EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
November 10, 2003 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 6,815,555 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).
"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).
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities, including without
limitation all Additional Investment Rights.
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"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.
"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.
"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
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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.
(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
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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 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
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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 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
7
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 October 28, 2003, there were
128,083,657 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 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
8
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 current
report on Form 8-K dated as of September 26, 2003 and the current report on Form
8-K dated as of November 3, 2003, (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-K,
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.
(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
9
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. 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
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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 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
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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 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
12
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, 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.
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(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.
(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.
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
14
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 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.
15
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.
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.
16
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 November 11, 2003, 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 November 12, 2003,
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, 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
17
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 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
18
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.
(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").
19
(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.
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 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
20
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").
(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,
21
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 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
22
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.
(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
23
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 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.
24
(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.
(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
25
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 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
26
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
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
27
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 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
28
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 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
29
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.
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
30
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 $25,000 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 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.
31
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.
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.
32
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 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.
33
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 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
34
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.
[SIGNATURE PAGES TO FOLLOW]
35
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/ Xxxxxx Xxxxxxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxxxxxx
Title: Chairman & CEO
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 November 10, 2003 (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/ Xxxxxx X. 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: 700,000
-----------------------------------
Aggregate Purchase Price: $ 3,241,000.00
-------------------------
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 November 10, 2003 (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/Xxxxxxx X. Simpler
-----------------------------------------------
Title: Managing Director
Record
Address: 000 X. Xxxxxxxx Xxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 1,295,897
----------------------------------
Aggregate Purchase Price: $ 6,000,003.11
-------------------------
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 November 10, 2003 (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/ Xxx Xxxx
-----------------------------------------------
Title: Chief Legal Officer
Record
Address: 000 Xxxxxxxx Xxxx, Xxxxx 000
------------------------------------------
Xxxxxxxxxx, XX 00000
------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 431,966
----------------------------------
Aggregate Purchase Price: $ 2,000,002.58
-------------------------
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 November 10, 2003 (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 XxXxxx
-----------------------------------------------
Title: Authorized Signatory
By: /s/ Xxxxxxxx Xxxxx
-----------------------------------------------
Title: Authorized Signatory
Record
Address: 000 Xxxx Xxx. (0xx Xxxxx)
------------------------------------------
Xxx Xxxx, XX 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 2,159,828
----------------------------------
Aggregate Purchase Price: $ 10,000,003.64
-------------------------
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 November 10, 2003 (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'Xxxx
-----------------------------------------------
Title: Authorized Signatory
Record
Address: 000 Xxxxxxxx Xxxxx, Xxxxx 000
------------------------------------------
Xxxxxx, XX 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 431,966
----------------------------------
Aggregate Purchase Price: $ 2,000,002.58
-------------------------
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 November 10, 2003 (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/ Xxx Xxxxxx
-----------------------------------------------
Title: Authorized Signatory
Record
Address: 0 Xxxx 00xx Xxxxxx, 27th Floor
------------------------------------------
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 431,966
----------------------------------
Aggregate Purchase Price: $ 2,000,002.58
-------------------------
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 November 10, 2003 (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/ Xxxxxxx Xxxxx
-----------------------------------------------
Title: Director
Record
Address: 000 Xxxxx Xxxxxx, 00xx Xxxxx
------------------------------------------
Xxx Xxxx, XX 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 431,966
----------------------------------
Aggregate Purchase Price: $ 2,000,002.58
-------------------------
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 November 10, 2003 (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: 431,966
----------------------------------
Aggregate Purchase Price: $ 2,000,002.58
-------------------------
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 November 10, 2003 (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/ Xxxxxxx Xxxxxx
-----------------------------------------------
Title: Executive Director
Record
Address: One X. Xxxxxx Drive, 32nd Floor
------------------------------------------
Xxxxxxx, XX 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 125,000
----------------------------------
Aggregate Purchase Price: $ 578,750.00
-------------------------
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 November 10, 2003 (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/ Xxxxxxx Xxxxxx
-----------------------------------------------
Title: Executive Director
Record
Address: One X. Xxxxxx Drive, 32nd Floor
------------------------------------------
Xxxxxxx, XX 00000
---------------------------------------------
Telecopy No.: (000) 000-0000
-------------------------------------
Number of Units: 375,000
----------------------------------
Aggregate Purchase Price: $ 1,736,250.00
-------------------------
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 Right
Purchaser Units Shares Shares Purchase Price
--------- ----- ------ ------ --------------
BayStar Capital II, LP 700,000 700,000 140,000 $3,241,000.00
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. 1,295,897 1,295,897 259,180 $6,000,003.11
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 431,966 431,966 86,394 $2,000,002.58
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax number: 000-000-0000
Deutsche Bank, AG London Branch 2,159,828 2,159,828 431,966 $10,000,003.64
000 Xxxx Xxx. (0xx Xxxxx)
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx
T: 000-000-0000
F: 000-000-0000
Heimdall Investments Ltd. 431,966 431,966 86,394 $2,000,002.58
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 431,966 431,966 86,394 $2,000,002.58
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 Right
Purchaser Units Shares Shares Purchase Price
--------- ----- ------ ------ --------------
Portside Growth and Opportunity Fund 431,966 431,966 86,394 $2,000,002.58
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. 431,966 431,966 86,394 $2,000,002.58
c/o Sage Capital Growth, 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 Global 125,000 125,000 25,000 $578,750.00
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 PIPES Corporate 375,000 375,000 75,000 $1,736,250.00
Strategies Ltd.
c/o UBS X'Xxxxxx LLC
Xxx X. Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
F: 000-000-0000
TOTAL 6,815,555 6,815,555 1,363,116 $31,556,019.65
EXHIBIT A
(FILED AS EXHIBIT 99.2)
EXHIBIT B
November __, 2001
To the Purchasers listed on Exhibit A to the Avanex Corporation Securities
Purchase Agreement dated the date hereof
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement, dated as of
November __, 2003 (the "Purchase Agreement"), by and among Avanex Corporation, a
Delaware corporation (the "Company") and the Purchasers listed on Exhibit 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.
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 Annual Report on Form 10-K for the
year ended June 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
November __, 2003
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 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
November __, 2003. 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 November 10, 2003
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 November 10, 2003 (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 Corporation Delaware
LambdaFlex, Inc. Delaware
Pearl Acquisition Corp. Delaware
Avanex France S.A. France
Avanex U.K. Limited United Kingdom
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 June 30, 2003, the Company had outstanding options to purchase 8,920,056
shares of Common Stock, subject to adjustment.
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 November 3, 2003.
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.
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.
