights in accordance with the provisions of the Purchase
Agreement and the issuance of the Underlying Shares in conformity with the terms
of the Rights are exempt from the registration requirements of the Securities
Act of 1933, as amended, subject to timely filing of a Form D pursuant to
Securities and Exchange Commission Regulation D.
6. The execution and delivery by the Company of the Purchase Agreement and
the Rights and the performance by the Company of the Purchase Agreement and the
Rights will not, (i) conflict with or violate the Certificate of Incorporation
or Bylaws of the Company, (ii) conflict with or violate in any material respect
any U.S. federal or California statute, rule or regulation known to us to be
customarily applicable to a transaction of this nature and to which the Company
is subject, or (iii) violate in any material respect, or constitute a material
default under, any contract or agreement filed as an exhibit to the Company's
Annual Report on Form 10-K for the year ended June 30, 2003 or Quarterly Report
on Form 10-Q for the quarter ended September 30, 2003.
7. The Company currently meets the eligibility requirements for the use of
Form S-3 for the registration of the Company Securities.
8. Except as disclosed in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2003, to our knowledge, there are no material
actions, suits or proceedings pending against the Company before any court or
governmental agency.
9. No consent, approval, authorization, declaration or filing with any
court, governmental or regulatory authority on the part of the Company is
required in connection with the offer, sale and issuance of the Company Shares
and the issuance of the Underlying Shares upon exercise of the Rights, or the
consummation of the transactions contemplated by the Purchase Agreement, except
for (i) the filing of a Form D pursuant to Securities and Exchange Commission
Regulation D, (ii) the filing of a Form 8-K pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (iii) the filing of the
Registration Statement contemplated by the Purchase Agreement.
This opinion is furnished to the Purchasers solely for their benefit in
connection with the purchase of the Units, and may not be relied upon by any
other person, firm, or entity or for any other purpose without our prior written
consent. We assume no obligation to inform you of any facts, circumstances,
events or changes in the law that may arise or be brought to our attention after
the date of this opinion that may alter, affect or modify the opinions expressed
herein.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
EXHIBIT C
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- transactions on a national securities exchange or quotation service
on which the securities may be listed or quoted at the time of sale;
- transactions in the over-the-counter market;
- privately negotiated transactions;
- short sales;
- through the writing of call options, whether such options are listed
on a national exchange or otherwise;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
In connection with sales of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may
in turn engage in short sales of the common stock in the course of hedging in
positions they assume. The selling stockholders may also engage in short sales
against the box, puts and calls and other transactions in our securities or
derivatives of our securities and may sell or deliver shares in connection with
these trades.
The selling stockholders may also loan or pledge shares to broker-dealers that
in turn may sell such shares.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. These commissions and discounts may be in excess of what is
customary in the types of transactions involved. Any profits on the resale of
shares of common stock by a broker-dealer acting as principal might be deemed to
be underwriting discounts or commissions under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, attributable to
the sale of shares will be borne by a selling stockholder. The selling
stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.
The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of common
stock in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus and may sell the shares of common stock from time to time under
this prospectus after, if required, we have filed a supplement to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgees,
transferees or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration
of the shares of common stock. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
The selling stockholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to
this prospectus. If the selling stockholders use this prospectus for any sale of
the shares of common stock, they will be subject to the prospectus delivery
requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange
Act of 1934 may apply to sales of our common stock and activities of the selling
stockholders.
EXHIBIT D
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
AVANEX CORPORATION
February __, 2004
Equiserve
Client Administration
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Attention:
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement (the "Purchase
Agreement"), dated as of the date hereof, by and among Avanex Corporation, a
Delaware corporation (the "Company") and the purchasers named therein (the
"Holders") pursuant to which the Company is issuing the Company's common stock,
$0.001 par value per share (the "Common Stock") and certain Common Stock
purchase rights (the "Additional Investment Rights") which shall be exercisable
into shares of Common Stock. The shares of Common Stock issued and transferred
at the Closing and issuable upon exercise of the Additional Investment Rights
are collectively referred to herein as the "Underlying Shares." Capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Purchase Agreement.
The Company has agreed with the Holders that it will instruct you to: (A) issue
the Underlying Shares free of all restrictive and other legends if, at the time
of such issue, (i) a registration statement covering the resale of such
Underlying Shares has been declared and is effective by the Commission under the
Securities Act, (ii) such Underlying Shares are eligible for sale under Rule
144(k) or (iii) such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission); or (B) reissue the Underlying Shares (if such
shares were originally issued with a restrictive legend) free of all restrictive
and other legends (i) upon the effectiveness of a registration statement
covering the resale of the Underlying Shares or (ii) following any sale of such
Underlying Shares pursuant to Rule 144 or (iii) such Underlying Shares are
eligible for sale under Rule 144(k) or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
In furtherance of this instruction, upon the effectiveness of the Registration
Statement we have instructed our counsel to deliver to you their opinion letter
in the form attached hereto as EXHIBIT I to the effect that the Registration
Statement has been declared effective by the Commission and
that Underlying Shares are freely transferable by the Holders and accordingly
may be issued (or reissued, as applicable) and delivered to the Holders free of
all restrictive and other legends.
You need not require further letters from us or our counsel to effect any future
issuance or reissuance of shares of Common Stock to the Holders as contemplated
by the Purchase Agreement, the Additional Investment Rights and this letter.
This letter shall serve as our standing irrevocable instructions with regard to
this matter
Please be advised that the Holders have relied upon this instruction letter as
an inducement to enter into the Purchase Agreement. Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.
Very truly yours,
AVANEX CORPORATION
By: _____________________________________
Name: __________________________________
Title: _________________________________
ACKNOWLEDGED AND AGREED:
EQUISERVE
By: _______________________________
Name :______________________________
Title: ____________________________
EXHIBIT I
[Letterhead of WSGR]
Equiserve
Client Administration
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Re: Avanex Corporation
To Whom It May Concern:
We are writing on behalf of our client, Avanex Corporation, a
Delaware corporation (the "Company"), in connection with the Company's recent
filing of a Registration Statement on Form S-3 (File No. 333-______) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to ____ shares of the Company's common stock, $0.001 par value
per share (the "Registrable Securities"), issued or to be issued to the selling
stockholders (the "Selling Stockholders") listed in the selling stockholders
table at pages __ of the final prospectus, a copy of which is attached hereto as
Exhibit A.
In connection with the foregoing, we advise you that the SEC has
entered an order declaring the Registration Statement effective under the
Securities Act of 1933, as amended (the "1933 Act"), on ____________ __, 20__.
We have no knowledge that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC.
This letter shall serve as our standing opinion to you that,
provided that the prospectus delivery requirements under the 1933 Act have been
satisfied, the Underlying Shares are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to
effect any future legend-free issuance or reissuance of shares of Common Stock
to the Holders as contemplated by the Company's Irrevocable Transfer Agent
Instructions dated February __, 2004. This letter shall serve as our standing
opinion with regard to this matter.
If you have any questions relating to the foregoing, please feel free to
call me at _________________.
Very truly yours,
AVANEX DISCLOSURE SCHEDULE
to the
SECURITIES PURCHASE AGREEMENT
by and among
AVANEX CORPORATION
and the
PURCHASERS
Dated as of February 11, 2004
The section numbers referenced in this Avanex Disclosure Schedule (the
"Disclosure Schedule") refer to the sections of that certain Securities Purchase
Agreement dated as of February 11, 2004 (the "Agreement") by and among Avanex
Corporation, a Delaware corporation ("Avanex" or the "Company") and the
purchasers identified on the signature pages thereto. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Agreement. This Disclosure Schedule and the information and disclosures
contained in this Disclosure Schedule are intended only to qualify and limit the
representations, warranties and covenants of the Company contained in the
Agreement and shall not be deemed to expand in any way the scope or effect of
any such representations, warranties or covenants.
SECTION 3.1(A)
SUBSIDIARIES
Name Jurisdiction of Incorporation
---- -----------------------------
Avanex Cayman Cayman Islands
Avanex U.S.A. Corporation Delaware
Avanex International Delaware
Corporation
LambdaFlex, Inc. Delaware
Pearl Acquisition Corp. Delaware
Avanex France S.A. France
Avanex U.K. Limited United Kingdom
On February 6, 2004, the Company announced the signing of a definitive agreement
with Gemfire Corporation by which Gemfire will acquire the Company's silica
planar lightwave circuit (PLC) unit in Livingston, Scotland. As part of the
agreement, Gemfire will acquire all outstanding capital stock of Avanex U.K.
With respect to the Company's subsidiaries that are incorporated outside of the
United States, nominal shares of the subsidiary's capital stock may be held in
the name of officers or directors to comply with applicable local law.
SECTION 3.1(D)
NO CONFLICTS
In order to sell Company Securities pursuant to the Registration Statement, the
Registration Statement must be declared effective by the SEC.
SECTION 3.1(F)
CAPITALIZATION
As of February 6, 2004, the Company had outstanding options to purchase
16,045,571 shares of Common Stock, subject to adjustment.
On November 12, 2003, the Company issued Additional Investment Rights
exercisable for up to 1,363,116 shares of Common Stock at a price of $4.63 per
share pursuant to the Prior Agreement.
In January 2004, the Company issued a Warrant exercisable for up to 60,000
shares of Common Stock in connection with a lease amendment entered into with
one of the Company's landlords.
Reference is made to Section 3.1(a) with regard to the definitive agreement with
Gemfire Corporation.
Reference is made to that certain Preferred Stock Rights Agreement, dated as of
July 26, 2001, between the Registrant and the EquiServe Trust Company, N. A., as
amended.
Reference is made to the following stock incentive plans of the Company:
- 1998 Stock Plan
- 1999 Director Option Plan
- 1999 Employee Stock Purchase Plan
- Holographix Inc. 1996 Stock Option Plan
- Holographix Inc. 2000 Stock Option Plan
- LambdaFlex, Inc. 2000 Stock Plan
SECTION 3.1(G)
SEC REPORTS; FINANCIAL STATEMENTS
The Company filed a current report on Form 8-K on February 2, 2004.
On May 29, 2002, in connection with the restatement of various of its financial
statements, Avanex filed amended quarterly reports on Forms 10-Q/A for the
quarterly periods ended March 31, 2002, December 31, 2001 and September 30, 2001
and an amended annual report on Form 10-K/A for the fiscal year ended June 30,
2001.
SECTION 3.1(K)
TITLE TO ASSETS
As more fully described in the Form 10-K, Avanex has short-term borrowing,
long-term debt and capital lease obligations, which are secured by certain
assets or the related equipment, with the following entities:
- Agilent Financial Services, Inc.;
- Citicorp Vendor Finance, Inc.; and
- Comerica Bank-California.
Reference is also made to that certain Master Installment Payment Agreement
between the Company and Fleet Business Credit LLC dated as of January 30, 2004.
SECTION 3.1(M)
PRIVATE PLACEMENT
Reference is made to the Prior Agreement.
SECTION 3.1(P)
REGISTRATION RIGHTS
Reference is made to that certain Stockholders' Agreement among the Company,
Alcatel, and Corning Incorporated dated as of July 31, 2003, pursuant to which
Avanex has agreed to use commercially reasonable efforts to cause 10% of the
securities acquired by Alcatel and Corning at the time of the Company's
acquisition of the optical components businesses of Alcatel and Corning to be
registered under the Securities Act upon expiration of an initial lock-up period
and to cause an additional ten percent (10%) of the acquired shares to be
registered during each of the subsequent four calendar quarters. Alcatel and
Corning also have demand registration rights effective two years following the
closing of the transactions and also have piggyback registration rights
effective upon the closing of the transactions, in each case, subject to certain
limitations related to underwriter cut-backs. These registration rights, as well
as the demand and piggyback registration rights, terminate on the date when all
registrable securities held by Alcatel or Corning may be sold immediately under
Rule 144(k) of the Securities Act during any 90 day period.
Alcatel's and Corning's piggyback registration rights do not apply to
registration statements filed pursuant to Rule 415 under the Securities Act or
any successor rule with similar effect. As a result, neither Alcatel nor Corning
have the right to list their shares on the Registration Statement.
