<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1999
REGISTRATION NO. 333-92097
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AVANEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3674 94-3285348
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
40919 ENCYCLOPEDIA CIRCLE
FREMONT, CALIFORNIA 94538
(510) 897-4188
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WALTER ALESSANDRINI
CHIEF EXECUTIVE OFFICER
AVANEX CORPORATION
40919 ENCYCLOPEDIA CIRCLE
FREMONT, CALIFORNIA 94538
(510) 897-4188
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JUDITH M. O'BRIEN, ESQ. JEFFREY R. VETTER, ESQ.
ANN YVONNE WALKER, ESQ. SCOTT J. LEICHTNER, ESQ.
TERI A. LITTLE, ESQ. CYNTHIA E. GARABEDIAN, ESQ.
SHELDON J. QUAN, ESQ. FENWICK & WEST LLP
WILSON SONSINI GOODRICH & ROSATI TWO PALO ALTO SQUARE
PROFESSIONAL CORPORATION PALO ALTO, CALIFORNIA 94306
650 PAGE MILL ROAD (650) 494-0600
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 1 to the Form S-1 Registration Statement is being filed
for the sole purpose of filing additional exhibits.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Avanex Corporation in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $25,502.40
NASD filing fee............................................. $10,160.00
Nasdaq National Market listing fee.......................... *
Printing and engraving costs................................ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Directors and Officers Insurance............................ *
Transfer Agent and Registrar fees........................... *
Miscellaneous expenses...................................... *
----------
Total............................................. *
==========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of our amended and restated certificate of incorporation
provides for the indemnification of directors and officers to the fullest extent
permissible under Delaware law.
Article VI of our bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of Avanex if such person acted in
good faith and in a manner reasonably believed to be in and not opposed to our
best interest, and, with respect to any criminal action or proceeding, the
indemnified party had no reason to believe his or her conduct was unlawful.
We have entered into indemnification agreements with our directors and
executive officers, in addition to indemnification provided for in our bylaws,
and intend to enter into indemnification agreements with any new directors and
executive officers in the future. The indemnification agreements may require us,
among other things, to indemnify our directors and officers against certain
liability that may arise by reason of their status or service as directors and
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors and
officers' insurance, if available on reasonable terms.
Reference is also made to Section 7 of the form of Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of Avanex
against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to a limited number
of persons, as described below. None of these transactions involved any
underwriters, underwriting discounts or commissions, or any public offering, and
we believe that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(2) thereof, Regulation D
promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
II-1
<PAGE> 4
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof, and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
(1) From inception through October 1, 1999, (the most recent practicable
date) we granted stock options and restricted stock purchase rights to
acquire an aggregate of 12,582,680 shares of our common stock at
prices ranging from $0.001 to $0.58 to employees, consultants and
directors pursuant to our 1998 Stock Plan, as amended.
(2) From inception through October 1, 1999, we issued an aggregate of
11,745,380 shares of our common stock to employees, consultants and
directors pursuant to the exercise of options and restricted stock
purchase rights granted under our 1998 Stock Plan, as amended, for
aggregate consideration of $650,326.34.
(3) On January 13, 1998, we sold 1,800,000 shares of common stock to an
employee in exchange for $1,000.00 in cash and $800.00 in transferred
technology.
(4) On February 10, 1998, we sold 4,530,080 shares of Series A Preferred
Stock for $0.223 per share to a group of private investors for an
aggregate purchase price of $1,010,208.
(5) On February 19, 1998, we granted a right to purchase an aggregate of
200,000 shares of common stock to a consultant in consideration for
past services rendered for an aggregate value of $1,000.00.
(6) On June 29, 1998, we sold 6,296,744 shares of Series B Preferred Stock
for $0.40 per share to a group of private investors for an aggregate
purchase price of $2,518,698.
(7) On December 31, 1998, we issued warrants to purchase 75,000 shares of
our common stock at an exercise price of $6.00 a share to each of
Simon Cao, Haiguang Lu, and Lee Wang.
(8) On February 19, 1999 and March 25, 1999, we sold 9,032,169 shares of
Series C Preferred Stock for $0.756 per share to a group of private
investors for an aggregate purchase price of $6,828,320.
(9) On July 8, 1999, in connection with a Revolving Credit and Security
Agreement, we issued a warrant to purchase 19,565 shares of Series D
Preferred Stock at an exercise price of $5.75 to Comerica
Bank -- California.
(10) On September 14 and October 15, 1999, we sold 3,487,097 shares of
Series D Preferred Stock for $5.75 per share to a group of private
investors for an aggregate purchase price of $20,050,807.75.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.
II-2
<PAGE> 5
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1++ Form of Underwriting Agreement
2.1+ Agreement and Plan of Merger of Avanex Corporation (a
Delaware Corporation) and Avanex Corporation (a California
Corporation)
3.1+ Amended and Restated Certificate of Incorporation to be
filed after effectiveness of this Registration Statement
filed , 19
3.2++ Amended and Restated Bylaws of the Registrant
4.1+ Specimen Common Stock Certificate
4.3++ Warrant to Purchase the Stock of the Registrant held by
Comerica Bank-California
4.4 Warrants to Purchase the Stock of the Registrant held by Lee
Wang, Haiguang Lu, and Simin Cai
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1++ Form of Indemnification Agreement between Registrant and
each of its directors and officers
10.2 1998 Stock Plan, as amended, and forms of agreement
thereunder
10.3++ 1999 Employee Stock Purchase Plan
10.4++ 1999 Director Option Plan
10.5 Founder's Stock Purchase Agreement between the Registrant
and Simon Xiaofan Cao dated January 13, 1998
10.6 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Walter Alessandrini dated October 8, 1999
10.7 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Walter Alessandrini dated March 26, 1999
10.8++ Form of Restricted Stock Purchase Agreement
10.8.1 Stock Purchase Agreement, including Security Agreement and
Promissory Note, between the Registrant and Paul Shi-Qi
Jiang dated July 22, 1999
10.8.2 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Simon Xiaofan Cao dated August 4, 1999
10.8.3 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Peter Maguire dated August 4, 1999
10.8.4 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
James Pickering dated September 10, 1999
10.8.5 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Margaret Quinn dated October 8, 1999
10.8.6 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Simon Xiaofan Cao dated October 12, 1999
10.8.7 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Anthony Florence dated November 19, 1999
10.8.8 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Jessy Chao dated November 26, 1999
10.8.9 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Paul Shi-Qi Jiang dated November 26, 1999
10.9 Series A Preferred, Series B Preferred and Series C
Preferred Stock Purchase Agreement dated February 10, 1998
</TABLE>
II-3
<PAGE> 6
<TABLE>
<S> <C>
10.10 First Amended and Restated Series A Preferred, Series B Preferred, and Series C Preferred Stock
Purchase Agreement dated February 19, 1999
10.11 Series D Preferred Stock Purchase Agreement dated September 14, 1999
10.12 Second Amended and Restated Co-Sale Agreement dated September 14, 1999
10.12.1 Second Amended and Restated Voting Agreement dated September 14, 1999
10.12.2 Second Amended and Restated Shareholder Rights Agreement dated September 14, 1999
10.13 Revolving Credit and Security Agreement between Comerica Bank-California and the Registrant dated
July 8, 1999
10.14+ Quick Start Loan and Security Agreement between Silicon Valley Bank and the Registrant dated
February 17, 1998
10.15 Senior Loan and Security Agreement No. 053-6193 between Phoenix Leasing Incorporated and the
Registrant dated November 5, 1998
10.16 Master Lease No. S7280 dated June 2, 1999, between Finova Capital Corporation and the Registrant
10.17 Security Agreement dated September 16, 1999 between Comerica Bank-California and the Registrant
10.18++ Employment Letter between the Registrant and Walter Alessandrini dated March 2, 1999
10.19 Secured Promissory Note held by the Registrant for Walter Alessandrini dated May 20, 1999 and
amendment to the Secured Promissory Note dated December 1, 1999
10.20++ Employment Letter between the Registrant and Simon Cao dated January 2, 1998
10.21++ Employment Letter between the Registrant and Paul Jiang dated January 2, 1998
10.22 Employment Agreement between the Registrant and William Lanfri dated July 1, 1998
10.23 Employment Letter between the Registrant and Peter Maguire dated June 18, 1999
10.24* Patent License Agreement between Fujitsu Limited and the Registrant dated July 15, 1998
10.24.1* Letter clarifying the Patent License Agreement between Fujitsu Limited and the Registrant dated
July 1, 1998
10.25++ Lease between the Registrant and Stevenson Business Park LLC for Building B of 40915 Encyclopedia
Circle, Fremont, California dated September 8, 1999
10.26 Assignment of Sublease between Registrant and Pathnet for 405 International Parkway, Richardson,
Texas dated September 17, 1998
10.26.1+ Sublease between KLA-Tencor Corporation and Pathnet, Inc. for 405 International Parkway,
Richardson, Texas dated October 16, 1997
10.27++ Amendment to Sublease for 405 International Parkway, Richardson, Texas dated January 1998
10.28 Master Lease for 405 International Parkway, Richardson, Texas dated January 1, 1990
10.29 Intellectual Property Security Agreement between Registrant and Comerica Bank-California dated July
8, 1999
10.30* License and Supply Agreement between Registrant and Concord Micro-Optics, Inc. dated May 24, 1999
10.31* International Distributor Agreement between the Registrant and Hakuto Co., Ltd. dated November 1999
10.32 Professional Services Agreement between the Registrant and AristaSoft Corporation dated July 7,
1999
10.33+ Cost Sharing Agreement between the Registrant and Avanex Cayman dated December, 1999
21.1 List of subsidiaries of the Registrant
</TABLE>
II-4
<PAGE> 7
<TABLE>
<S> <C>
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Counsel (See Exhibit 5.1)
24.1++ Power of Attorney (See page II-6)
27.1++ Financial Data Schedule for quarter ended October 1, 1999
27.2++ Financial Data Schedule for the year ended June 30, 1999
27.3++ Financial Data Schedule for the period from October 24, 1997 (inception) to June 30, 1998
</TABLE>
- -------------
+ To be filed by amendment.
* Confidential treatment requested.
++ Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
We hereby undertake to provide to the Underwriters at the closing specified
in the Underwriting Agreement certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fremont, State of
California, on the 20th day of December, 1999.
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
--------------------------------------
Walter Alessandrini,
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WALTER ALESSANDRINI President and Chief Executive December 20, 1999
- ------------------------------------------------ Officer (Principal Executive
Walter Alessandrini Officer) and Director
/s/ JESSY CHAO Vice President, Finance and December 20, 1999
- ------------------------------------------------ Chief Financial Officer
Jessy Chao (Principal Financial and
Accounting Officer)
/s/ XIAOFAN CAO* Senior Vice President, Product December 20, 1999
- ------------------------------------------------ Development and Director
Xiaofan Cao
/s/ TODD BROOKS* Director December 20, 1999
- ------------------------------------------------
Todd Brooks
/s/ MICHAEL GOGUEN* Director December 20, 1999
- ------------------------------------------------
Michael Goguen
/s/ SETH NEIMAN* Director December 20, 1999
- ------------------------------------------------
Seth Neiman
*By: /s/ JESSY CHAO
-------------------------------------------
Jessy Chao
Attorney-in-fact
</TABLE>
II-6
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
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<C> <S>
1.1++ Form of Underwriting Agreement
2.1+ Agreement and Plan of Merger of Avanex Corporation (a
Delaware Corporation) and Avanex Corporation (a California
Corporation)
3.1+ Amended and Restated Certificate of Incorporation to be
filed after effectiveness of this Registration Statement
filed , 19
3.2++ Amended and Restated Bylaws of the Registrant
4.1+ Specimen Common Stock Certificate
4.3++ Warrant to Purchase the Stock of the Registrant held by
Comerica Bank-California
4.4 Warrants to Purchase the Stock of the Registrant held by Lee
Wang, Haiguang Lu, and Simin Cai
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1++ Form of Indemnification Agreement between Registrant and
each of its directors and officers
10.2 1998 Stock Plan, as amended, and forms of agreement
thereunder
10.3++ 1999 Employee Stock Purchase Plan
10.4++ 1999 Director Option Plan
10.5 Founder's Stock Purchase Agreement between the Registrant
and Simon Xiaofan Cao dated January 13, 1998
10.6 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Walter Alessandrini dated October 8, 1999
10.7 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Walter Alessandrini dated March 26, 1999
10.8++ Form of Restricted Stock Purchase Agreement
10.8.1 Stock Purchase Agreement, including Security Agreement and
Promissory Note, between the Registrant and Paul Shi-Qi
Jiang dated July 22, 1999
10.8.2 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Simon Xiaofan Cao dated August 4, 1999
10.8.3 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Peter Maguire dated August 4, 1999
10.8.4 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
James Pickering dated September 10, 1999
10.8.5 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Margaret Quinn dated October 8, 1999
10.8.6 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Simon Xiaofan Cao dated October 12, 1999
10.8.7 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Anthony Florence dated November 19, 1999
10.8.8 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Jessy Chao dated November 26, 1999
10.8.9 Restricted Stock Purchase Agreement, including Security
Agreement and Promissory Note, between the Registrant and
Paul Shi-Qi Jiang dated November 26, 1999
10.9 Series A Preferred, Series B Preferred and Series C
Preferred Stock Purchase Agreement dated February 10, 1998
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
10.10 First Amended and Restated Series A Preferred, Series B Preferred, and Series C Preferred Stock
Purchase Agreement dated February 19, 1999
10.11 Series D Preferred Stock Purchase Agreement dated September 14, 1999
10.12 Second Amended and Restated Co-Sale Agreement dated September 14, 1999
10.12.1 Second Amended and Restated Voting Agreement dated September 14, 1999
10.12.2 Second Amended and Restated Shareholder Rights Agreement dated September 14, 1999
10.13 Revolving Credit and Security Agreement between Comerica Bank-California and the Registrant dated
July 8, 1999
10.14+ Quick Start Loan and Security Agreement between Silicon Valley Bank and the Registrant dated
February 17, 1998
10.15 Senior Loan and Security Agreement No. 053-6193 between Phoenix Leasing Incorporated and the
Registrant dated November 5, 1998
10.16 Master Lease No. S7280 dated June 2, 1999, between Finova Capital Corporation and the Registrant
10.17 Security Agreement dated September 16, 1999 between Comerica Bank-California and the Registrant
10.18++ Employment Letter between the Registrant and Walter Alessandrini dated March 2, 1999
10.19 Secured Promissory Note held by the Registrant for Walter Alessandrini dated May 20, 1999 and
amendment to the Secured Promissory Note dated December 1, 1999
10.20++ Employment Letter between the Registrant and Simon Cao dated January 2, 1998
10.21++ Employment Letter between the Registrant and Paul Jiang dated January 2, 1998
10.22 Employment Agreement between the Registrant and William Lanfri dated July 1, 1998
10.23 Employment Letter between the Registrant and Peter Maguire dated June 18, 1999
10.24* Patent License Agreement between Fujitsu Limited and the Registrant dated July 15, 1998
10.24.1* Letter clarifying the Patent License Agreement between Fujitsu Limited and the Registrant dated
July 1, 1998
10.25++ Lease between the Registrant and Stevenson Business Park LLC for Building B of 40915 Encyclopedia
Circle, Fremont, California dated September 8, 1999
10.26 Assignment of Sublease between Registrant and Pathnet for 405 International Parkway, Richardson,
Texas dated September 17, 1998
10.26.1+ Sublease between KLA-Tencor Corporation and Pathnet, Inc. for 405 International Parkway,
Richardson, Texas dated October 16, 1997
10.27++ Amendment to Sublease for 405 International Parkway, Richardson, Texas dated January 1998
10.28 Master Lease for 405 International Parkway, Richardson, Texas dated January 1, 1990
10.29 Intellectual Property Security Agreement between Registrant and Comerica Bank-California dated July
8, 1999
10.30* License and Supply Agreement between Registrant and Concord Micro-Optics, Inc. dated May 24, 1999
10.31* International Distributor Agreement between the Registrant and Hakuto Co., Ltd. dated November 1999
10.32 Professional Services Agreement between the Registrant and AristaSoft Corporation dated July 7,
1999
10.33+ Cost Sharing Agreement between the Registrant and Avanex Cayman dated December, 1999
21.1 List of subsidiaries of the Registrant
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
<C> <S>
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Counsel (See Exhibit 5.1)
24.1++ Power of Attorney (See page II-6)
27.1++ Financial Data Schedule for quarter ended October 1, 1999
27.2++ Financial Data Schedule for the year ended June 30, 1999
27.3++ Financial Data Schedule for the period from October 24, 1997
(inception) to June 30, 1998
</TABLE>
- -------------
+ To be filed by amendment.
* Confidential treatment requested.
++ Previously filed.
<PAGE> 1
EXHIBIT 4.4
WARRANT PURCHASE AGREEMENT
Haiguang Lu (the "Purchaser") hereby purchases from Avanex Corporation, a
California corporation (the "Seller"), and the Seller hereby sells to the
Purchaser, a warrant in the form attached hereto as Exhibit A (the "Warrant")
for the purchase price of $10.00.
The Purchaser represents and warrants that it is acquiring the Warrant for
investment purposes only and not with a view to the distribution of the
Warrant, as such term is defined under the Securities Act of 1933, as amended
(the "1933 Act"). The Purchaser understands and acknowledges that the Warrant
constitutes a "restricted security" as such term is defined under the 1933 Act
and may not be sold or otherwise transferred unless registered under the 1933
Act or unless an appropriate exemption from registration shall then exist.
The Purchaser acknowledges receipt of the Warrant, and the Seller
acknowledges receipt from Purchaser of cash or a check in the amount of $10.00.
This Warrant Purchase Agreement is executed effective as of this 31st day
of Dec., 1998.
PURCHASER
/s/ HAIGUANG LU
--------------------------
Name (print): Haiguang Lu
SELLER:
AVANEX CORPORATION
a California corporation
By: /s/ SIMON CAO
-----------------------
Name: Simon Cao
Title: Sr. VP
<PAGE> 2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
Warrant to Purchase
75,000 Shares
of Common Stock
Dated 12/31, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
AVANEX CORPORATION
Void after 12/31, 2003
This certifies that, for value received, HAIGUANG LU or his or her
registered assigns ("Holder") is entitled, subject to the terms set forth
below, to purchase from AVANEX CORPORATION (the "Company"), a California
corporation, Seventy-Five Thousand (75,000) shares of the Common Stock of the
Company, as constituted on the date hereof (the "Warrant Issue Date"), upon
surrender hereof, at the principal office of the Company referred to below, with
the subscription form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States or otherwise as hereinafter
provided, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard
Time, on 12/31, 2003 (the "Term"), and shall be void thereafter.
2. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $6.00 per share of Common Stock as adjusted from time to time
pursuant to Section 10 hereof (the "Exercise Price").
3. Exercise of Warrant.
(a) Manner of Exercise. This Warrant is exercisable by the Holder in
whole or in part, but not for less than twenty thousand (20,000) shares at a
time (or if the maximum number of shares purchasable upon exercise of this
Warrant is less than 20,000, this Warrant shall be exercisable for such lesser
number of shares which may then constitute the maximum number purchasable), at
any time, or from time to time, during the term hereof as described in Section
1 above, by the surrender of this
<PAGE> 3
Warrant and the Notice of Exercise annexed hereto duly completed and executed
on behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designated by notice in writing to the Holder
at the address of the Holder appearing on the books of the Company). Unless
Holder is exercising the conversion right set forth in Section 3(c), Holder
shall also deliver to the Company a check for the aggregate Exercise Price for
the shares of Common Stock being purchased.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within twenty (20) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the remaining number of shares for which
this Warrant may then be exercised.
(c) Net Exercise Conversion Right. In lieu of exercising this
Warrant as specified in Section 3(a), Holder may from time to time convert this
Warrant, in whole or in part, into a number of Shares determined by dividing
(y) the aggregate fair market value of the shares of Common Stock or other
securities otherwise issuable upon exercise of this Warrant minus the aggregate
Warrant Price of such shares of Common Stock by (z) the fair market value of
one shares of Common Stock. The fair market value of the shares of Common Stock
shall be determined pursuant to Section 3(d).
(d) Fair Market Value. The Board of Directors of the Company shall
determine fair market value of the Company's Common Stock in its reasonable
good faith judgment. The foregoing notwithstanding, if Holder advises the Board
of Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking
firm to undertake such valuation. If the valuation of such investment banking
firm is greater than that determined by the Board of Directors, then all fees
and expenses of such investment banking firm shall be paid by the Company. In
all other circumstances, such fees and expenses shall be paid by Holder.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional share shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of loss, theft, or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the
Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor and amount.
-2-
<PAGE> 4
6. Rights of Stockholders. Subject to Sections 8 and 10 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised and
the shares of Common Stock purchasable upon the exercise hereof (the "Warrant
Shares") shall have been issued, as provided herein.
7. Compliance with Securities Laws. This Warrant may not be transferred
or assigned in whole or in part without compliance with all applicable federal
and state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company).
(a) The Holder of this Warrant, by acceptance thereof, acknowledges
that this Warrant and the shares of Common Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Common Stock
to be issued upon exercise hereof except under circumstances that will not
result in a violation of any federal securities laws, including without
limitation the Securities Act of 1933, as amended (the "Act"), any state
securities laws or any applicable securities law of foreign jurisdictions, or
any rules or regulations promulgated thereunder. Upon exercise of this Warrant,
the Holder shall, if requested by the Company, confirm in writing in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Without in any way limiting the representations set forth in (a)
above, the Holder further agrees not to make any disposition of all or any
portion of this Warrant or any Warrant Shares unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by this
Section 7, and the satisfaction of the following conditions: (i) the Holder
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Company, the Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the Act.
(c) This Warrant and all shares issuable hereunder shall bear the
following legends:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
-3-
<PAGE> 5
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT."
(ii) Any legend required by applicable state law.
8. Reservation of Stock. The Company covenants that during the Term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to provide sufficient reserves of shares of the Common
Stock issuable upon the exercise of the Warrant. The Company further covenants
that all shares that may be issued upon the exercise of rights represented by
this Warrant and payment of the Exercise Price, all as set forth herein, will be
free from all taxes, liens, and charges in respect to the issue thereof (other
than taxes in respect to any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the exercise of this Warrant.
9. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holder. No waivers of or exceptions to
any term, condition or provision of this Warrant, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
10. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) Reclassification, etc. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under the Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 10.
(b) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased and the number of securities issuable upon exercise proportionately
increased in the case of a split or subdivision
-4-
<PAGE> 6
or the Exercise Price of such securities shall be proportionately increased and
the number of securities issuable upon exercise proportionately decreased in the
case of a combination.
(c) Adjustments for Dividends in Stock or Other Securities or
Property. If, while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon the exercise of this
Warrant, and without payment of any additional consideration thereof, the amount
of such other or additional stock or other securities or property (other than
cash) of the Company which such holder would hold on the date of such exercise
had it been the holder of record of the security receivable upon exercise of
this Warrant on the date hereof and had thereafter, during the period from the
date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock available by it as aforesaid during such
period, giving effect to all adjustments called for during such period by the
provisions of this Section 10.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 10, the Company shall, upon
the written request of any holder of this Warrant, furnish or cause to be
furnished to such holder a certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.
(e) No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all of the provisions of this Section 10 and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
11. Expiration of Warrant Upon Occurrence of Certain Events.
(a) Upon the closing of any Acquisition or Initial Public Offering,
this Warrant shall expire.
(b) Definitions. For the purpose of this Section 11 the following
definitions shall apply:
(i) "Acquisition" means any sale, license, or other disposition
of all or substantially all of the assets (including intellectual property) of
the Company, or any reorganization, consolidation, or merger of the Company
where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
-5-
<PAGE> 7
(ii) "Initial Public Offering" means the Company's initial firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company to the public.
12. Successors and Assigns. The terms and provisions of this Warrant shall
inure to the benefit of and be binding upon the Company and Holder and their
respective permitted successors and assigns.
13. Attorneys' Fees. If any action of law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
14. Governing Law. This Warrant shall be governed by the laws of the State
of California.
15. Notices. All notices required under this Warrant and shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail to either party hereto at the address
set forth below or at such other address as either party may designate by notice
pursuant to this Section 15.
If to the Company: Avanex Corporation
4601 Albae Avenue
Fremont, CA 94538
Attn: President
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith O'Brien
If to the Holder: Haiguang Lu
141 Beverly Street
Mountain View, CA 94043
16. Captions. The Section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
-6-
<PAGE> 8
IN WITNESS HEREOF, AVANEX CORPORATION has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: 12/31, 1998
AVANEX CORPORATION
By: /s/ SIMON CAO
-------------------------------
Simon Cao
2/9/99
*WARRANT*
-7-
<PAGE> 9
NOTICE OF EXERCISE
To: AVANEX CORPORATION
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ___________ shares of the
Common Stock of Avanex Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
shares in the manner specified in Section 3(c) of the Warrant. This conversion
is exercised with respect to __________ of the Shares covered by the Warrant.
[STRIKE VERSION OF PARAGRAPH 1 THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
----------------------------------
(Name)
----------------------------------
----------------------------------
(Address)
3. In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of any federal securities laws, including without
limitation the Securities Act of 1933, as amended, any state securities laws or
any applicable securities laws of foreign jurisdictions or any rules or
regulations promulgated thereunder.
----------------------------------
(Signature)
- ----------------------------
(Date)
-8-
<PAGE> 10
WARRANT PURCHASE AGREEMENT
Simin Cai (the "Purchaser") hereby purchases from Avanex Corporation, a
California corporation (the "Seller"), and the Seller hereby sells to the
Purchaser, a warrant in the form attached hereto as Exhibit A (the "Warrant")
for the purchase price of $10.00.
The Purchaser represents and warrants that it is acquiring the Warrant for
investment purposes only and not with a view to distribution of the Warrant, as
such term is defined under the Securities Act of 1933, as amended (the "1933
Act"). The Purchaser understands and acknowledges that the Warrant constitutes
a "restricted security" as such term is defined under the 1933 Act and may not
be sold or otherwise transferred unless registered under the 1933 Act or unless
an appropriate exemption from registration shall then exist.
The Purchaser acknowledges receipt of the Warrant, and the Seller
acknowledges receipt from Purchaser of cash or a check in the amount of $10.00.
This Warrant Purchase Agreement is executed effective as of this 31st day
of December, 1998.
PURCHASER:
/s/ SIMIN CAI
----------------------------------------
Name (print): Simin Cai
SELLER:
AVANEX CORPORATION
A California corporation
By: /s/ SIMON CAO
------------------------------------
Name: Simon Cao
Title: Sr. VP
Date: 3-3-99
<PAGE> 11
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT.
Warrant to Purchase
75,000 Shares
of Common Stock
Dated ______, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
AVANEX CORPORATION
Void after Dec. 31st, 2003
This certifies that, for value received, SIMIN CAI or his or her
registered assigns ("Holder") is entitled, subject to the terms set forth
below, to purchase from AVANEX CORPORATION (the "Company"), a California
corporation, Seventy-Five Thousand (75,000) shares of the Common Stock of the
Company, as constituted on the date hereof (the "Warrant Issue Date"), upon
surrender hereof, at the principal office of the Company referred to below, with
the subscription form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States or otherwise as hereinafter
provided, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard
Time, on Dec. 31st, 2003 (the "Term"), and shall be void thereafter.
2. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $6.00 per share of Common Stock as adjusted from time to time
pursuant to Section 10 hereof (the "Exercise Price").
3. Exercise of Warrant.
(a) Manner of Exercise. This Warrant is exercisable by the Holder in
whole or in part, but not for less than twenty thousand (20,000) shares at a
time (or if the maximum number of shares purchasable upon exercise of this
Warrant is less than 20,000, this Warrant shall be exercisable for such lesser
number of shares which may then constitute the maximum number purchasable), at
anytime, or from time to time, during the term hereof as described in Section
1 above, by the surrender of this
<PAGE> 12
Warrant and the Notice of Exercise annexed hereto duly completed and executed on
behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company). Unless Holder
is exercising the conversion right set forth in Section 3(c), Holder shall also
deliver to the Company a check for the aggregate Exercise Price for the shares
of Common Stock being purchased.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the share of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within twenty (20) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the remaining number of shares for which
this Warrant may then be exercised.
(c) Net Exercise Conversion Right. In lieu of exercising this Warrant
as specified in Section 3(a), Holder may from time to time convert this Warrant,
in whole or in part, into a number of Shares determined by dividing (y) the
aggregate fair market value of the shares of Common Stock or other securities
otherwise issuable upon exercise of this Warrant minus the aggregate Warrant
Price of such shares of Common Stock by (z) the fair market value of one shares
of Common Stock. The fair market value of the shares of Common Stock shall be
determined pursuant to Section 3(d).
(d) Fair Market value. The Board of Directors of the Company shall
determine fair market value of the Company's Common Stock in its reasonable good
faith judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking firm
to undertake such valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors, then all fees and
expenses of such investment banking firm shall be paid by the Company. In all
other circumstances, such fees and expenses shall be paid by Holder.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional share shall be issued upon the exercise of this Warrant.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of loss, theft, or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor and amount.
-2-
<PAGE> 13
6. Rights of Stockholders. Subject to Sections 8 and 10 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised
and the shares of Common Stock purchasable upon the exercise hereof (the
"Warrant Shares") shall have been issued, as provided herein.
7. Compliance with Securities Laws. This Warrant may not be transferred
or assigned in whole or in part without compliance with all applicable federal
and state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company).
(a) The Holder of this Warrant, by acceptance thereof, acknowledges
that this Warrant and the shares of Common Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Common Stock
to be issued upon exercise hereof except under circumstances that will not
result in a violation of any federal securities laws, including without
limitation the Securities Act of 1933, as amended (the "Act"), any state
securities laws or any applicable securities law of foreign jurisdictions, or
any rules or regulations promulgated thereunder. Upon exercise of this Warrant,
the Holder shall, if requested by the Company, confirm in writing in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Without in any way limiting the representations set forth in (a)
above, the Holder further agrees not to make any disposition of all or any
portion of this Warrant or any Warrant Shares unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by this
Section 7, and the satisfaction of the following conditions: (i) the Holder
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Company, the Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the Act.
(c) This Warrant and all shares issuable hereunder shall bear the
following legends:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
-3-
<PAGE> 14
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT."
(ii) Any legend required by applicable state law.
8. Reservation of Stock. The Company covenants that during the Term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to provide sufficient reserves of shares of the Common
Stock issuable upon the exercise of the Warrant. The Company further covenants
that all shares that may be issued upon the exercise of rights represented by
this Warrant and payment of the Exercise Price, all as set forth herein, will
be free from all taxes, liens, and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously or
otherwise specified herein). The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
9. Amendments and Waivers. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holder. No waivers of or exceptions to
any term, condition or provision of this Warrant, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
10. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) Reclassification, etc. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 10.
(b) Split Subdivision or Combination of Shares. If the Company at any
time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased and the number of securities issuable upon exercise proportionately
increased in the case of a split or subdivision
-4-
<PAGE> 15
or the Exercise Price of such securities shall be proportionately increased and
the number of securities issuable upon exercise proportionately decreased in
the case of a combination.
(c) Adjustments for Dividends in Stock or Other Securities or
Property. If, while this Warrant, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which purchase rights under
this Warrant exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible Stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
the exercise of this Warrant, and without payment of any additional
consideration thereof, the amount of such other or additional stock or other
securities or property (other than cash) of the Company which such holder would
hold on the date of such exercise had it been the holder of record of the
security receivable upon exercise of this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period, giving effect to all adjustments called
for during such period by the provisions of this Section 10.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 10, the Company shall, upon
the written request of any holder of this Warrant, furnish or cause to be
furnished to such holder a certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.
(e) No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all of the provisions of this Section 10
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of this Warrant against impairment.
11. Expiration of Warrant Upon Occurrence of Certain Events.
(a) Upon the closing of any Acquisition or Initial Public Offering,
this Warrant shall expire.
(b) Definitions. For the purpose of this Section 11 the following
definitions shall apply:
(i) "Acquisition" means any sale, license, or other disposition
of all or substantially all of the assets (including intellectual property) of
the Company, or any reorganization, consolidation, or merger of the Company
where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
-5-
<PAGE> 16
(ii) "Initial Public Offering" means the Company's initial firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company to the public.
12. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of and be binding upon the Company and Holder and
their respective permitted successors and assigns.
13. Attorneys' Fees. If any action of law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which it may be entitled.
14. Governing Law. This Warrant shall be governed by the laws of the
State of California.
15. Notices. All notices required under this Warrant and shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail to either party hereto at the address
set forth below or at such other address as either party may designate by
notice pursuant to this Section 15.
If to the Company: Avanex Corporation
4601 Albae Avenue
Fremont, CA 94538
Attn: President
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith O'Brien
If to the Holder: Simin Cai
P.O. Box 2111
Hoboken, NJ 07030
16. Captions. The section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant
in construing or interpreting any provision hereof.
-6-
<PAGE> 17
IN WITNESS HEREOF, AVANEX CORPORATION has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: Dec. 31st, 1998
AVANEX CORPORATION
By: /s/ SIMON CAO
------------------------------
Simon Cao
3-3-99
*WARRANT*
-7-
<PAGE> 18
WARRANT PURCHASE AGREEMENT
Lee Wang (the "Purchaser") hereby purchases from Avanex Corporation, a
California corporation (the "Seller"), and the Seller hereby sells to the
Purchaser, a warrant in the form attached hereto as Exhibit A (the "Warrant")
for the purchase price of $10.00.
The Purchaser represents and warrants that it is acquiring the Warrant for
investment purposes only and not with a view to the distribution of the Warrant,
as such term is defined under the Securities Act of 1933, as amended (the "1933
Act"). The Purchaser understands and acknowledges that the Warrant constitutes a
"restricted security" as such term is defined under the 1933 Act and may not be
sold or otherwise transferred unless registered under the 1933 Act or unless an
appropriate exemption from registration shall then exist.
The Purchaser acknowledges receipt of the Warrant, and the Seller
acknowledges receipt from Purchaser of cash or a check in the amount of $10.00.
This Warrant Purchaser Agreement is executed effective as of this 31st day
of December 1998.
PURCHASER:
Lee Wang
-----------------------------------
Name (print)
/s/ LEE WANG
-----------------------------------
SELLER:
AVANEX CORPORATION
a California corporation
By: /s/ SIMON CAO
--------------------------------
Name: Simon Cao
Title: Sr. VP
<PAGE> 19
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
Warrant to Purchase
75,000 Shares
of Common Stock
Dated 12/31, 1998
WARRANT TO PURCHASE COMMON STOCK
OF
AVANEX CORPORATION
Void after 12/31, 2003
This certifies that, for value received, LEE WANG or his or her registered
assigns ("Holder") is entitled, subject to the terms set forth below, to
purchase from AVANEX CORPORATION (the "Company"), a California corporation,
Seventy-Five Thousand (75,000) shares of the Common Stock of the Company, as
constituted on the date hereof (the "Warrant Issue Date"), upon surrender
hereof, at the principal office of the Company referred to below, with the
subscription form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States or otherwise as hereinafter
provided, at the Exercise Price as set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific Standard
Time, on 12/31, 2003 (the "Term"), and shall be void thereafter.
2. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $6.00 per share of Common Stock as adjusted from time to time
pursuant to Section 10 hereof (the "Exercise Price").
3. Exercise of Warrant.
(a) Manner of Exercise. This Warrant is exercisable by the Holder in
whole or in part, but not for less than twenty thousand (20,000) shares at a
time (or if the maximum number of shares purchasable upon exercise of this
Warrant is less than 20,000, this Warrant shall be exercisable for such lesser
number of shares which may then constitute the maximum number purchasable), at
any time, or from time to time, during the term hereof as described in Section
1 above, by the surrender of this
<PAGE> 20
Warrant and the Notice of Exercise annexed hereto duly completed and executed on
behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company). Unless Holder
is exercising the conversion right set forth in Section 3(c), Holder shall also
deliver to the Company a check for the aggregate Exercise Price for the shares
of Common Stock being purchased.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within twenty (20) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the remaining number of shares for which
this Warrant may then be exercised.
(c) Net Exercise Conversion Right. In lieu of exercising this Warrant
as specified in Section 3(a), Holder may from time to time convert this Warrant,
in whole or in part, into a number of Shares determined by dividing (y) the
aggregate fair market value of the shares of Common Stock or other securities
otherwise issuable upon exercise of this Warrant minus the aggregate Warrant
Price of such shares of Common Stock by (z) the fair market value of one shares
of Common Stock. The fair market value of the shares of Common Stock shall be
determined pursuant to Section 3(d).
(d) Fair Market Value. The Board of Directors of the Company shall
determine fair market value of the Company's Common Stock in its reasonable good
faith judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking firm
to undertake such valuation. If the valuation of such investment banking firm is
greater than that determined by the Board of Directors, then all fees and
expenses of such investment banking firm shall be paid by the Company. In all
other circumstances, such fees and expenses shall be paid by Holder.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional share shall be issued upon the exercise of this Warrant.
In lieu of any fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of loss, theft, or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the Company or, in
the case of mutilation, on surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor and amount.
-2-
<PAGE> 21
6. Rights of Stockholders. Subject to Sections 8 and 10 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock of any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised
and the shares of Common Stock purchasable upon the exercise hereof (the
"Warrant Shares") shall have been issued, as provided herein.
7. Compliance with Securities Laws. This Warrant may not be transferred
or assigned in whole or in part without compliance with all applicable federal
and state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if such are requested by the Company).
(a) The Holder of this Warrant, by acceptance thereof, acknowledges
that this Warrant and the shares of Common Stock to be issued upon exercise
hereof are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Common Stock
to be issued upon exercise hereof except under circumstances that will not
result in a violation of any federal securities laws, including without
limitation the Securities Act of 1933, as amended (the "Act"), any state
securities laws or any applicable securities law of foreign jurisdictions, or
any rules or regulations promulgated thereunder. Upon exercise of this Warrant,
the Holder shall, if requested by the Company, confirm in writing in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Without in any way limiting the representations set forth in (a)
above, the Holder further agrees not to make any disposition of all or any
portion of this Warrant or any Warrant Shares unless and until the transferee
has agreed in writing for the benefit of the Company to be bound by this
Section 7, and the satisfaction of the following conditions: (i) the Holder
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Company, the Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition shall
not require registration of such securities under the Act.
(c) This Warrant and all shares issuable hereunder shall bear the
following legends:
(i) "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
-3-
<PAGE> 22
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH
SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT."
(ii) Any legend required by applicable state law.
8. Reservation of Stock. The Company covenants that during the Term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to provide sufficient reserves of shares of the Common
Stock issuable upon the exercise of the Warrant. The Company further covenants
that all shares that may be issued upon the exercise of rights represented by
this Warrant and payment of the Exercise Price, all as set forth herein, will
be free from all taxes, liens, and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously or
otherwise specified herein). The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
9. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the Holder. No waivers of or exceptions
to any term, condition or provision of this Warrant, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
10. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a) Reclassification, etc. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 10.
(b) Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased and the number of securities issuable upon exercise proportionately
increased in the case of a split or subdivision
-4-
<PAGE> 23
or the Exercise Price of such securities shall be proportionately increased and
the number of securities issuable upon exercise proportionately decreased in the
case of a combination.
(c) Adjustments for Dividends in Stock or Other Securities or
Property. If, while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon the exercise of this
Warrant, and without payment of any additional consideration thereof, the amount
of such other or additional stock or other securities or property (other than
cash) of the Company which such holder would hold on the date of such exercise
had it been the holder of record of the security receivable upon exercise of
this Warrant on the date hereof and had thereafter, during the period from the
date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock available by it as aforesaid during such
period, giving effect to all adjustments called for during such period by the
provisions of this Section 10.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 10, the Company shall, upon
the written request of any holder of this Warrant, furnish or cause to be
furnished to such holder a certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.
(e) No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all of the provisions of this Section 10 and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
11. Expiration of Warrant Upon Occurrence of Certain Events.
(a) Upon the closing of any Acquisition or Initial Public Offering,
this Warrant shall expire.
(b) Definitions. For the purpose of this Section 11 the following
definitions shall apply:
(i) "Acquisition" means any sale, license, or other disposition
of all or substantially all of the assets (including intellectual property) of
the Company, or any reorganization, consolidation, or merger of the Company
where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
-5-
<PAGE> 24
(ii) "Initial Public Offering" means the Company's initial firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company to the public.
12. Successors and Assigns. The terms and provisions of this Warrant
shall inure to the benefit of and be binding upon the Company and Holder and
their respective permitted successors and assigns.
13. Attorneys' Fees. If any action of law or equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to its reasonable attorney's fees, costs and disbursements in addition
to any other relief to which it may be entitled.
14. Governing Law. This Warrant shall be governed by the laws of the
State of California.
15. Notices. All notices required under this Warrant shall be deemed to
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail to either party hereto at the address
set forth below or at such other address as either party may designate by
notice pursuant to this Section 15.
If to the Company: Avanex Corporation
4601 Albae Avenue
Fremont, CA 94538
Attn: President
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith O'Brien
If to the Holder: Lee Wang
1247 Scott Blvd., #B
Santa Clara, CA 95050
16. Captions. The Section and subsection headings of this Warrant are
inserted for convenience only and shall not constitute a part of this Warrant
in construing or interpreting any provision hereof.
-6-
<PAGE> 25
IN WITNESS HEREOF, AVANEX CORPORATION has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: 12/31/, 1998
AVANEX CORPORATION
By: /s/ SIMON CAO
------------------------------------
Simon Cao 2-9-99
*WARRANT*
-7-
<PAGE> 1
EXHIBIT 10.2
AVANEX CORPORATION
1998 STOCK PLAN
(as amended and restated effective ________)
1. Purposes of the Plan. The purposes of this 1998 Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Avanex Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "IPO Effective Date" means the date upon which the Securities
and Exchange Commission declares the initial public offering of the Company's
common stock as effective.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
-2-
<PAGE> 3
(q) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1998 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(aa) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "Section 16(b) " means Section 16(b) of the Exchange Act.
(dd) "Service Provider" means an Employee, Director or Consultant.
(ee) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ff) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
-3-
<PAGE> 4
(gg) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 10,200,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning on July 1, 2000, equal to the
lesser of (i) 4,000,000 shares, (ii) 4.9% of the outstanding shares on such date
or (iii) a lesser amount determined by the Board. The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees
with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
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<PAGE> 5
(iii) to determine the number of shares of Common Stock to
be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
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<PAGE> 6
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
3,000,000 Shares, which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the amendment and
restatement of the Plan shall become effective upon the IPO Effective Date. It
shall continue in effect for a term of ten (10) years from the date of obtaining
stockholder approval of the Plan in December, 1999, unless terminated earlier
under Section 15 of the Plan.
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<PAGE> 7
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
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<PAGE> 8
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise
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<PAGE> 9
his or her Option within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept
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<PAGE> 10
such offer. The offer shall be accepted by execution of a Restricted Stock
Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall
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<PAGE> 11
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
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<PAGE> 12
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE> 13
AVANEX CORPORATION
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number ______________________________
Date of Grant ______________________________
Vesting Commencement Date ______________________________
Exercise Price per Share $_____________________________
Total Number of Shares Granted ______________________________
Total Exercise Price $_____________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ______________________________
Vesting Schedule:
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates.
<PAGE> 14
Termination Period:
This Option may be exercised for three months after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for twelve months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
A. Grant of Option.
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to [TITLE] of the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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<PAGE> 15
C. Method of Payment.
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
D. Non-Transferability of Option.
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this Option
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
E. Term of Option.
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. Tax Consequences.
Some of the federal tax consequences relating to this Option, as of
the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
G. Exercising the Option.
1. Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to
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<PAGE> 16
honor the exercise and refuse to deliver Shares if such withholding amounts are
not delivered at the time of exercise.
2. Incentive Stock Option. If this Option qualifies as an ISO, the
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3) months and one (1)
day following such change of status.
3. Disposition of Shares.
(a) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
H. Entire Agreement; Governing Law.
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
-4-
<PAGE> 17
I. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AVANEX CORPORATION
- ------------------------- -----------------------------------------
Signature By
- ------------------------- -----------------------------------------
Print Name Title
- -------------------------
Residence Address
- --------------------------
-5-
<PAGE> 18
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
-----------------------------------------
Spouse of Optionee
<PAGE> 19
EXHIBIT A
AVANEX CORPORATION
1998 STOCK PLAN
EXERCISE NOTICE
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538
Attention: [Title]
1. Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Avanex Corporation (the "Company") under
and pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option Agreement
dated, _____ (the "Option Agreement"). The purchase price for the Shares shall
be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE> 20
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: AVANEX CORPORATION
- ---------------------------- -----------------------------------------
Signature By
- ---------------------------- -----------------------------------------
Print Name Its
Address: Address:
- ---------------------------- AVANEX CORPORATION
- ---------------------------- 40919 Encyclopedia Circle
Fremont, CA 94538
-----------------------------------------
Date Received
-2-
<PAGE> 21
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, _____ between Avanex
Corporation, a Delaware corporation ("Pledgee"), and _________________________
("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1998 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the Option,
and the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE> 22
(c) Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees
to cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and
of this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
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<PAGE> 23
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
-3-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" -----------------------------------------
Signature
-----------------------------------------
Print Name
Address:
---------------------------------
---------------------------------
"PLEDGEE" AVANEX CORPORATION
a Delaware corporation
-----------------------------------------
Signature
-----------------------------------------
Print Name
-----------------------------------------
Title
"PLEDGEHOLDER" -----------------------------------------
Secretary of Avanex Corporation
-4-
<PAGE> 25
EXHIBIT C
NOTE
$_________________ [City, State]
------------------, -----
FOR VALUE RECEIVED, _____________________ promises to pay to Avanex
Corporation, a Delaware corporation (the "Company"), or order, the principal sum
of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on _______________, _____.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
------------------------------------
------------------------------------
<PAGE> 26
AVANEX CORPORATION
1998 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1998 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: AVANEX CORPORATION
- -------------------------------- -------------------------------------
Signature By
- -------------------------------- -------------------------------------
Print Name Title
<PAGE> 27
EXHIBIT A-1
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is a
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser
and the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
canceling an amount of the Purchaser's
<PAGE> 28
indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by
a combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice
and the payment of the aggregate Repurchase Price, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Shares being repurchased by
the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares to
be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a)__________________________ percent (______%) of the Shares shall
be released from the Company's Repurchase Option [one year] after the Date of
Grant and __________________ percent (______%) of the Shares [at the end of each
month thereafter], provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section
6 or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's
-2-
<PAGE> 29
Repurchase Option expires. As a further condition to the Company's obligations
under this Agreement, the Company may require the spouse of Purchaser, if any,
to execute and deliver to the Company the Consent of Spouse attached hereto as
Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares that may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that
-3-
<PAGE> 30
the Purchaser (and not the Company) shall be responsible for the Purchaser's own
tax liability that may arise as a result of the transactions contemplated by
this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the
difference between the purchase price for the Shares and the Fair Market Value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Repurchase Option expires by filing an election under Section 83(b) of
the Code with the IRS within 30 days from the date of purchase. The form for
making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of California. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
nor prevent that party from thereafter enforcing any other provision of this
Agreement. The rights granted both parties hereunder are
-4-
<PAGE> 31
cumulative and shall not constitute a waiver of either party's right to assert
any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:
----------------------------
PURCHASER: AVANEX CORPORATION
- ----------------------------------- -----------------------------------------
Signature By
- ----------------------------------- -----------------------------------------
Print Name Title
-5-
<PAGE> 32
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________________________, hereby sell, assign
and transfer unto (__________) shares of the Common Stock of Avanex Corporation,
standing in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint
to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, _____.
Dated: _______________, _____
Signature:_____________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 33
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
------------------, ----
Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538
Dear __________:
As Escrow Agent for both Avanex Corporation, a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities.
<PAGE> 34
Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 35
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538
PURCHASER:
--------------------------------------------
--------------------------------------------
--------------------------------------------
ESCROW AGENT: Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
-3-
<PAGE> 36
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of California.
Very truly yours,
AVANEX CORPORATION
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
- -------------------------------------
Corporate Secretary
-4-
<PAGE> 37
EXHIBIT A-4
CONSENT OF SPOUSE
I, _________________________, spouse of ________________________, have
read and approve the foregoing Restricted Stock Purchase Agreement (the
"Agreement"). In consideration of the Company's grant to my spouse of the right
to purchase shares of Avanex Corporation, as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: ,
--------------------- -----
------------------------------------------
Signature of Spouse
<PAGE> 38
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: _______ shares (the "Shares") of the Common Stock of Avanex
Corporation (the "Company").
3. The date on which the property was transferred is:________________,_____.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is: $__________.
6. The amount (if any) paid for such property is: $___________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:_________________, ____ ______________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: _________________, ____ ______________________________________
Spouse of Taxpayer
<PAGE> 1
EXHIBIT 10.5
AVANEX CORPORATION
FOUNDER'S STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of January 13, 1998, by and between Avanex
Corporation, a California corporation (the "COMPANY"), and Simon Xiaofan Cao
(the "PURCHASER").
Whereas, Purchaser possesses certain Technology (as defined below) related
to the business of the Company which the Company's Board of Directors has
determined to have a value of $800.00.
Whereas, Purchaser and the Company desire to assign the Technology to the
Company in consideration for the sale and issuance of shares of the Company's
common stock (as described below), and to sell additional shares of the
Company's common stock to Purchaser.
The parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 1,800,000 shares of the
Company's Common Stock, no par value (the "SHARES") at a price of $0.001 per
share for an aggregate purchase price of $1,000.00, plus the assignment of all
of Purchaser's right, title and interest in and to the Technology as described
in Section 13 hereof.
2. Payment of Purchase Price. The payment of the purchase price shall be
by either cash, check, promissory notes payable to the Company, or an
assignment of all right, title and interest in certain property by Purchaser
to the company as provided in that certain Assignment of Proprietary Rights
between the Company and the Purchaser of even date herewith, or any combination
of these.
3. Repurchase Option. In the event of any voluntary or involuntary
termination of the Purchaser's employment by, or services to, the Company for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below in Section 4),
the Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option, but not the
obligation, for a period of 90 days from such date to repurchase all or any
portion of the Unreleased Shares (as defined below in Section 4) at such time
at the original purchase price per share (the "REPURCHASE PRICE"). The
Repurchase Option shall be exercisable by the Company by written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Agent, as
defined below in Section 6) and shall be exercisable, at the company's option,
(i) by delivery to the Purchaser or the Purchaser's executor with such notice
of a check in the amount of the purchase price for the Shares being
repurchased, or (ii) by cancellation by the Company of an amount of the
Purchaser's indebtedness, if any, to the Company equal to the purchase price
for the Shares being repurchased, or (iii) by a combination of (i) and (ii) so
that the combined payment and cancellation of indebtedness equals the
Repurchased Price times the number of shares to be repurchased (the "AGGREGATE
REPURCHASE PRICE"). Upon delivery of such notice and the payment of the
Aggregate Repurchase Price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall
have the right to retain and transfer to its own name the number of Shares
being repurchased by the Company. The Repurchase Option set forth in this
Section may be assigned by the Company in whole or in part in its sole and
unfettered discretion.
<PAGE> 2
4. Release of Shares from Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's repurchase option (the "REPURCHASE OPTION"). The
Shares shall be released from the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from the
Repurchase Option on January 13, 1999; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "UNRELEASED
SHARES".
(c) The Shares which have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request.
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released form the Repurchase Option on the same schedule as existed prior to the
Change of Control. For example, if a Change of Control occurs on a date where
25% of Purchaser's Shares have been released from the Company's Purchase Option,
then an additional 25% of the Shares shall be released from the Purchase Option
pursuant hereto. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
(ii) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company;
(iii) a merger or consolidation in which the Company is a party
and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
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<PAGE> 3
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to the
Shares released from the Company's Repurchase Option pursuant to Section 4(d)
above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 4(e), the following terms referred to in
this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the Purchaser has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Purchaser or the
Purchaser's legal representative (such agreement as to acceptability not to be
unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the relocation of the Purchaser to a facility or a location more than 50
miles from the Purchaser's then present location, without the Purchaser's
express written consent; (vi) any purported termination of the Purchaser by the
Company which is not effected for death or Disability or for Cause, or any
purported termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 4(f) below.
-3-
<PAGE> 4
(f) Successors.
(i) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Section 4 and agree expressly to
perform the obligations under this Section 4 in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Section 4, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
4(f)(i) or which becomes bound by the terms of this Agreement by operation of
law.
(ii) Purchaser's Successors. The terms of this Section 4 and all
rights of the Purchaser hereunder shall inure to the benefit of, and be
enforceable by, the Purchaser's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
5. Restriction on Transfer.
(a) Except for the escrow described below in Section 6, none of the
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any manner until the release of such shares from the
Repurchase Option in accordance with the provisions of this Agreement.
(b) Before any Shares may be sold or transferred (including transfer
by operation of law), such Shares shall first be offered to the Company (the
"RIGHT OF FIRST REFUSAL").
(i) Notice. In the event the Purchaser wishes to sell the
Shares, Purchaser shall deliver a notice ("Notice") to the Company stating (A)
his bona fide intention to sell or transfer such Shares, (B) the number of such
Shares to be sold or transferred, (C) the price for which he proposes to sell or
transfer such Shares, and (D) the name of the proposed purchaser or transferee.
(ii) Election to Purchase. Within thirty (30) days after receipt
of the Notice, the Company or its assignee may elect to purchase all or none of
the Shares to which the Notice refers, at the price per share specified in the
Notice. The purchase of the Shares in either such event shall occur at a closing
held at the Company's principal office at a mutually agreed upon time which in
no event shall be more than thirty (30) days following the end of the time
period in which the Company had to elect to purchase such Shares.
(iii) Sale of Shares by Purchaser. If all of the Shares to which
the Notice refers are not elected to be purchased, as provided in this Section
5(b), Purchaser may sell the Shares to any person named in the Notice at the
price specified in the Notice or at a higher price, provided that such sale or
transfer is consummated within sixty (60) days of the date of said Notice to the
Company, and provided, further, that any such sale is in accordance with all the
terms and conditions hereof.
(iv) Termination of Restrictions. Notwithstanding the provisions
of Section 5(a) above, the Company's Right of First Refusal shall terminate
immediately as to all Shares upon the occurrence of the first to occur of the
following events:
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<PAGE> 5
(A) the acquisition of the Company by another entity by
means of the merger or consolidation of the Company with or into another
corporation in which the stock-holders of the Company immediately prior to such
merger or consolidation own less than 50% of the voting securities of the
surviving entity,
(B) the sale of all or substantially all of the assets of
the Company, or
(C) the date upon which a public market exists for the
Company's capital stock (or any other stock issued to purchasers in exchange for
the Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (1) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934), or (2) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
(v) Assignment. Whenever the Company shall have the right to
purchase Shares under this Section 5, the Company may designate and assign one
or more employees, officers, directors or shareholders of the Company or other
persons or organizations to exercise all of the Company's purchase rights under
this Agreement and purchase all of such Shares; provided that if the fair market
value of the Shares to be purchased on the date of such designated or assignment
(the "Repurchase FMV") exceeds the purchase price of the Shares (determined as
described hereinabove) to be purchased, then each such designee or assignee
shall pay the Company cash equal to the difference between the Repurchase FMV
and the purchase price of the Shares which such designee or assignee shall have
the right to purchase.
(vi) Exempt Transfers. The provisions of this Section 5 shall not
apply to a transfer of any Shares by Purchaser, either during his lifetime or on
death by will or intestacy to his ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse; provided, in each such case that the transferee shall
receive and hold such Shares subject to all of the provisions of this Section 5
and there shall be no further transfer of such Shares except in accordance
herewith.
6. Escrow of Shares. Pursuant to the terms of the Joint Escrow
Instructions attached hereto as Exhibit B, the Shares issued under this
Agreement shall be held by the Escrow Agent (as defined in such Joint Escrow
Instructions) along with a stock assignment executed by the Purchaser in blank
in the form hereto as Exhibit A.
7. Investment Representations. In connection with the purchase of the
Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. The
Purchaser is purchasing the Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
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<PAGE> 6
(b) The Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "COMMISSION"), the statutory basis for such exemption may not be
present if the Purchaser's representations meant that the Purchaser's present
intention was to hold the Shares for a minimum capital gains period under
applicable tax statues, for a deferred sale, for a market rise, for a sale if
the market does not rise, or for a year or any other fixed period in the future.
(c) The Purchaser further acknowledges and understands that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.
8. Stock Certificate Legends. The share certificate evidencing the Shares
issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
requested by the managing underwriters or the Company in connection with the
initial public offering of the Company's Common Stock, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of, assign any legal or beneficial interest in or make a
distribution of any capital stock of the Company held by or on behalf of the
Purchaser or beneficially owned by the Purchaser in accordance with the rules
and regulations of the Securities and Exchange Commission for a period of up to
180 days after the date of the final prospectus relating to the Company's
initial public offering.
10. Adjustment for Stock Split. All references to the number of Shares and
the purchaser price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split
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<PAGE> 7
or stock dividend or other similar change in the Shares which may be made by
the Company after the date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. The Purchaser understands
that the Purchaser (and not the Company) shall be responsible for the
Purchaser's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement. The Purchaser understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the "CODE"), taxes
as ordinary income both (i) the difference between the fair market value of the
Shares when the Company granted the Purchaser the right to purchase the Shares
and the fair market value of the Shares on the date of this Agreement, and (ii)
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to its repurchase option. In the event the Company has registered
under the Exchange Act, "restriction" with respect to officers, directors and
10% shareholders could be subject to suit under Section 16(b) of the Exchange
Act. The Purchaser understands that the Purchaser may elect to be taxed at the
time the Shares are purchased rather than when and as the Company's repurchase
option or 16(b) period expires by filing an election under Section 83(b) of the
Code with the I.R.S. within 30 days from the date of purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
13. Assignment of Technology. In partial consideration for the sale and
issuance of the Stock by the Company to the Purchaser:
(i) Purchaser hereby irrevocably assigns, transfers and conveys to the
Company all of its right, title and interest in and to:
(a) all technical information, know-how, processes, procedures,
compositions, devices, methods, techniques, data, marks (and the goodwill
associated therewith), ideas, discoveries, trade secrets, copyrights or other
subject matter generally relating to micro-optic based broadband and low loss
Dispersion Compensators capable of compensating dispersion induced signal
distortion, and thermally
-7-
<PAGE> 8
tunable WDM devices capable of wavelength tuning for applications such as
programmable ADD/DROP Modules and Optical Cross-Connect systems (collectively,
the "Technology"), including without limitation any and all invention(s)
disclosed in the Technology and all embodiments thereof (the "Inventions");
(b) all rights to apply in any and all countries of the world for
patents, certificates of inventions or other governmental grants on the
Inventions, including the right to apply for patents pursuant to the
International Convention for the Protection of Industrial Property or pursuant
to any other convention, treaty, agreement or understanding;
(c) any and all applications filed and any and all patents,
certificates of inventions or other governmental grants granted on the
Invention in the United States or any other country, including each and every
application filed and each and every patent granted on any application which is
a division, substitution or continuation of any of said applications
(collectively, the "Patents");
(d) each and every reissue or extension of any of the Patents;
(e) in and to each and every patent claim resulting from a
reexamination certificate for any and all of the Patents; and
(f) any and all causes of action relating to the enforcement of the
Technology and any and all other right or interest in or to the Technology, in
each case existing as of or arising after the Effective Date.
(ii) Purchaser represents and warrants that (i) Purchaser is the owner of
the entire right, title, and interest in and to the Technology; (ii) Purchaser
has the sole right and authority to enter into this Agreement and grant the
rights hereunder; (iii) Purchaser has not previously granted and will not grant
any rights or licenses in the Technology; (iv) to the best of its knowledge,
there are no claims of third parties that would call into question the rights of
Purchaser to grant to the Company the rights contemplated hereunder; (v) as of
the Closing Date, Purchaser does not own any patents, patent applications,
technical information, know-how, processes, compositions, devices, methods,
techniques, data, market, ideas, discoveries, trade secrets, copyrights or other
intellectual property related to micro-optic based broadband and low loss
Dispersion Compensators capable of compensating dispersion induced signal
distortion, and thermally tunable WDM devices capable of wavelength tuning for
applications such as programmable ADD/DROP Modules and Optical Cross-Connect
systems except for the Technology assigned to the Company.
(iii) Purchaser agrees to execute any and all papers and documents, and
take such other actions as are reasonably requested by the Company, to evidence,
perfect or defend the foregoing assignment and fully implement the Company's
proprietary rights in the subject matter assigned hereunder, such as obtaining
and enforcing patents, and to fully cooperate in the prosecution, enforcement
and defense of such proprietary rights. Purchaser further agrees that if the
Company is unable, for any reason, to secure such signatures to apply for or to
pursue any application for any patent, copyright or other proprietary right
covering any Technology assigned to the Company above, then Purchaser hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as Purchaser's agent and attorney-in-fact, to act for and in
Purchaser's behalf and stead to execute and file any such applications and
-8-
<PAGE> 9
to do all other lawfully permitted acts to further the prosecution and issuance
of patents, copyright and other registrations thereon with the same legal force
and effect as if executed by Purchaser.
14. General Provisions.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other
in writing.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company and any purported transfer otherwise shall be null and
void.
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN "AT WILL" EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
REPURCHASE OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY
PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser has reviewed this Agreement in its entirety, has had
an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
PURCHASER: AVANEX CORPORATION
/s/ SIMON XIAOFAN CAO /s/ SIMON XIAOFAN CAO
- ----------------------------------- ----------------------------------------
(Name) Simon Xiaofan Cao Simon Xiaofan Cao, President
Address: Address:
2202 Ensenada Way 2202 Ensenada Way
San Mateo, California 94403 San Mateo, California 94403
<PAGE> 11
CONSENT OF SPOUSE
I, Julie Cao, spouse of Simon Cao, have read and approve the foregoing
Agreement. In consideration of granting of the right to my spouse to purchase
shares of Avanex Corporation as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under
the Agreement and agree to be bound by the provisions of the Agreement insofar
as I may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws of the State of California or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: Jan. 20, 1998
/s/ JULIE CAO
---------------------------------------------
<PAGE> 12
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, , herby sell,
assign and transfer unto ( ) shares of
the Common Stock of Avanex Corporation standing in my name on the books of said
corporation represented by Certificate No. herewith and do hereby irrevocably
constitute and appoint Wilson, Sonsini, Goodrich & Rosati, attorney, to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be sued only in accordance with the Founder
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
January 13, 1998.
Dated:
------------------------
/s/ SIMON XIAOFAN CAO
-------------------------------------
(Name) Simon Xiaofan Cao
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
January 13, 1998
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
Ladies and Gentlemen:
As escrow agent (the "Escrow Agent") for both Avanex Corporation, a
California corporation (the "Company"), and the undersigned purchaser of stock
of the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Founder
Stock Purchase Agreement ("Agreement") between the Company and the undersigned
(the "Escrow"), in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the
Company's Repurchase Option (as defined in the Agreement), the Company shall
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness or some combination thereof) for
the number of shares of stock being purchased pursuant to the exercise of the
Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this Escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions
<PAGE> 14
of the Agreement and of this Escrow Agreement, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by the
Company, or any parent or subsidiary of the Company, you will deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's repurchase option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE> 15
12. Your responsibilities as Escrow Agent shall terminate if you shall
cease to be an officer or agent of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes have been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but you shall be under no duty whatsoever to institute or defend any
such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto:
<TABLE>
<S> <C>
COMPANY: Avanex Corporation
PURCHASER: Simon Cao
2202 Ensenada Way
San Mateo, CA 94403
ESCROW AGENT: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
</TABLE>
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
-3-
<PAGE> 16
Very truly yours,
AVANEX CORPORATION
/s/ SIMON CAO
-----------------------------------
Simon Xiaofan Cao, President
PURCHASER:
/s/ SIMON X. CAO
-----------------------------------
(Name) Simon Xiaofan Cao
ESCROW AGENT:
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By: /s/ Judith M. O'Brien
----------------------------------
Judith M. O'Brien
<PAGE> 1
EXHIBIT 10.6
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock
Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement (the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
WALTER ALESSANDRINI
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant October 8, 1999
Exercise Price Per Share $0.58
Total Number of Shares Subject 347,706
to This Stock Purchase Right
Expiration Date January 6, 2000
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual
named in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the exercise price per share set forth in
the Notice of Grant of Stock Purchase Right (the "Exercise Price"), and subject
to the terms and conditions of the Plan, which is incorporated herein by
reference. Subject to 14(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Agreement, the terms and conditions of
the Plan shall prevail.
<PAGE> 2
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of sixty (60) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each such designee or assignee shall pay the Company
cash equal to the difference between the Repurchase FMV and the aggregate
Repurchase Price of Unreleased Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
2
<PAGE> 3
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from
the Repurchase Option on March 22, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
(ii) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
3
<PAGE> 4
(iii) a merger or consolidation in which the Company is a
party and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the
Purchaser has been unable to substantially perform his duties as the result of
his incapacity due to physical or mental illness, and such inability, at least
26 weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the
4
<PAGE> 5
relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in 7 or
transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time
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<PAGE> 6
during the term of the Company's Repurchase Option, there is (i) any stock
dividend, stock split or other change in the Shares, or (ii) any merger or sale
of all or substantially all of the assets or other acquisition of the Company,
any and all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the Company's
Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided
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<PAGE> 7
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the date of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A
REPURCHASE OPTION
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<PAGE> 8
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED
AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE OPTION ARE
BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date
of grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will
be recognized by Purchaser in connection with the exercise of the stock
purchaser right for shares subject to the Repurchase Option, unless an election
under Section 83(b) of the Code is filed with the Internal Revenue Service
within 30 days of the date of exercise of the right to purchase stock. The form
for making this election is attached as Exhibit A-4 hereto. Otherwise, as the
Company's repurchase right lapses, Purchaser will recognize compensation income
in an amount equal to the difference between the Fair Market Value of the stock
at the time the Company's repurchase right lapses and the amount paid for the
stock, if any (the "Spread"). If Purchaser is an Employee or former Employee,
the
8
<PAGE> 9
Spread will be subject to tax withholding by the Company, and the Company will
be entitled to a tax deduction in the amount at the time the Purchaser
recognizes ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any
gain or loss is treated as capital gain or loss. If the Shares are held for at
least one year, any gain realized on disposition of the shares will be treated
as long-term capital gain for federal income tax purposes. Long-term capital
gains are grouped and netted by holding periods. Net capital gains on assets
held for more than 12 months is capped at 20%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE WILL OF
THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
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<PAGE> 10
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
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<PAGE> 11
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
Dated: October 8, 1999
PURCHASER: AVANEX CORPORATION
/s/ Walter Alessandrini By: /s/ Simon Cao
- ------------------------------- -------------------------------
Signature Simon Cao
Walter Alessandrini Title: Director
- ------------------------------- ----------------------------
Print Name
11
<PAGE> 12
EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Walter Alessandrini, hereby sell, assign and
transfer unto_________ (__________) shares of the Common Stock of Avanex
Corporation standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and
appoint______________________ to transfer the said stock on the books of the
within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
October 8, 1999.
Dated: Signature: /s/ Walter Alessandrini
---------------,------ -------------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
October 8, 1999
Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
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<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
PURCHASER: Walter Alessandrini
1305 Crane Street
Menlo Park, CA 94025
ESCROW AGENT: Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement
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<PAGE> 16
(including the exhibits referenced therein) constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Escrow Agent, the
Purchaser and the Company with respect to the subject matter hereof, and may not
be modified except by means of a writing signed by the Escrow Agent, the
Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ Simon X. Cao
----------------------------------
Director (Simon Cao)
----------------------------------
Title
PURCHASER
/s/ Walter Alessandrini
----------------------------------
(Signature)
Walter Alessandrini
----------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ Judith M. O'Brien
----------------------------------
Corporate Secretary
5
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, Anna Alessandrini, spouse of Walter Alessandrini, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: October 8, 1999 Signature: /s/ Anna Alessandrini
-------------------------------
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EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME:
TAXPAYER: Walter Alessandrini
SPOUSE: Anna Alessandrini
ADDRESS: 1305 Crane Street, Menlo Park, CA 94025
IDENTIFICATION NO.: TAXPAYER: TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described
as follows: 347,706 shares (the "Shares") of the Common Stock of Avanex
Corporation (the "Company").
3. The date on which the property was transferred is: October 12, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares based
on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will never
lapse, of such property is: $201,669.48.
6. The amount (if any) paid for such property is: $201,669.48
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be
revoked except with the consent of the Commissioner.
/s/ Walter Alessandrini
Dated: October 12, 1999 -----------------------------------------
Walter Alessandrini, Taxpayer
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<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: WALTER ALESSANDRINI
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 347,706
DATE: OCTOBER 8, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the
Securities. Purchaser is acquiring these Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one (1) year or any other
fixed period in the future. Purchaser further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Securities. Purchaser understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of Corporations of the
State of California and any other legend required under applicable state
securities laws.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities"
<PAGE> 20
acquired, directly or indirectly from the issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of the grant of the
Stock Purchase Right to the Purchaser, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the Securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three (3)
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ Walter Alessandrini
-------------------------------
Date: October 8, 1999
2
<PAGE> 21
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. INVESTMENT - CHAPTER 3. COMMISSIONER OF CORPORATIONS
260.141.11: RESTRICTION ON TRANSFER. (a) THE ISSUER OF ANY SECURITY UPON
WHICH A RESTRICTION ON TRANSFER HAS BEEN IMPOSED PURSUANT TO SECTIONS 260.102.6,
260.141.10 OR 260.534 SHALL CAUSE A COPY OF THIS SECTION TO BE DELIVERED TO EACH
ISSUEE OR TRANSFEREE OF SUCH SECURITY AT THE TIME THE CERTIFICATE EVIDENCING THE
SECURITY IS DELIVERED TO THE ISSUEE OR TRANSFEREE.
(b) IT IS UNLAWFUL FOR THE HOLDER OF ANY SUCH SECURITY TO
CONSUMMATE A SALE OR TRANSFER OF SUCH SECURITY, OR ANY INTEREST THEREIN, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER (UNTIL THIS CONDITION IS REMOVED
PURSUANT TO SECTION 260.141.12 OF THESE RULES), EXCEPT:
(1) TO THE ISSUER;
(2) PURSUANT TO THE ORDER OR PROCESS OF ANY COURT;
(3) TO ANY PERSON DESCRIBED IN SUBDIVISION (i) OF SECTION
25102 OF THE CODE OR SECTION 260.105.14 OF THESE RULES;
(4) TO THE TRANSFEROR'S ANCESTORS, DESCENDANTS OR SPOUSE,
OR ANY CUSTODIAN OR TRUSTEE FOR THE ACCOUNT OF THE TRANSFEROR OR THE
TRANSFEROR'S ANCESTORS, DESCENDANTS, OR SPOUSE; OR TO A TRANSFEREE BY A TRUSTEE
OR CUSTODIAN FOR THE ACCOUNT OF THE TRANSFEREE OR THE TRANSFEREE'S ANCESTORS,
DESCENDANTS OR SPOUSE;
(5) TO HOLDERS OF SECURITIES OF THE SAME CLASS OF THE SAME
ISSUER;
(6) BY WAY OF GIFT OR DONATION INTER VIVOS OR ON DEATH;
(7) BY OR THROUGH A BROKER-DEALER LICENSED UNDER THE CODE
(EITHER ACTING AS SUCH OR AS A FINDER) TO A RESIDENT OF A FOREIGN STATE,
TERRITORY OR COUNTRY WHO IS NEITHER DOMICILED IN THIS STATE TO THE KNOWLEDGE OF
THE BROKER-DEALER, NOR ACTUALLY PRESENT IN THIS STATE IF THE SALE OF SUCH
SECURITIES IS NOT IN VIOLATION OF ANY SECURITIES LAW OF THE FOREIGN STATE,
TERRITORY OR COUNTRY CONCERNED;
(8) TO A BROKER-DEALER LICENSED UNDER THE CODE IN A
PRINCIPAL TRANSACTION, OR AS AN UNDERWRITER OR MEMBER OF AN UNDERWRITING
SYNDICATE OR SELLING GROUP;
(9) IF THE INTEREST SOLD OR TRANSFERRED IS A PLEDGE OR
OTHER LIEN GIVEN BY THE PURCHASER TO THE SELLER UPON A SALE OF THE SECURITY FOR
WHICH THE COMMISSIONER'S WRITTEN CONSENT IS OBTAINED OR UNDER THIS RULE NOT
REQUIRED;
3
<PAGE> 22
(10) BY WAY OF A SALE QUALIFIED UNDER SECTIONS 25111,
25112, 25113 OR 25121 OF THE CODE, OF THE SECURITIES TO BE TRANSFERRED, PROVIDED
THAT NO ORDER UNDER SECTION 25140 OR SUBDIVISION (a) OF SECTION 25143 IS IN
EFFECT WITH RESPECT TO SUCH QUALIFICATION;
(11) BY A CORPORATION TO A WHOLLY OWNED SUBSIDIARY OF SUCH
CORPORATION, OR BY A WHOLLY OWNED SUBSIDIARY OF A CORPORATION TO SUCH
CORPORATION;
(12) BY WAY OF AN EXCHANGE QUALIFIED UNDER SECTION 25111,
25112 OR 25113 OF THE CODE, PROVIDED THAT NO ORDER UNDER SECTION 25140 OR
SUBDIVISION (a) OF SECTION 25143 IS IN EFFECT WITH RESPECT TO SUCH
QUALIFICATION;
(13) BETWEEN RESIDENTS OF FOREIGN STATES, TERRITORIES OR
COUNTRIES WHO ARE NEITHER DOMICILED NOR ACTUALLY PRESENT IN THIS STATE;
(14) TO THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR TO THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE; OR
(15) BY THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR BY THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE IF, IN EITHER SUCH CASE, SUCH PERSON (i) DISCLOSES TO POTENTIAL PURCHASERS
AT THE SALE THAT TRANSFER OF THE SECURITIES IS RESTRICTED UNDER THIS RULE, (ii)
DELIVERS TO EACH PURCHASER A COPY OF THIS RULE, AND (iii) ADVISES THE
COMMISSIONER OF THE NAME OF EACH PURCHASER;
(16) BY A TRUSTEE TO A SUCCESSOR TRUSTEE WHEN SUCH
TRANSFER DOES NOT INVOLVE A CHANGE IN THE BENEFICIAL OWNERSHIP OF THE
SECURITIES;
(17) BY WAY OF AN OFFER AND SALE OF OUTSTANDING SECURITIES
IN AN ISSUER TRANSACTION THAT IS SUBJECT TO THE QUALIFICATION REQUIREMENT OF
SECTION 25110 OF THE CODE BUT EXEMPT FROM THAT QUALIFICATION REQUIREMENT BY
SUBDIVISION (f) OF SECTION 25102; PROVIDED THAT ANY SUCH TRANSFER IS ON THE
CONDITION THAT ANY CERTIFICATE EVIDENCING THE SECURITY ISSUED TO SUCH TRANSFEREE
SHALL CONTAIN THE LEGEND REQUIRED BY THIS SECTION.
(c) THE CERTIFICATES REPRESENTING ALL SUCH SECURITIES SUBJECT TO
SUCH A RESTRICTION ON TRANSFER, WHETHER UPON INITIAL ISSUANCE OR UPON ANY
TRANSFER THEREOF, SHALL BEAR ON THEIR FACE A LEGEND, PROMINENTLY STAMPED OR
PRINTED THEREON IN CAPITAL LETTERS OF NOT LESS THAN 10-POINT SIZE, READING AS
FOLLOWS:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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<PAGE> 23
PROMISSORY NOTE
$201,669.48
October 8, 1999
FOR VALUE RECEIVED, Walter Alessandrini promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of TWO HUNDRED ONE
THOUSAND SIX HUNDRED SIXTY-NINE DOLLARS AND FORTY-EIGHT CENTS, together with
interest on the unpaid principal hereof from the date hereof at the rate of
6.02% per annum, compounded semiannually.
Principal and interest shall be due and payable on October 31, 2003.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Restricted Stock Purchase
Agreement, dated as of October 8, 1999. This Note is secured in part by a
pledge of the Company's Common Stock under the terms of a Security Agreement of
even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ Walter Alessandrini
-------------------------------
Walter Alessandrini
<PAGE> 24
SECURITY AGREEMENT
This Security Agreement is made as of October 8, 1999 between Avanex
Corporation ("Pledgee") and Walter Alessandrini ("(Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Restricted
Stock Purchase Agreement dated April 30, 1999 (the "Agreement"), between Pledgor
and Pledgee under Pledgee's 1998 Stock Plan, and the Pledgor's election under
the terms of the Agreement to pay for such shares with his promissory note (the
"Note"), Pledgor has purchased 347,706 shares of Pledgee's Common Stock (the
"Shares") at a price of $0.58 per share, for a total purchase price of
$201,669.48.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Agreement, Pledgor, pursuant to
the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number 13
duly endorsed in blank or with executed stock powers, and herewith delivers said
certificate to Wilson Sonsini Goodrich & Rosati, Professional Corporation
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and extensions or renewals thereof,
to be executed by Pledgor pursuant to the terms of the Agreement, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations
<PAGE> 25
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
- 2 -
<PAGE> 26
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
- 3 -
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By: /s/ Walter Alessandrini
-------------------------------
Walter Alessandrini
Address: 1305 Crane Street
Menlo Park, CA 94025
"PLEDGEE" Avanex Corporation
By: /s/ Jessy Chao
-------------------------------
Jessy Chao
Title: Chief Financial Officer
"PLEDGEHOLDER" Wilson Sonsini Goodrich & Rosati
Professional Corporation
/s/ Judith M. O'Brien
----------------------------------
Judith M. O'Brien
- 4 -
<PAGE> 1
EXHIBIT 10.7
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock
Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement (the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
WALTER ALESSANDRINI
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant March 26, 1999
Exercise Price Per Share $0.08
Total Number of Shares Subject 3,477,059
to This Stock Purchase Right
Expiration Date June 26, 1999
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the
individual named in the Notice of Grant of Stock Purchase Right (the
"Purchaser"), and the Purchaser hereby agrees to purchase the number of Shares
set forth in the Notice of Grant of Stock Purchase Right, at the exercise price
per share set forth in the Notice of Grant of Stock Purchase Right (the
"Exercise Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to 14(c) of the Plan, in the event of
a conflict between the terms and conditions of the Plan and this Agreement, the
terms and conditions of the Plan shall prevail.
<PAGE> 2
2. Payment of Purchase Price. Purchaser herewith delivers to the
Company the aggregate Exercise Price for the Shares by cash or check.
3. Purchaser's Representations. In the event the Shares have not
been registered under the Securities Act of 1933, as amended, at the time this
Stock Purchase Right is exercised, the Optionee shall, if required by the
Company, concurrently with the exercise of all or any portion of this Stock
Purchase Right, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a
Service Provider terminates for any or no reason (including death or
Disability), the Company shall, upon the date of such termination (as reasonably
fixed and determined by the Company), have an irrevocable, exclusive option for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 5) at the
Exercise Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company
by delivering written notice to the Purchaser or the Purchaser's executor (with
a copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase
the Unreleased Shares hereunder, the Company may designate and assign one or
more employees, officers, directors or shareholders of the Company or other
persons or organizations to exercise all or a part of the Company's Repurchase
Option to purchase all or a part of the Unreleased Shares. If the Fair Market
Value of the Unreleased Shares to be repurchased on the date of such designation
or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of
the Unreleased Shares, then each such designee or assignee shall pay the Company
cash equal to the difference between the Repurchase FMV and the aggregate
Repurchase Price of Unreleased Shares to be purchased.
(d) If the Company or its assignee does not elect to
exercise the Repurchase Option conferred above by giving the requisite notice
within ninety (90) days following Purchaser's termination as a Service Provider,
the Repurchase Option shall terminate.
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<PAGE> 3
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from
the Repurchase Option on March 22, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
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<PAGE> 4
(ii) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(iii) a merger or consolidation in which the Company is a
party and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the
Purchaser has been unable to substantially perform his duties as the result of
his incapacity due to physical or mental illness, and such inability, at least
26 weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written
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<PAGE> 5
consent, a material reduction by the Company in the base compensation of the
Purchaser as in effect immediately prior to such reduction, or the ineligibility
of the Purchaser to continue to participate in any long-term incentive plan of
the Company; (iv) a material reduction by the Company in the kind or level of
employee benefits to which the Purchaser is entitled immediately prior to such
reduction with the result that the Purchaser's overall benefits package is
significantly reduced; (v) the relocation of the Purchaser to a facility or a
location more than 50 miles from the Purchaser's then present location, without
the Purchaser's express written consent; (vi) any purported termination of the
Purchaser by the Company which is not effected for death or Disability or for
Cause, or any purported termination for which the grounds relied upon are not
valid; or (vii) the failure of the Company to obtain the assumption of this
agreement by any successors contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in 7 or
transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
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<PAGE> 6
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
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<PAGE> 7
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the date of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE
7
<PAGE> 8
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A
REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE
OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
8
<PAGE> 9
11. Tax Consequences. Set forth below is a brief summary as of the date
of grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will
be recognized by Purchaser in connection with the exercise of the stock
purchaser right for shares subject to the Repurchase Option, unless an election
under Section 83(b) of the Code is filed with the Internal Revenue Service
within 30 days of the date of exercise of the right to purchase stock. The form
for making this election is attached as Exhibit A-4 hereto. Otherwise, as the
Company's repurchase right lapses, Purchaser will recognize compensation income
in an amount equal to the difference between the Fair Market Value of the stock
at the time the Company's repurchase right lapses and the amount paid for the
stock, if any (the "Spread"). If Purchaser is an Employee or former Employee,
the Spread will be subject to tax withholding by the Company, and the Company
will be entitled to a tax deduction in the amount at the time the Purchaser
recognizes ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any
gain or loss is treated as capital gain or loss. If the Shares are held for at
least one year, any gain realized on disposition of the shares will be treated
as long-term capital gain for federal income tax purposes. Long-term capital
gains are grouped and netted by holding periods. Net capital gains on assets
held for more than 12 months is capped at 20%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE WILL OF
THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
9
<PAGE> 10
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
10
<PAGE> 11
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ WALTER ALESSANDRINI By: /s/ JESSY CHAO
- ------------------------------- ----------------------------
Signature
Walter Alessandrini Title: Director of Finance
- ------------------------------- -------------------------
Print Name
11
<PAGE> 12
EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Walter Alessandrini, hereby sell, assign and
transfer unto __________ (__________) shares of the Common Stock of Avanex
Corporation standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and appoint
__________ to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
April 30, 1999.
Dated: _______________, _____ Signature: /s/ WALTER ALESSANDRINI
------------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
April 30, 1999
Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
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<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
PURCHASER: ___________________
___________________
___________________
ESCROW AGENT: Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
4
<PAGE> 16
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement (including the exhibits referenced therein)
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Escrow Agent, the Purchaser and the Company with respect to
the subject matter hereof, and may not be modified except by means of a writing
signed by the Escrow Agent, the Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ JESSY CHAO
---------------------------------------------
Title: Director of Finance
------------------------------------------
PURCHASER
/s/ WALTER ALESSANDRINI
------------------------------------------------
(Signature)
Walter Alessandrini
------------------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
------------------------------------------------
Corporate Secretary
5
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, Anna Alessandrini, spouse of Walter Alessandrini, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: April 30, 1999 Signature: /s/ ANNA ALESSANDRINI
-----------------------------
6
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME:
TAXPAYER: Walter Alessandrini
SPOUSE: Anna Alessandrini
ADDRESS: 129 Beaver Dam Road, Columbia, South Carolina 29223
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described
as follows: 3,477,059 shares (the "Shares") of the Common Stock of Avanex
Corporation (the "Company").
3. The date on which the property was transferred is: April 30, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares based
on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will never
lapse, of such property is: $278,164.72.
6. The amount (if any) paid for such property is: $278,164.72.
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
7
<PAGE> 19
The undersigned understands that the foregoing election may not be
revoked except with the consent of the Commissioner.
Dated: April 30, 1999 /s/ WALTER ALESSANDRINI
---------------------------------------------
Walter Alessandrini, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: April 30, 1999 /s/ ANNA ALESSANDRINI
---------------------------------------------
Anna Alessandrini, Spouse of Taxpayer
8
<PAGE> 20
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: WALTER ALESSANDRINI
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 3,477,059
DATE: APRIL 30, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the
Securities. Purchaser is acquiring these Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one (1) year or any other
fixed period in the future. Purchaser further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Securities. Purchaser understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of Corporations of the
State of California and any other legend required under applicable state
securities laws.
<PAGE> 21
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Stock Purchase Right to the Purchaser, the
exercise will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such
longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three (3) month period not exceeding the limitations specified
in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ WALTER ALESSANDRINI
-------------------------------
Date: April 30, 1999
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ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. INVESTMENT - CHAPTER 3. COMMISSIONER OF CORPORATIONS
260.141.11: RESTRICTION ON TRANSFER. (a) THE ISSUER OF ANY SECURITY UPON
WHICH A RESTRICTION ON TRANSFER HAS BEEN IMPOSED PURSUANT TO SECTIONS 260.102.6,
260.141.10 OR 260.534 SHALL CAUSE A COPY OF THIS SECTION TO BE DELIVERED TO EACH
ISSUEE OR TRANSFEREE OF SUCH SECURITY AT THE TIME THE CERTIFICATE EVIDENCING THE
SECURITY IS DELIVERED TO THE ISSUEE OR TRANSFEREE.
(b) IT IS UNLAWFUL FOR THE HOLDER OF ANY SUCH SECURITY TO
CONSUMMATE A SALE OR TRANSFER OF SUCH SECURITY, OR ANY INTEREST THEREIN, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER (UNTIL THIS CONDITION IS REMOVED
PURSUANT TO SECTION 260.141.12 OF THESE RULES), EXCEPT:
(1) TO THE ISSUER;
(2) PURSUANT TO THE ORDER OR PROCESS OF ANY COURT;
(3) TO ANY PERSON DESCRIBED IN SUBDIVISION (i) OF SECTION
25102 OF THE CODE OR SECTION 260.105.14 OF THESE RULES;
(4) TO THE TRANSFEROR'S ANCESTORS, DESCENDANTS OR SPOUSE,
OR ANY CUSTODIAN OR TRUSTEE FOR THE ACCOUNT OF THE TRANSFEROR OR THE
TRANSFEROR'S ANCESTORS, DESCENDANTS, OR SPOUSE; OR TO A TRANSFEREE BY A TRUSTEE
OR CUSTODIAN FOR THE ACCOUNT OF THE TRANSFEREE OR THE TRANSFEREE'S ANCESTORS,
DESCENDANTS OR SPOUSE;
(5) TO HOLDERS OF SECURITIES OF THE SAME CLASS OF THE SAME
ISSUER;
(6) BY WAY OF GIFT OR DONATION INTER VIVOS OR ON DEATH;
(7) BY OR THROUGH A BROKER-DEALER LICENSED UNDER THE CODE
(EITHER ACTING AS SUCH OR AS A FINDER) TO A RESIDENT OF A FOREIGN STATE,
TERRITORY OR COUNTRY WHO IS NEITHER DOMICILED IN THIS STATE TO THE KNOWLEDGE OF
THE BROKER-DEALER, NOR ACTUALLY PRESENT IN THIS STATE IF THE SALE OF SUCH
SECURITIES IS NOT IN VIOLATION OF ANY SECURITIES LAW OF THE FOREIGN STATE,
TERRITORY OR COUNTRY CONCERNED;
(8) TO A BROKER-DEALER LICENSED UNDER THE CODE IN A
PRINCIPAL TRANSACTION, OR AS AN UNDERWRITER OR MEMBER OF AN UNDERWRITING
SYNDICATE OR SELLING GROUP;
(9) IF THE INTEREST SOLD OR TRANSFERRED IS A PLEDGE OR
OTHER LIEN GIVEN BY THE PURCHASER TO THE SELLER UPON A SALE OF THE SECURITY FOR
WHICH THE COMMISSIONER'S WRITTEN CONSENT IS OBTAINED OR UNDER THIS RULE NOT
REQUIRED;
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(10) BY WAY OF A SALE QUALIFIED UNDER SECTIONS 25111,
25112, 25113 OR 25121 OF THE CODE, OF THE SECURITIES TO BE TRANSFERRED, PROVIDED
THAT NO ORDER UNDER SECTION 25140 OR SUBDIVISION (a) OF SECTION 25143 IS IN
EFFECT WITH RESPECT TO SUCH QUALIFICATION;
(11) BY A CORPORATION TO A WHOLLY OWNED SUBSIDIARY OF SUCH
CORPORATION, OR BY A WHOLLY OWNED SUBSIDIARY OF A CORPORATION TO SUCH
CORPORATION;
(12) BY WAY OF AN EXCHANGE QUALIFIED UNDER SECTION 25111,
25112 OR 25113 OF THE CODE, PROVIDED THAT NO ORDER UNDER SECTION 25140 OR
SUBDIVISION (a) OF SECTION 25143 IS IN EFFECT WITH RESPECT TO SUCH
QUALIFICATION;
(13) BETWEEN RESIDENTS OF FOREIGN STATES, TERRITORIES OR
COUNTRIES WHO ARE NEITHER DOMICILED NOR ACTUALLY PRESENT IN THIS STATE;
(14) TO THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR TO THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE; OR
(15) BY THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR BY THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE IF, IN EITHER SUCH CASE, SUCH PERSON (i) DISCLOSES TO POTENTIAL PURCHASERS
AT THE SALE THAT TRANSFER OF THE SECURITIES IS RESTRICTED UNDER THIS RULE, (ii)
DELIVERS TO EACH PURCHASER A COPY OF THIS RULE, AND (iii) ADVISES THE
COMMISSIONER OF THE NAME OF EACH PURCHASER;
(16) BY A TRUSTEE TO A SUCCESSOR TRUSTEE WHEN SUCH
TRANSFER DOES NOT INVOLVE A CHANGE IN THE BENEFICIAL OWNERSHIP OF THE
SECURITIES;
(17) BY WAY OF AN OFFER AND SALE OF OUTSTANDING SECURITIES
IN AN ISSUER TRANSACTION THAT IS SUBJECT TO THE QUALIFICATION REQUIREMENT OF
SECTION 25110 OF THE CODE BUT EXEMPT FROM THAT QUALIFICATION REQUIREMENT BY
SUBDIVISION (f) OF SECTION 25102; PROVIDED THAT ANY SUCH TRANSFER IS ON THE
CONDITION THAT ANY CERTIFICATE EVIDENCING THE SECURITY ISSUED TO SUCH TRANSFEREE
SHALL CONTAIN THE LEGEND REQUIRED BY THIS SECTION.
(c) THE CERTIFICATES REPRESENTING ALL SUCH SECURITIES SUBJECT TO
SUCH A RESTRICTION ON TRANSFER, WHETHER UPON INITIAL ISSUANCE OR UPON ANY
TRANSFER THEREOF, SHALL BEAR ON THEIR FACE A LEGEND, PROMINENTLY STAMPED OR
PRINTED THEREON IN CAPITAL LETTERS OF NOT LESS THAN 10-POINT SIZE, READING AS
FOLLOWS:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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PROMISSORY NOTE
$278,164.72
April 30, 1999
FOR VALUE RECEIVED, Walter Alessandrini promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of TWO HUNDRED
SEVENTY-EIGHT THOUSAND ONE HUNDRED SIXTY-FOUR DOLLARS AND SEVENTY-TWO CENTS,
together with interest on the unpaid principal hereof from the date hereof at
the rate of 4.99% per annum, compounded semiannually.
Principal and interest shall be due and payable on April 30, 2003.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Restricted Stock Purchase
Agreement, dated as of April 30, 1999. This Note is secured in part by a pledge
of the Company's Common Stock under the terms of a Security Agreement of even
date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ WALTER ALESSANDRINI
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Walter Alessandrini
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SECURITY AGREEMENT
This Security Agreement is made as of April 30, 1999 between Avanex
Corporation ("Pledgee") and Walter Alessandrini ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Restricted
Stock Purchase Agreement dated April 30, 1999 (the "Agreement"), between Pledgor
and Pledgee under Pledgee's 1998 Stock Plan, and the Pledgor's election under
the terms of the Agreement to pay for such shares with his promissory note (the
"Note"), Pledgor has purchased 3,477,059 shares of Pledgee's Common Stock (the
"Shares") at a price of $0.08 per share, for a total purchase price of
$278,164.72.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Agreement, Pledgor, pursuant to
the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number 13
duly endorsed in blank or with executed stock powers, and herewith delivers said
certificate to Wilson Sonsini Goodrich & Rosati, Professional Corporation
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and extensions or renewals thereof,
to be executed by Pledgor pursuant to the terms of the Agreement, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations
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("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
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8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By: /s/ WALTER ALESSANDRINI
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Walter Alessandrini
Address: 129 BEAVER DAM RD.
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COLUMBIA SC 29223
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"PLEDGEE" Avanex Corporation
By: /s/ JESSY CHAO
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Jessy Chao
Title: Chief Financial Officer
"PLEDGEHOLDER" Wilson Sonsini Goodrich & Rosati
Professional Corporation
/s/ JUDITH M. O'BRIEN
--------------------------------------------
Judith M. O'Brien
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EXHIBIT A-3
CONSENT OF SPOUSE
I, Anna Alessandrini, spouse of Walter Alessandrini, have read and approve
the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: April 30, 1999 Signature: /s/ ANNA ALESSANDRINI
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EXHIBIT 10.8.1
AVANEX CORPORATION
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 22, 1999, by and between Avanex
Corporation, a California corporation (the "COMPANY"), and Paul Shi-Qi Jiang
(the "PURCHASER").
The parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 300,000 shares of the
Company's Common Stock, no par value (the "SHARES") at a price of $0.04 per
share for an aggregate purchase price of $12,000.00.
2. Payment of Purchase Price. The payment of the purchase price shall be
by $300.00 in cash or check, and the balance by delivery of a promissory note in
the form attached hereto as EXHIBIT C, secured by the shares so purchased
pursuant to a Pledge Agreement in the form attached hereto as EXHIBIT D.
3. Repurchase Option. In the event of any voluntary or involuntary
termination of the Purchaser's employment by, or services to, the Company for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below in Section 4),
the Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option, but not the
obligation, for a period of 90 days from such date to repurchase all or any
portion of the Unreleased Shares (as defined below in Section 4) at such time at
the original purchase price per share (the "REPURCHASE PRICE"). The Repurchase
Option shall be exercisable by the Company by written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Agent, as defined below in
Section 6) and shall be exercisable, at the Company's option, (i) by delivery to
the Purchaser or the Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Purchaser's indebtedness, if
any, to the Company equal to the purchase price for the Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals the Repurchase Price times the
number of shares to be repurchased (the "AGGREGATE REPURCHASE PRICE"). Upon
delivery of such notice and the payment of the Aggregate Repurchase Price in any
of the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company. The
Repurchase Option set forth in this Section may be assigned by the Company in
whole or in part in its sole and unfettered discretion.
4. Release of Shares From Repurchase Option.
(a) The Shares shall vest to Purchaser and be released from the
Company's repurchase option as follows: Provided that Purchaser maintains a
continuous status as a Service Provider of the Company, 25% of the Shares shall
be released from the Company's Repurchase Option on the one year anniversary of
the Vesting Commencement Date and an additional 1/48th of the Shares
<PAGE> 2
shall be released from the Company's Repurchase Option on the last day of each
full calendar month thereafter. Notwithstanding the foregoing, upon any Change
of Control (as herein defined) that number of Unreleased Shares, if any, which,
when aggregated with any Shares previously released from the Repurchase Option,
are required to equal fifty percent (50%) of the Shares shall be released from
the Repurchase Option on the date the event constituting a Change of Control is
consummated. The balance of the Shares subject to the Repurchase Option shall
continue to be released from the Repurchase Option on the same schedule as
existed prior to the Change of Control. For example, if a Change of Control
occurs on a date where 25% of Purchaser's Shares have been released from the
Company's Purchase Option, then an additional 25% of the Shares shall be
released from the Purchase Option pursuant hereto. If a Change of Control occurs
on a date where more than 50% of Purchaser's Shares have already been released
from the Company's Purchase Option, then no additional Shares shall be released
from the Purchase Option.
(b) "Change of Control" shall mean any of the following: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company, (ii) a merger or consolidation of the
Company with any other corporation which results in the voting securities of the
Company outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or its parent) less than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity (or
its parent) outstanding immediately after such merger or consolidation, or (iii)
the approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(c) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(d) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's request
(see Section 3).
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Repurchase Option upon the date of such termination.
For the purposes of this Section 4(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the Purchaser has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and
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such inability, at least 26 weeks after its commencement, is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Purchaser or the Purchaser's legal representative (such
agreement as to acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the relocation of the Purchaser to a facility or a location more than 50
miles from the Purchaser's then present location, without the Purchaser's
express written consent; (vi) any purported termination of the Purchaser by the
Company which is not effected for death or Disability or for Cause, or any
purported termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 4(f) below.
(f) Successors.
(i) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Section 4 and agree expressly to
perform the obligations under this Section 4 in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Section 4, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
4(f)(i) or which becomes bound by the terms of this Agreement by operation of
law.
(ii) Purchaser's Successors. The terms of this Section 4 and all
rights of the Purchaser hereunder shall inure to the benefit of, and be
enforceable by, the Purchaser's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
5. Restriction on Transfer.
(a) Except for the escrow described below in Section 6, none of
the Shares or any beneficial interest therein shall be transferred, encumbered
or otherwise disposed of in any manner until the release of such Shares from the
Repurchase Option in accordance with the provisions of this Agreement.
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<PAGE> 4
(b) Before any Shares may be sold or transferred (including
transfer by operation of law), such Shares shall first be offered to the Company
(the "RIGHT OF FIRST REFUSAL").
(i) Notice. In the event the Purchaser wishes to sell the
Shares, Purchaser shall deliver a notice ("Notice") to the Company stating (A)
his bona fide intention to sell or transfer such Shares, (B) the number of such
Shares to be sold or transferred, (C) the price for which he proposes to sell or
transfer such Shares, and (D) the name of the proposed purchaser or transferee.
(ii) Election to Purchase. Within thirty (30) days after
receipt of the Notice, the Company or its assignee may elect to purchase all or
none of the Shares to which the Notice refers, at the price per share specified
in the Notice. The purchase of the Shares in either such event shall occur at a
closing held at the Company's principal office at a mutually agreed upon time
which in no event shall be more than thirty (30) days following the end of the
time period in which the Company had to elect to purchase such Shares.
(iii) Sale of Shares by Purchaser. If all of the Shares to
which the Notice refers are not elected to be purchased, as provided in this
Section 5(b), Purchaser may sell the Shares to any person named in the Notice at
the price specified in the Notice or at a higher price, provided that such sale
or transfer is consummated within sixty (60) days of the date of said Notice to
the Company, and provided, further, that any such sale is in accordance with all
the terms and conditions hereof.
(iv) Termination of Restrictions. Notwithstanding the
provisions of Section 5(a) above, the Company's Right of First Refusal shall
terminate immediately as to all Shares upon the occurrence of the first to occur
of the following events:
(A) the acquisition of the Company by another entity by
means of the merger or consolidation of the Company with or into another
corporation in which the stock-holders of the Company immediately prior to such
merger or consolidation own less than 50% of the voting securities of the
surviving entity,
(B) the sale of all or substantially all of the assets
of the Company, or
(C) the date upon which a public market exists for the
Company's capital stock (or any other stock issued to purchasers in exchange for
the Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (1) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934), or (2) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
(v) Assignment. Whenever the Company shall have the right to
purchase Shares under this Section 5, the Company may designate and assign one
or more employees, officers, directors or shareholders of the Company or other
persons or organizations to exercise all of the Company's purchase rights under
this Agreement and purchase all of such Shares; provided that if the fair market
value of the Shares to be purchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the purchase price of the Shares
(determined as described hereinabove) to be purchased, then each such designee
or assignee shall pay the Company cash equal to the difference
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between the Repurchase FMV and the purchase price of the Shares which such
designee or assignee shall have the right to purchase.
(vi) Exempt Transfers. The provisions of this Section 5
shall not apply to a transfer of any Shares by Purchaser, either during his
lifetime or on death by will or intestacy to his ancestors, descendants or
spouse, or any custodian or trustee for the account of Purchaser or Purchaser's
ancestors, descendants or spouse; provided, in each such case that the
transferee shall receive and hold such Shares subject to all of the provisions
of this Section 5 and there shall be no further transfer of such Shares except
in accordance herewith.
6. Escrow of Shares. Pursuant to the terms of the Joint Escrow
Instructions attached hereto as EXHIBIT B, the Shares issued under this
Agreement shall be held by the Escrow Agent (as defined in such Joint Escrow
Instructions) along with a stock assignment executed by the Purchaser in blank
in the form attached hereto as EXHIBIT A.
7. Investment Representations. In connection with the purchase of the
Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. The
Purchaser is purchasing the Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(b) The Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "COMMISSION"), the statutory basis for such exemption may not be
present if the Purchaser's representations meant that the Purchaser's present
intention was to hold the Shares for a minimum capital gains period under
applicable tax statutes, for a deferred sale, for a market rise, for a sale if
the market does not rise, or for a year or any other fixed period in the future.
(c) The Purchaser further acknowledges and understands that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.
8. Stock Certificate Legends. The share certificate evidencing the
Shares issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
-5-
<PAGE> 6
UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
requested by the managing underwriters or the Company in connection with the
initial public offering of the Company's Common Stock, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of, assign any legal or beneficial interest in or make a
distribution of any capital stock of the Company held by or on behalf of the
Purchaser or beneficially owned by the Purchaser in accordance with the rules
and regulations of the Securities and Exchange Commission for a period of up to
180 days after the date of the final prospectus relating to the Company's
initial public offering.
10. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split or stock dividend or
other similar change in the Shares which may be made by the Company after the
date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary income both (i)
the difference between the fair market value of the Shares when the Company
granted the Purchaser the right to purchase the Shares and the fair market value
of the Shares on the date of this Agreement, and (ii) the difference between the
amount paid for the Shares and the fair market value of the Shares as of the
date any restrictions on the Shares lapse. In this context, "restriction"
includes the right of the Company to buy back the Shares pursuant to its
repurchase option. In the event the Company has registered under the Exchange
Act, "restriction" with respect to officers, directors and 10% shareholders also
means the period after the purchase of the Shares during which such officers,
directors and 10% shareholders could be subject to suit under Section 16(b) of
the Exchange Act. The Purchaser understands that the Purchaser may elect to be
taxed at the time the Shares are purchased rather than when and as the Company's
repurchase option or 16(b) period expires by filing an election under Section
83(b) of the Code with the I.R.S. within 30 days from the date of purchase.
-6-
<PAGE> 7
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
13. General Provisions.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company and any purported transfer otherwise shall be null and
void.
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN "AT WILL" EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE
-7-
<PAGE> 8
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE REPURCHASE OPTION SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT AT ANY
TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
PURCHASER: AVANEX CORPORATION
/s/ SIMON XIAOFAN CAO
---------------------------
/s/ PAUL SHI-QI JIANG
- -------------------------
Address: Address:
1848 Montage Ct. 42501 Albrae Avenue
San Jose, CA 95131 Fremont, California 94538
<PAGE> 10
CONSENT OF SPOUSE
I, MARY P.L. JIANG, spouse of PAUL S.Q. JIANG, have read and approve
the foregoing Agreement. In consideration of granting of the right to my spouse
to purchase shares of Avanex Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws of the State of
California or similar laws relating to marital property in effect in the state
of our residence as of the date of the signing of the foregoing Agreement.
Dated: 1-22-99
/s/ MARY P.L. JIANG
------------------------------------
<PAGE> 11
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, PAUL S. Q. JIANG, hereby sell, assign and
transfer unto THREE HUNDRED THOUSAND ( 300,000 ) shares of the Common Stock of
Avanex Corporation standing in my name on the books of said corporation
represented by Certificate No. 3 and Certificate Number _____ herewith and do
hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
attorney, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between Avanex Corporation and the undersigned dated July 22,
1999.
Dated: 7-22-99
/s/ PAUL SHI-QI JIANG
----------------------------------------
Paul Shi-Qi Jiang
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 12
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
7-22-99
--------------------
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
Ladies and Gentlemen:
As escrow agent (the "Escrow Agent") for both Avanex Corporation, a
California corporation (the "Company"), and the undersigned purchaser of stock
of the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Stock
Purchase Agreement ("Agreement") between the Company and the undersigned (the
"Escrow"), in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
Repurchase Option (as defined in the Agreement), the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness or some combination thereof) for the
number of shares of stock being purchased pursuant to the exercise of the
Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this Escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
<PAGE> 13
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of the Agreement and of this Escrow
Agreement, Purchaser shall exercise all rights and privileges of a shareholder
of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by the
Company, or any parent or subsidiary of the Company, you will deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's repurchase option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE> 14
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: AVANEX CORPORATION
PURCHASER: Paul Shi-Qi Jiang
1694 Willow Lake Lane, Bldg. 5
San Jose, CA 95131
ESCROW AGENT: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
-3-
<PAGE> 15
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
/s/ SIMON CAO
------------------------------------
PURCHASER:
/s/ PAUL SHI-QI JIANG
------------------------------------
Paul Shi-Qi Jiang
ESCROW AGENT:
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By: /S/ JUDITH M. O'BRIEN
-----------------------------
Judith M. O'Brien
-4-
<PAGE> 16
PROMISSORY NOTE
$ 11,700.00
July 22, 1999
FOR VALUE RECEIVED, Paul Shi-Qi Jiang promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of ELEVEN THOUSAND
SEVEN HUNDRED dollars, together with interest on the unpaid principal hereof
from the date hereof at the rate of 5.69% per annum, compounded semiannually.
Principal and interest shall be due and payable on July 22, 2003. Should
the undersigned fail to make full payment of principal or interest for a period
of 10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement, dated
as of July 22, 1999. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ PAUL SHI-QI JIANG
-----------------------------------
Paul Shi-Qi Jiang
<PAGE> 17
AVANEX CORPORATION
42501 Albrae Avenue
Fremont, CA 94538
AGREEMENT TO FORGIVE REPAYMENT OF PROMISSORY NOTE
July 22, 1999
WHEREAS, Paul Shi-Qi Jiang ("Borrower") has executed a promissory note dated
July 22, 1999 (the "Note") in the amount of $11,700.00 (the "Principal") payable
to Avanex Corporation (the "Company"); and
WHEREAS, subject to Borrower's continued employment with the Company, the
Company wishes to forgive repayment of part or all of the Principal and interest
due on the Note.
NOW, THEREFORE, THE COMPANY AND BORROWER AGREE AS FOLLOWS:
On each one-year anniversary of the date set forth above that Borrower
is still an employee of the Company, 25% of the Principal and all interest
accrued under the Note through such date shall be forgiven by the Company and no
longer owed and payable by Borrower.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
BORROWER: AVANEX CORPORATION
/s/ PAUL SHI-QI JIANG /s/ SIMON CAO
- ---------------------------------- ------------------------------------
Paul Shi-Qi Jiang Simon Cao, President
<PAGE> 18
SECURITY AGREEMENT
This Security Agreement is made as of July 22, 1999 between Avanex
Corporation a ("Pledgee"), and Paul Shi-Qi Jiang ("Pledgor").
Recitals
1. Pledgor has incurred payment obligations (the "Payment Obligations")
to Pledgee set forth in a Promissory Note of even date herewith.
A. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common Stock of the Pledgee, all options, and similar rights
to acquire such capital stock or interests, and all rights to receive profits or
surplus or other dividends or distributions from the Pledgee to its
shareholders, in each case whether now owned or existing or hereafter acquired
or arising, wherever located, together with all substitutions, replacements,
(the "Shares") to secure performance by Pledgor of the Payment Obligations, all
as more specifically set forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement), Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number ___, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE> 19
c. Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees
to cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall
-2-
<PAGE> 20
be that number of full Shares which bears the same proportion to the initial
number of Shares pledged hereunder as the payment of principal bears to the
initial full principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
-3-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By: /s/ PAUL SHI-QI JIANG
-------------------------------------
Paul Shi-Qi Jiang
Address: 1848 Montage Ct.
--------------------------------
San Jose CA 95131
--------------------------------
"PLEDGEE" Avanex Corporation
By: /s/ SIMON X. CAO
-------------------------------------
Simon X. Cao, President
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
----------------------------------------
Stock Option Administrator of
Avanex Corporation
-4-
<PAGE> 1
EXHIBIT 10.8.2
AVANEX CORPORATION
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 4, 1999, by and between Avanex
Corporation, a California corporation (the "COMPANY"), and Simon Xiaofan Cao
(the "PURCHASER").
The parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 600,000 shares of the
Company's Common Stock, no par value (the "SHARES") at a price of $0.15 per
share for an aggregate purchase price of $90,000.00.
2. Payment of Purchase Price. The payment of the purchase price shall be
by by delivery of a promissory note in the form attached hereto as EXHIBIT C,
secured by the shares so purchased pursuant to a Pledge Agreement in the form
attached hereto as EXHIBIT D.
3. Repurchase Option. In the event of any voluntary or involuntary
termination of the Purchaser's employment by, or services to, the Company for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below in Section 4),
the Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option, but not the
obligation, for a period of 90 days from such date to repurchase all or any
portion of the Unreleased Shares (as defined below in Section 4) at such time at
the original purchase price per share (the "REPURCHASE PRICE"). The Repurchase
Option shall be exercisable by the Company by written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Agent, as defined below in
Section 6) and shall be exercisable, at the Company's option, (i) by delivery to
the Purchaser or the Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Purchaser's indebtedness, if
any, to the Company equal to the purchase price for the Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals the Repurchase Price times the
number of shares to be repurchased (the "AGGREGATE REPURCHASE PRICE"). Upon
delivery of such notice and the payment of the Aggregate Repurchase Price in any
of the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company. The
Repurchase Option set forth in this Section may be assigned by the Company in
whole or in part in its sole and unfettered discretion.
4. Release of Shares From Repurchase Option.
(a) The Shares shall vest to Purchaser and be released from the
Company's repurchase option as follows: Provided that Purchaser maintains a
continuous status as a Service Provider of the Company, 25% of the Shares shall
be released from the Company's Repurchase
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Option on the one year anniversary of the Vesting Commencement Date and an
additional 1/48th of the Shares shall be released from the Company's Repurchase
Option on the last day of each full calendar month thereafter. Notwithstanding
the foregoing, upon any Change of Control (as herein defined) that number of
Unreleased Shares, if any, which, when aggregated with any Shares previously
released from the Repurchase Option, are required to equal fifty percent (50%)
of the Shares shall be released from the Repurchase Option on the date the event
constituting a Change of Control is consummated. The balance of the Shares
subject to the Repurchase Option shall continue to be released from the
Repurchase Option on the same schedule as existed prior to the Change of
Control. For example, if a Change of Control occurs on a date where 25% of
Purchaser's Shares have been released from the Company's Purchase Option, then
an additional 25% of the Shares shall be released from the Purchase Option
pursuant hereto. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
(b) "Change of Control" shall mean any of the following: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company, (ii) a merger or consolidation of the
Company with any other corporation which results in the voting securities of the
Company outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or its parent) less than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity (or
its parent) outstanding immediately after such merger or consolidation, or (iii)
the approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(c) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(d) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's request
(see Section 3).
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Repurchase Option upon the date of such termination.
For the purposes of this Section 4(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
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(ii) Disability. "Disability" shall mean that the
Purchaser has been unable to substantially perform his duties as the result of
his incapacity due to physical or mental illness, and such inability, at least
26 weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the relocation of the Purchaser to a facility or a location more than 50
miles from the Purchaser's then present location, without the Purchaser's
express written consent; (vi) any purported termination of the Purchaser by the
Company which is not effected for death or Disability or for Cause, or any
purported termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 4(f) below.
(f) Successors.
(i) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Section 4 and agree
expressly to perform the obligations under this Section 4 in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Section 4, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
4(f)(i) or which becomes bound by the terms of this Agreement by operation of
law.
(ii) Purchaser's Successors. The terms of this Section 4
and all rights of the Purchaser hereunder shall inure to the benefit of, and be
enforceable by, the Purchaser's personal
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or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
5. Restriction on Transfer.
(a) Except for the escrow described below in Section 6, none of
the Shares or any beneficial interest therein shall be transferred, encumbered
or otherwise disposed of in any manner until the release of such Shares from the
Repurchase Option in accordance with the provisions of this Agreement.
(b) Before any Shares may be sold or transferred (including
transfer by operation of law), such Shares shall first be offered to the Company
(the "RIGHT OF FIRST Refusal").
(i) Notice. In the event the Purchaser wishes to sell the
Shares, Purchaser shall deliver a notice ("Notice") to the Company stating (A)
his bona fide intention to sell or transfer such Shares, (B) the number of such
Shares to be sold or transferred, (C) the price for which he proposes to sell or
transfer such Shares, and (D) the name of the proposed purchaser or transferee.
(ii) Election to Purchase. Within thirty (30) days after
receipt of the Notice, the Company or its assignee may elect to purchase all or
none of the Shares to which the Notice refers, at the price per share specified
in the Notice. The purchase of the Shares in either such event shall occur at a
closing held at the Company's principal office at a mutually agreed upon time
which in no event shall be more than thirty (30) days following the end of the
time period in which the Company had to elect to purchase such Shares.
(iii) Sale of Shares by Purchaser. If all of the Shares to
which the Notice refers are not elected to be purchased, as provided in this
Section 5(b), Purchaser may sell the Shares to any person named in the Notice at
the price specified in the Notice or at a higher price, provided that such sale
or transfer is consummated within sixty (60) days of the date of said Notice to
the Company, and provided, further, that any such sale is in accordance with all
the terms and conditions hereof.
(iv) Termination of Restrictions. Notwithstanding the
provisions of Section 5(a) above, the Company's Right of First Refusal shall
terminate immediately as to all Shares upon the occurrence of the first to occur
of the following events:
(A) the acquisition of the Company by another entity
by means of the merger or consolidation of the Company with or into another
corporation in which the stock-holders of the Company immediately prior to such
merger or consolidation own less than 50% of the voting securities of the
surviving entity,
(B) the sale of all or substantially all of the
assets of the Company, or
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<PAGE> 5
(C) the date upon which a public market exists for
the Company's capital stock (or any other stock issued to purchasers in exchange
for the Shares purchased under this Agreement). For the purpose of this
Agreement, a "Public Market" shall be deemed to exist if (1) such stock is
listed on a national securities exchange (as that term is used in the Securities
Exchange Act of 1934), or (2) such stock is traded on the over-the-counter
market and prices are published daily on business days in a recognized financial
journal.
(v) Assignment. Whenever the Company shall have the right
to purchase Shares under this Section 5, the Company may designate and assign
one or more employees, officers, directors or shareholders of the Company or
other persons or organizations to exercise all of the Company's purchase rights
under this Agreement and purchase all of such Shares; provided that if the fair
market value of the Shares to be purchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the purchase price of the Shares
(determined as described hereinabove) to be purchased, then each such designee
or assignee shall pay the Company cash equal to the difference between the
Repurchase FMV and the purchase price of the Shares which such designee or
assignee shall have the right to purchase.
(vi) Exempt Transfers. The provisions of this Section 5
shall not apply to a transfer of any Shares by Purchaser, either during his
lifetime or on death by will or intestacy to his ancestors, descendants or
spouse, or any custodian or trustee for the account of Purchaser or Purchaser's
ancestors, descendants or spouse; provided, in each such case that the
transferee shall receive and hold such Shares subject to all of the provisions
of this Section 5 and there shall be no further transfer of such Shares except
in accordance herewith.
6. Escrow of Shares. Pursuant to the terms of the Joint Escrow
Instructions attached hereto as EXHIBIT B, the Shares issued under this
Agreement shall be held by the Escrow Agent (as defined in such Joint Escrow
Instructions) along with a stock assignment executed by the Purchaser in blank
in the form attached hereto as EXHIBIT A.
7. Investment Representations. In connection with the purchase of the
Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. The
Purchaser is purchasing the Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(b) The Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "COMMISSION"), the statutory basis for such exemption may not be
present if the Purchaser's representations meant that the Purchaser's present
intention was to hold the Shares for a minimum
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<PAGE> 6
capital gains period under applicable tax statutes, for a deferred sale, for a
market rise, for a sale if the market does not rise, or for a year or any other
fixed period in the future.
(c) The Purchaser further acknowledges and understands that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.
8. Stock Certificate Legends. The share certificate evidencing the
Shares issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
requested by the managing underwriters or the Company in connection with the
initial public offering of the Company's Common Stock, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of, assign any legal or beneficial interest in or make a
distribution of any capital stock of the Company held by or on behalf of the
Purchaser or beneficially owned by the Purchaser in accordance with the rules
and regulations of the Securities and Exchange Commission for a period of up to
180 days after the date of the final prospectus relating to the Company's
initial public offering.
10. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split or stock dividend or
other similar change in the Shares which may be made by the Company after the
date of this Agreement.
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11. Tax Consequences. The Purchaser has reviewed with the Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary income both (i)
the difference between the fair market value of the Shares when the Company
granted the Purchaser the right to purchase the Shares and the fair market value
of the Shares on the date of this Agreement, and (ii) the difference between the
amount paid for the Shares and the fair market value of the Shares as of the
date any restrictions on the Shares lapse. In this context, "restriction"
includes the right of the Company to buy back the Shares pursuant to its
repurchase option. In the event the Company has registered under the Exchange
Act, "restriction" with respect to officers, directors and 10% shareholders also
means the period after the purchase of the Shares during which such officers,
directors and 10% shareholders could be subject to suit under Section 16(b) of
the Exchange Act. The Purchaser understands that the Purchaser may elect to be
taxed at the time the Shares are purchased rather than when and as the Company's
repurchase option or 16(b) period expires by filing an election under Section
83(b) of the Code with the I.R.S. within 30 days from the date of purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
13. General Provisions.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage
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prepaid, and addressed to the parties at the addresses of the parties set forth
at the end of this Agreement or such other address as a party may request by
notifying the other in writing.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company and any purported transfer otherwise shall be null and
void.
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN "AT WILL" EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
REPURCHASE OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY
PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
PURCHASER: AVANEX CORPORATION
/s/ SIMON XIAOFAN CAO /s/ SIMON XIAOFAN CAO
- ------------------------------- -------------------------------
Simon Xiaofan Cao
Address: Address:
4571 Meyer Park Cir 42501 Albrae Avenue
Fremont, CA 94538 Fremont, California 94538
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CONSENT OF SPOUSE
I, ________________________, spouse of ___________________________, have
read and approve the foregoing Agreement. In consideration of granting of the
right to my spouse to purchase shares of Avanex Corporation as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws of the
State of California or similar laws relating to marital property in effect in
the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated:
-------------------------------
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<PAGE> 11
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, SIMON XIAOFAN CAO, hereby sell, assign and
transfer unto SIX HUNDRED THOUSAND (600,000) shares of the Common Stock of
Avanex Corporation standing in my name on the books of said corporation
represented by Certificate No. 3 and Certificate Number _____ herewith and do
hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
attorney, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between Avanex Corporation and the undersigned dated August
4, 1999.
Dated: AUG 30, 99 /s/ SIMON XIAOFAN CAO
-------------------------------
Simon Xiaofan Cao
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 12
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
August 4, 1999
--------------------
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
Ladies and Gentlemen:
As escrow agent (the "Escrow Agent") for both Avanex Corporation, a
California corporation (the "Company"), and the undersigned purchaser of stock
of the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Stock
Purchase Agreement ("Agreement") between the Company and the undersigned (the
"Escrow"), in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
Repurchase Option (as defined in the Agreement), the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness or some combination thereof) for the
number of shares of stock being purchased pursuant to the exercise of the
Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this Escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete
<PAGE> 13
any transaction herein contemplated, including but not limited to the filing
with any applicable state blue sky authority of any required applications for
consent to, or notice of transfer of, the securities. Subject to the provisions
of the Agreement and of this Escrow Agreement, Purchaser shall exercise all
rights and privileges of a shareholder of the Company while the stock is held by
you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by the
Company, or any parent or subsidiary of the Company, you will deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's repurchase option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
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11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: AVANEX CORPORATION
PURCHASER: Simon Xiaofan Cao
ESCROW AGENT: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
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<PAGE> 15
Very truly yours,
AVANEX CORPORATION
/s/ SIMON XIAOFAN CAO
-------------------------------
PURCHASER:
/s/ SIMON XIAOFAN CAO
-------------------------------
Simon Xiaofan Cao
ESCROW AGENT:
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By: /s/ JUDITH M. O'BRIEN
-------------------------------
Judith M. O'Brien
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<PAGE> 16
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: Simon Xiaofan Cao SPOUSE:
ADDRESS:
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows: _______________ shares (the "Shares") of the Common Stock of
Avanex Corporation (the "Company").
3. The date on which the property was transferred is: __________, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares
over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is approximately: $0.15 per share.
6. The amount (if any) paid for such property is: $
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
------------------------------- -------------------------------
Simon Xiaofan Cao
The undersigned spouse of taxpayer joins in this election.
Dated:
------------------------------- -------------------------------
Spouse of Taxpayer
<PAGE> 17
PROMISSORY NOTE
$90,000.00
AUGUST 4, 1999
FOR VALUE RECEIVED, Simon Xiaofan Cao promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of NINETY THOUSAND
dollars, together with interest on the unpaid principal hereof from the date
hereof at the rate of 5.96% per annum, compounded semiannually.
Principal and interest shall be due and payable on August 4, 2003.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement, dated
as of August 4, 1999. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/S/ SIMON XIAOFAN CAO
-------------------------------
SIMON XIAOFAN CAO
-------------------------------
<PAGE> 18
AVANEX CORPORATION
42501 Albrae Avenue
Fremont, CA 94538
AGREEMENT TO FORGIVE REPAYMENT OF PROMISSORY NOTE
August 4, 1999
WHEREAS, Simon Xiaofan Cao ("Borrower") has executed a promissory note dated
August 4, 1999 (the "Note") in the amount of $90,000.00 (the "Principal")
payable to Avanex Corporation (the "Company"); and
WHEREAS, subject to Borrower's continued employment with the Company, the
Company wishes to forgive repayment of part or all of the Principal and interest
due on the Note.
NOW, THEREFORE, THE COMPANY AND BORROWER AGREE AS FOLLOWS:
On each one-year anniversary of the date set forth above that Borrower
is still an employee of the Company, 25% of the Principal and all interest
accrued under the Note through such date shall be forgiven by the Company and no
longer owed and payable by Borrower.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
BORROWER: AVANEX CORPORATION
/s/ Simon Xiaofan Cao /s/ Simon Xiaofan Cao
- ------------------------------- -------------------------------
Simon Xiaofan Cao Simon Cao, President
<PAGE> 19
SECURITY AGREEMENT
This Security Agreement is made as of August 4, 1999 between Avanex
Corporation a ("Pledgee"), and Simon Xiaofan Cao ("Pledgor").
Recitals
A. Pledgor has incurred payment obligations (the "Payment Obligations")
to Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common Stock of the Pledgee, all options, and similar rights
to acquire such capital stock or interests, and all rights to receive profits or
surplus or other dividends or distributions from the Pledgee to its
shareholders, in each case whether now owned or existing or hereafter acquired
or arising, wherever located, together with all substitutions, replacements,
(the "Shares") to secure performance by Pledgor of the Payment Obligations, all
as more specifically set forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement), Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number ___, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations
<PAGE> 20
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
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<PAGE> 21
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By: /s/ Simon Xiaofan Cao
-------------------------------------
Simon Xiaofan Cao
Address: 4571 MEYER PARK CIR
-------------------------------
FREMONT, CA 94538
-------------------------------
"PLEDGEE" Avanex Corporation
By: /s/ Simon Xiaofan Cao
-------------------------------------
Simon X. Cao, President
"PLEDGEHOLDER" /s/ Judith M. O'Brien
----------------------------------------
Stock Option Administrator of
Avanex Corporation
-4-
<PAGE> 1
EXHIBIT 10.8.3
AVANEX CORPORATION
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 4, 1999, by and between Avanex
Corporation, a California corporation (the "COMPANY"), and Peter Maguire (the
"PURCHASER").
The parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 550,000 shares of the
Company's Common Stock, no par value (the "SHARES") at a price of $0.15 per
share for an aggregate purchase price of $82,500.00.
2. Payment of Purchase Price. The payment of the purchase price shall be by
by delivery of a promissory note in the form attached hereto as EXHIBIT C,
secured by the shares so purchased pursuant to a Pledge Agreement in the form
attached hereto as EXHIBIT D.
3. Repurchase Option. In the event of any voluntary or involuntary
termination of the Purchaser's employment by, or services to, the Company for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below in Section 4),
the Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option, but not the
obligation, for a period of 90 days from such date to repurchase all or any
portion of the Unreleased Shares (as defined below in Section 4) at such time at
the original purchase price per share (the "REPURCHASE PRICE"). The Repurchase
Option shall be exercisable by the Company by written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Agent, as defined below in
Section 6) and shall be exercisable, at the Company's option, (i) by delivery to
the Purchaser or the Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Purchaser's indebtedness, if
any, to the Company equal to the purchase price for the Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals the Repurchase Price times the
number of shares to be repurchased (the "AGGREGATE REPURCHASE PRICE"). Upon
delivery of such notice and the payment of the Aggregate Repurchase Price in any
of the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company. The
Repurchase Option set forth in this Section may be assigned by the Company in
whole or in part in its sole and unfettered discretion.
4. Release of Shares From Repurchase Option.
(a) The Shares shall vest to Purchaser and be released from the
Company's repurchase option as follows: Provided that Purchaser maintains a
continuous status as a Service Provider of the Company, 25% of the Shares shall
be released from the Company's Repurchase Option on the one year anniversary of
the Vesting Commencement Date and an additional 1/48th of the Shares shall be
released from the Company's Repurchase Option on the last day of each full
<PAGE> 2
calendar month thereafter. Notwithstanding the foregoing, upon any Change of
Control (as herein defined) that number of Unreleased Shares, if any, which,
when aggregated with any Shares previously released from the Repurchase Option,
are required to equal fifty percent (50%) of the Shares shall be released from
the Repurchase Option on the date the event constituting a Change of Control is
consummated. The balance of the Shares subject to the Repurchase Option shall
continue to be released from the Repurchase Option on the same schedule as
existed prior to the Change of Control. For example, if a Change of Control
occurs on a date where 25% of Purchaser's Shares have been released from the
Company's Purchase Option, then an additional 25% of the Shares shall be
released from the Purchase Option pursuant hereto. If a Change of Control occurs
on a date where more than 50% of Purchaser's Shares have already been released
from the Company's Purchase Option, then no additional Shares shall be released
from the Purchase Option.
(b) "Change of Control" shall mean any of the following: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company, (ii) a merger or consolidation of the
Company with any other corporation which results in the voting securities of the
Company outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or its parent) less than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity (or
its parent) outstanding immediately after such merger or consolidation, or (iii)
the approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(c) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(d) The Shares which have been released from the Company's Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 3).
(e) Acceleration Upon Termination of Employment. In addition to the
Shares released from the Company's Repurchase Option pursuant to Section 4(d)
above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Repurchase Option upon the date of such termination.
For the purposes of this Section 4(e), the following terms referred to in
this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal dishonesty
taken by the Purchaser in connection with his responsibilities as an employee
and intended to result in substantial personal enrichment of the Purchaser, (ii)
conviction of a felony that is injurious to the Company, and (iii) a willful act
by the Purchaser which constitutes gross misconduct and which is injurious to
the Company.
(ii) Disability. "Disability" shall mean that the Purchaser has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness,
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<PAGE> 3
and such inability, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Purchaser or the Purchaser's legal representative (such
agreement as to acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the relocation of the Purchaser to a facility or a location more than 50
miles from the Purchaser's then present location, without the Purchaser's
express written consent; (vi) any purported termination of the Purchaser by the
Company which is not effected for death or Disability or for Cause, or any
purported termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 4(f) below.
(f) Successors.
(i) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Section 4 and agree expressly to
perform the obligations under this Section 4 in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Section 4, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
4(f)(i) or which becomes bound by the terms of this Agreement by operation of
law.
(ii) Purchaser's Successors. The terms of this Section 4 and all
rights of the Purchaser hereunder shall inure to the benefit of, and be
enforceable by, the Purchaser's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
-3-
<PAGE> 4
5. Restriction on Transfer.
(a) Except for the escrow described below in Section 6, none of the
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any manner until the release of such Shares from the
Repurchase Option in accordance with the provisions of this Agreement.
(b) Before any Shares may be sold or transferred (including transfer
by operation of law), such Shares shall first be offered to the Company (the
"RIGHT OF FIRST REFUSAL").
(i) Notice. In the event the Purchaser wishes to sell the
Shares, Purchaser shall deliver a notice ("Notice") to the Company stating (A)
his bona fide intention to sell or transfer such Shares, (B) the number of such
Shares to be sold or transferred, (C) the price for which he proposes to sell or
transfer such Shares, and (D) the name of the proposed purchaser or transferee.
(ii) Election to Purchase. Within thirty (30) days after receipt
of the Notice, the Company or its assignee may elect to purchase all or none of
the Shares to which the Notice refers, at the price per share specified in the
Notice. The purchase of the Shares in either such event shall occur at a closing
held at the Company's principal office at a mutually agreed upon time which in
no event shall be more than thirty (30) days following the end of the time
period in which the Company had to elect to purchase such Shares.
(iii) Sale of Shares by Purchaser. If all of the Shares to which
the Notice refers are not elected to be purchased, as provided in this Section
5(b), Purchaser may sell the Shares to any person named in the Notice at the
price specified in the Notice or at a higher price, provided that such sale or
transfer is consummated within sixty (60) days of the date of said Notice to the
Company, and provided, further, that any such sale is in accordance with all the
terms and conditions hereof.
(iv) Termination of Restrictions. Notwithstanding the provisions
of Section 5(a) above, the Company's Right of First Refusal shall terminate
immediately as to all Shares upon the occurrence of the first to occur of the
following events:
(A) the acquisition of the Company by another entity by
means of the merger or consolidation of the Company with or into another
corporation in which the stock-holders of the Company immediately prior to such
merger or consolidation own less than 50% of the voting securities of the
surviving entity,
(B) the sale of all or substantially all of the assets of
the Company, or
(C) the date upon which a public market exists for the
Company's capital stock (or any other stock issued to purchasers in exchange for
the Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (1) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934), or (2) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
-4-
<PAGE> 5
(v) Assignment. Whenever the Company shall have the right to
purchase Shares under this Section 5, the Company may designate and assign one
or more employees, officers, directors or shareholders of the Company or other
persons or organizations to exercise all of the Company's purchase rights under
this Agreement and purchase all of such Shares; provided that if the fair market
value of the Shares to be purchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the purchase price of the Shares
(determined as described hereinabove) to be purchased, then each such designee
or assignee shall pay the Company cash equal to the difference between the
Repurchase FMV and the purchase price of the Shares which such designee or
assignee shall have the right to purchase.
(vi) Exempt Transfers. The provisions of this Section 5 shall not
apply to a transfer of any Shares by Purchaser, either during his lifetime or on
death by will or intestacy to his ancestors, descendants or spouse, or any
custodian or trustee for the account of Purchaser or Purchaser's ancestors,
descendants or spouse; provided, in each such case that the transferee shall
receive and hold such Shares subject to all of the provisions of this Section 5
and there shall be no further transfer of such Shares except in accordance
herewith.
6. Escrow of Shares. Pursuant to the terms of the Joint Escrow Instructions
attached hereto as EXHIBIT B, the Shares issued under this Agreement shall be
held by the Escrow Agent (as defined in such Joint Escrow Instructions) along
with a stock assignment executed by the Purchaser in blank in the form attached
hereto as EXHIBIT A.
7. Investment Representations. In connection with the purchase of the
Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. The
Purchaser is purchasing the Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(b) The Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "COMMISSION"), the statutory basis for such exemption may not be
present if the Purchaser's representations meant that the Purchaser's present
intention was to hold the Shares for a minimum capital gains period under
applicable tax statutes, for a deferred sale, for a market rise, for a sale if
the market does not rise, or for a year or any other fixed period in the future.
(c) The Purchaser further acknowledges and understands that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the
-5-
<PAGE> 6
Shares unless they are registered or such registration is not required in the
opinion of counsel satisfactory to the Company.
8. Stock Certificate Legends. The share certificate evidencing the Shares
issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
requested by the managing underwriters or the Company in connection with the
initial public offering of the Company's Common Stock, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of, assign any legal or beneficial interest in or make a
distribution of any capital stock of the Company held by or on behalf of the
Purchaser or beneficially owned by the Purchaser in accordance with the rules
and regulations of the Securities and Exchange Commission for a period of up to
180 days after the date of the final prospectus relating to the Company's
initial public offering.
10. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split or stock dividend or
other similar change in the Shares which may be made by the Company after the
date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary income both (i)
the difference between the fair market value of the Shares
-6-
<PAGE> 7
when the Company granted the Purchaser the right to purchase the Shares and the
fair market value of the Shares on the date of this Agreement, and (ii) the
difference between the amount paid for the Shares and the fair market value of
the Shares as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its repurchase option. In the event the Company has registered under the
Exchange Act, "restriction" with respect to officers, directors and 10%
shareholders also means the period after the purchase of the Shares during which
such officers, directors and 10% shareholders could be subject to suit under
Section 16(b) of the Exchange Act. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Company's repurchase option or 16(b) period expires by filing an election
under Section 83(b) of the Code with the I.R.S. within 30 days from the date of
purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
12. California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
13. General Provisions.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
(c) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company and any purported transfer otherwise shall be null and void.
-7-
<PAGE> 8
(d) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further documents
or instruments necessary or desirable to carry out the purposes or intent of
this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN "AT WILL" EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
REPURCHASE OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY
PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
PURCHASER: AVANEX CORPORATION
/s/ PETER MAGUIRE /s/ WALTER ALESSANDRINI
- ---------------------- --------------------------
Peter Maguire
Address: Address:
2913 Shadywood Lane 42501 Albrae Avenue
Plano, Texas 75023 Fremont, California 94538
-9-
<PAGE> 10
PAGE>
CONSENT OF SPOUSE
I, Mary Pat Maguire, spouse of Peter R. Maguire, have read and approve the
foregoing Agreement. In consideration of granting of the right to my spouse to
purchase shares of Avanex Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws of the State of
California or similar laws relating to marital property in effect in the state
of our residence as of the date of the signing of the foregoing Agreement.
Dated: 8-4-99
/s/ MARY PAT MAGUIRE
----------------------------------------
<PAGE> 11
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, PETER MAGUIRE, hereby sell, assign and transfer unto
__________________________________________ (550,000) shares of the Common Stock
of Avanex Corporation standing in my name on the books of said corporation
represented by Certificate No. 3 and Certificate Number _____ herewith and do
hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
attorney, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between Avanex Corporation and the undersigned dated August
4, 1999.
Dated: 8-4-99
/s/ PETER MAGUIRE
----------------------------------------
PETER MAGUIRE
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 12
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
August 4, 1999
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
Ladies and Gentlemen:
As escrow agent (the "Escrow Agent") for both Avanex Corporation, a
California corporation (the "Company"), and the undersigned purchaser of stock
of the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Stock
Purchase Agreement ("Agreement") between the Company and the undersigned (the
"Escrow"), in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively for convenience herein as the "Company") exercises the Company's
Repurchase Option (as defined in the Agreement), the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness or some combination thereof) for the
number of shares of stock being purchased pursuant to the exercise of the
Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this Escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state
<PAGE> 13
blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of the Agreement and of
this Escrow Agreement, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by the
Company, or any parent or subsidiary of the Company, you will deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's repurchase option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 14
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: AVANEX CORPORATION
PURCHASER: Peter Macguire
ESCROW AGENT: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
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<PAGE> 15
Very truly yours,
AVANEX CORPORATION
/s/ WALTER ALESSANDRINI
----------------------------------------
PURCHASER:
/s/ PETER MAGUIRE
----------------------------------------
Peter Maguire
ESCROW AGENT:
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By: /s/ JUDITH M. O'BRIEN
-----------------------------------
Judith M. O'Brien
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<PAGE> 16
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: Peter Maguire SPOUSE:
ADDRESS:
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows: _______________ shares (the "Shares") of the Common Stock of
Avanex Corporation (the "Company").
3. The date on which the property was transferred is: __________, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is approximately: $0.04 per share.
6. The amount (if any) paid for such property is: $
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
- ------------------------------------ -------------------------------------
Dated: Peter Maguire
The undersigned spouse of taxpayer joins in this election.
- ------------------------------------ -------------------------------------
Dated: Spouse of Taxpayer
<PAGE> 17
SECURITY AGREEMENT
This Security Agreement is made as of August 4, 1999 between Avanex
Corporation a ("Pledgee"), and Peter Maguire ("Pledgor").
Recitals
A. Pledgor has incurred payment obligations (the "Payment Obligations") to
Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the Pledgor's
shares of Common Stock of the Pledgee, all options, and similar rights to
acquire such capital stock or interests, and all rights to receive profits or
surplus or other dividends or distributions from the Pledgee to its
shareholders, in each case whether now owned or existing or hereafter acquired
or arising, wherever located, together with all substitutions, replacements,
(the "Shares") to secure performance by Pledgor of the Payment Obligations, all
as more specifically set forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement), Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number __, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is now
or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations
<PAGE> 18
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
-2-
<PAGE> 19
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
-3-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" By: /s/ PETER MAGUIRE
------------------------------------
Peter Maguire
Address: 2913 SHADYWOOD LANE
PLANO, TEXAS 75023
"PLEDGEE" Avanex Corporation
By: /s/ WALTER ALESSANDRINI
------------------------------------
Walter Alessandrini, President
/s/ JUDITH M. O'BRIEN
"PLEDGEHOLDER" ----------------------------------------
Stock Option Administrator of
Avanex Corporation
-4-
<PAGE> 21
PROMISSORY NOTE
$82,500.00
AUGUST 4, 1999
FOR VALUE RECEIVED, Peter Macguire promises to pay to Avanex Corporation
(the "Company"), or order, the principal sum of EIGHTY-TWO THOUSAND FIVE HUNDRED
dollars, together with interest on the unpaid principal hereof from the date
hereof at the rate of 5.96% per annum, compounded semiannually.
Principal and interest shall be due and payable on August 4, 2003. Should
the undersigned fail to make full payment of principal or interest for a period
of 10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement, dated as
of August 4, 1999. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ PETER MAGUIRE
----------------------------------------
----------------------------------------
<PAGE> 1
EXHIBIT 10.8.4
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock
Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement (the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
JAMES L. PICKERING III
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant September 10, 1999
Exercise Price Per Share $0.58
Total Number of Shares Subject 175,920
to This Stock Purchase Right
Expiration Date December 31, 1999
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual
named in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the exercise price per share set forth in
the Notice of Grant of Stock Purchase Right (the "Exercise Price"), and subject
to the terms and conditions of the Plan, which is incorporated herein by
reference. Subject to 14(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Agreement, the terms and conditions of
the Plan shall prevail.
<PAGE> 2
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of sixty (60) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each such designee or assignee shall pay the Company
cash equal to the difference between the Repurchase FMV and the aggregate
Repurchase Price of Unreleased Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
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5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released
from the Repurchase Option on August 2, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding voting
securities other than in a private financing transaction approved by the Board
of Directors;
(ii) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
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(iii) a merger or consolidation in which the Company is
a party and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the
Purchaser has been unable to substantially perform his duties as the result of
his incapacity due to physical or mental illness, and such inability, at least
26 weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary
Termination" shall mean (i) without the Purchaser's express written consent, the
significant reduction of the Purchaser's duties or responsibilities relative to
the Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the
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relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in 7 or
transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time
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during the term of the Company's Repurchase Option, there is (i) any stock
dividend, stock split or other change in the Shares, or (ii) any merger or sale
of all or substantially all of the assets or other acquisition of the Company,
any and all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the Company's
Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided
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further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the date of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A
REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT
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BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND
REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date
of grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will
be recognized by Purchaser in connection with the exercise of the stock
purchaser right for shares subject to the Repurchase Option, unless an election
under Section 83(b) of the Code is filed with the Internal Revenue Service
within 30 days of the date of exercise of the right to purchase stock. The form
for making this election is attached as Exhibit A-4 hereto. Otherwise, as the
Company's repurchase right lapses, Purchaser will recognize compensation income
in an amount equal to the difference between the Fair Market Value of the stock
at the time the Company's repurchase right lapses and the amount paid for the
stock, if any (the "Spread"). If Purchaser is an Employee or former Employee,
the Spread will be subject to tax withholding by the Company, and the Company
will be entitled to a tax
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deduction in the amount at the time the Purchaser recognizes ordinary income
with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any
gain or loss is treated as capital gain or loss. If the Shares are held for at
least one year, any gain realized on disposition of the shares will be treated
as long-term capital gain for federal income tax purposes. Long-term capital
gains are grouped and netted by holding periods. Net capital gains on assets
held for more than 12 months is capped at 20%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE WILL OF
THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER).
PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the
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successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Purchaser and his or her
heirs, executors, administrators, successors and assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
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By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ JAMES L. PICKERING III
- ------------------------------ By: /s/ WALTER ALESSANDRINI
Signature ----------------------------------------
JAMES L. PICKERING III
- ------------------------------ Title: President & CEO
Print Name -------------------------------------
Date: October 1, 1999
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EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, James L. Pickering III, hereby sell, assign and
transfer unto (__________) shares of the Common Stock of Avanex Corporation
standing in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
October 1, 1999.
Dated: _______________, _____ Signature: /s/ JAMES L. PICKERING III
------------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
October 1, 1999
Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
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4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
3
<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
PURCHASER: /s/ JAMES L. PICKERING III
--------------------------------
--------------------------------
--------------------------------
ESCROW AGENT: Corporate Secretary
Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement
4
<PAGE> 16
(including the exhibits referenced therein) constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Escrow Agent, the
Purchaser and the Company with respect to the subject matter hereof, and may not
be modified except by means of a writing signed by the Escrow Agent, the
Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
---------------------------------
Title: PRESIDENT & CEO
------------------------------
PURCHASER
/s/ JAMES L. PICKERING III
------------------------------------
(Signature)
James L. Pickering III
------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
------------------------------------
Corporate Secretary
5
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, LINDA D. PICKERING, spouse of James L. Pickering III, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: 1 OCT, 1999 Signature: /s/ LINDA D. PICKERING
--------- -----------------------------------
6
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME:
TAXPAYER: James L. Pickering III
SPOUSE: Linda D. Pickering
ADDRESS:
IDENTIFICATION NO.: TAXPAYER:
SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described
as follows: 175,920 shares (the "Shares") of the Common Stock of Avanex
Corporation (the "Company").
3. The date on which the property was transferred is: October 1, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares based
on the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will never
lapse, of such property is: $ 100,873.60
6. The amount (if any) paid for such property is: $ 102,033.60
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be
revoked except with the consent of the Commissioner.
Dated: ________, 1999 ____________________________________
James L. Pickering, III, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ________, 1999 ____________________________________
Linda D. Pickering
7
<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: JAMES L. PICKERING III
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 175,920
DATE: OCTOBER 1, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the
Securities. Purchaser is acquiring these Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one (1) year or any other
fixed period in the future. Purchaser further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Securities. Purchaser understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of Corporations of the
State of California and any other legend required under applicable state
securities laws.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities"
8
<PAGE> 20
acquired, directly or indirectly from the issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of the grant of the
Stock Purchase Right to the Purchaser, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the Securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three (3)
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ JAMES L. PICKERING III
---------------------------------
Date: 1 OCT, 1999
------------
9
<PAGE> 21
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. INVESTMENT - CHAPTER 3. COMMISSIONER OF CORPORATIONS
260.141.11: RESTRICTION ON TRANSFER. (a) THE ISSUER OF ANY SECURITY UPON
WHICH A RESTRICTION ON TRANSFER HAS BEEN IMPOSED PURSUANT TO SECTIONS 260.102.6,
260.141.10 OR 260.534 SHALL CAUSE A COPY OF THIS SECTION TO BE DELIVERED TO EACH
ISSUEE OR TRANSFEREE OF SUCH SECURITY AT THE TIME THE CERTIFICATE EVIDENCING THE
SECURITY IS DELIVERED TO THE ISSUEE OR TRANSFEREE.
(b) IT IS UNLAWFUL FOR THE HOLDER OF ANY SUCH SECURITY TO
CONSUMMATE A SALE OR TRANSFER OF SUCH SECURITY, OR ANY INTEREST THEREIN, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER (UNTIL THIS CONDITION IS REMOVED
PURSUANT TO SECTION 260.141.12 OF THESE RULES), EXCEPT:
(1) TO THE ISSUER;
(2) PURSUANT TO THE ORDER OR PROCESS OF ANY COURT;
(3) TO ANY PERSON DESCRIBED IN SUBDIVISION (i) OF SECTION
25102 OF THE CODE OR SECTION 260.105.14 OF THESE RULES;
(4) TO THE TRANSFEROR'S ANCESTORS, DESCENDANTS OR SPOUSE, OR
ANY CUSTODIAN OR TRUSTEE FOR THE ACCOUNT OF THE TRANSFEROR OR THE TRANSFEROR'S
ANCESTORS, DESCENDANTS, OR SPOUSE; OR TO A TRANSFEREE BY A TRUSTEE OR CUSTODIAN
FOR THE ACCOUNT OF THE TRANSFEREE OR THE TRANSFEREE'S ANCESTORS, DESCENDANTS OR
SPOUSE;
(5) TO HOLDERS OF SECURITIES OF THE SAME CLASS OF THE SAME
ISSUER;
(6) BY WAY OF GIFT OR DONATION INTER VIVOS OR ON DEATH;
(7) BY OR THROUGH A BROKER-DEALER LICENSED UNDER THE CODE
(EITHER ACTING AS SUCH OR AS A FINDER) TO A RESIDENT OF A FOREIGN STATE,
TERRITORY OR COUNTRY WHO IS NEITHER DOMICILED IN THIS STATE TO THE KNOWLEDGE OF
THE BROKER-DEALER, NOR ACTUALLY PRESENT IN THIS STATE IF THE SALE OF SUCH
SECURITIES IS NOT IN VIOLATION OF ANY SECURITIES LAW OF THE FOREIGN STATE,
TERRITORY OR COUNTRY CONCERNED;
(8) TO A BROKER-DEALER LICENSED UNDER THE CODE IN A
PRINCIPAL TRANSACTION, OR AS AN UNDERWRITER OR MEMBER OF AN UNDERWRITING
SYNDICATE OR SELLING GROUP;
(9) IF THE INTEREST SOLD OR TRANSFERRED IS A PLEDGE OR OTHER
LIEN GIVEN BY THE PURCHASER TO THE SELLER UPON A SALE OF THE SECURITY FOR WHICH
THE COMMISSIONER'S WRITTEN CONSENT IS OBTAINED OR UNDER THIS RULE NOT REQUIRED;
(10) BY WAY OF A SALE QUALIFIED UNDER SECTIONS 25111, 25112,
25113 OR 25121 OF THE CODE, OF THE SECURITIES TO BE TRANSFERRED, PROVIDED THAT
NO ORDER UNDER SECTION 25140 OR SUBDIVISION (a) OF SECTION 25143 IS IN EFFECT
WITH RESPECT TO SUCH QUALIFICATION;
(11) BY A CORPORATION TO A WHOLLY OWNED SUBSIDIARY OF SUCH
CORPORATION, OR BY A WHOLLY OWNED SUBSIDIARY OF A CORPORATION TO SUCH
CORPORATION;
(12) BY WAY OF AN EXCHANGE QUALIFIED UNDER SECTION 25111,
25112 OR 25113 OF THE CODE, PROVIDED THAT NO ORDER UNDER SECTION 25140 OR
SUBDIVISION (a) OF SECTION 25143 IS IN EFFECT WITH RESPECT TO SUCH
QUALIFICATION;
10
<PAGE> 22
(13) BETWEEN RESIDENTS OF FOREIGN STATES, TERRITORIES OR
COUNTRIES WHO ARE NEITHER DOMICILED NOR ACTUALLY PRESENT IN THIS STATE;
(14) TO THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR TO THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE; OR
(15) BY THE STATE CONTROLLER PURSUANT TO THE UNCLAIMED
PROPERTY LAW OR BY THE ADMINISTRATOR OF THE UNCLAIMED PROPERTY LAW OF ANOTHER
STATE IF, IN EITHER SUCH CASE, SUCH PERSON (i) DISCLOSES TO POTENTIAL PURCHASERS
AT THE SALE THAT TRANSFER OF THE SECURITIES IS RESTRICTED UNDER THIS RULE, (ii)
DELIVERS TO EACH PURCHASER A COPY OF THIS RULE, AND (iii) ADVISES THE
COMMISSIONER OF THE NAME OF EACH PURCHASER;
(16) BY A TRUSTEE TO A SUCCESSOR TRUSTEE WHEN SUCH TRANSFER
DOES NOT INVOLVE A CHANGE IN THE BENEFICIAL OWNERSHIP OF THE SECURITIES;
(17) BY WAY OF AN OFFER AND SALE OF OUTSTANDING SECURITIES
IN AN ISSUER TRANSACTION THAT IS SUBJECT TO THE QUALIFICATION REQUIREMENT OF
SECTION 25110 OF THE CODE BUT EXEMPT FROM THAT QUALIFICATION REQUIREMENT BY
SUBDIVISION (f) OF SECTION 25102; PROVIDED THAT ANY SUCH TRANSFER IS ON THE
CONDITION THAT ANY CERTIFICATE EVIDENCING THE SECURITY ISSUED TO SUCH TRANSFEREE
SHALL CONTAIN THE LEGEND REQUIRED BY THIS SECTION.
(c) THE CERTIFICATES REPRESENTING ALL SUCH SECURITIES SUBJECT TO
SUCH A RESTRICTION ON TRANSFER, WHETHER UPON INITIAL ISSUANCE OR UPON ANY
TRANSFER THEREOF, SHALL BEAR ON THEIR FACE A LEGEND, PROMINENTLY STAMPED OR
PRINTED THEREON IN CAPITAL LETTERS OF NOT LESS THAN 10-POINT SIZE, READING AS
FOLLOWS:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
11
<PAGE> 23
PROMISSORY NOTE
$102,033.60 OCTOBER 1, 1999
FOR VALUE RECEIVED, James L. Pickering III ("Borrower") promises
to pay to Avanex Corporation (the "Company"), or order, the principal sum of one
hundred two thousand thirty-three and 60/100 dollars, together with interest on
the unpaid principal hereof from the date hereof at the rate of 5.54% per annum,
compounded semiannually.
Principal and interest shall be due and payable on October 1,
2004. Should the undersigned fail to make full payment of principal or interest
for a period of 10 days or more after the due date thereof, the whole unpaid
balance on this Note of principal and interest shall become immediately due at
the option of the holder of this Note. Payments of principal and interest shall
be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement
between Borrower and the Company and dated as of October 1, 1999. This Note is
secured in part by a pledge of the Company's Common Stock under the terms of a
Security Agreement of even date herewith and is subject to all the provisions
thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note,
the reasonable costs and attorneys' fees therein of the holder shall be paid by
the undersigned.
/s/ JAMES L. PICKERING III
----------------------------------
James L. Pickering III 10/1/99
<PAGE> 24
SECURITY AGREEMENT
This Security Agreement is made as of October 1, 1999 between
Avanex Corporation ("Pledgee"), and James L. Pickering III ("Pledgor").
Recitals
A. Pledgor has incurred payment obligations (the "Payment
Obligations") to Pledgee setforth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common
Stock of the Pledgee, all options, and similar rights to acquire such
capital stock or interests, and all rights to receive profits or surplus or
other dividends or distributions from the Pledgee to its shareholders, in each
case whether now owned or existing or hereafter acquired or arising, wherever
located, together with all substitutions, replacements, (the "Shares") to secure
performance by Pledgor of the Payment Obligations, all as more specifically set
forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In
consideration of the transfer of the Shares to Pledgor under the Stock Purchase
Agreement (the "Agreement), Pledgor, pursuant to the California Commercial Code,
hereby pledges all of such Shares (herein sometimes referred to as the
"Collateral") represented by certificate number __, duly endorsed in blank or
with executed stock powers, and herewith delivers said certificate to the
Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject
to the terms and conditions of this Security Agreement.
The pledged stock (together with an executed blank stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the
Agreement, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
-2-
<PAGE> 25
(2) Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to Pledgee,
its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum
of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve
Board and Pledgee is classified as a "lender" within the meaning
of the regulations under Part 207 of Title 12 of the Code of
Federal Regulations ("Regulation G"), Pledgor agrees to cooperate
with Pledgee in making any amendments to the Note or providing
any additional collateral as may be necessary to comply with such
regulations.
(3) Voting Rights. During the term of this pledge and so long as
all payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the Shares
pledged hereunder.
(4) Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and
additional shares or other securities issued by reason of any such change shall
be delivered to and held by the Pledgee under the terms of this Security
Agreement in the same manner as the Shares originally pledged hereunder. In the
event of substitution of such securities, Pledgor, Pledgee and Pledgeholder
shall cooperate and execute such documents as are reasonable so as to provide
for the substitution of such Collateral and, upon such substitution, references
to "Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of
this pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
-3-
<PAGE> 26
(6) Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary
rules under Regulation G, there shall be released from this pledge a portion of
the pledged Shares held by Pledgeholder hereunder upon payments of the principal
of the Note. The number of the pledged Shares which shall be released shall be
that number of full Shares which bears the same proportion to the initial number
of Shares pledged hereunder as the payment of principal bears to the initial
full principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the
payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or
insolvency proceeding is instituted by or against it, or if a receiver is
appointed for the property of Pledgor, or if Pledgor makes an assignment for the
benefit of creditors, the entire amount unpaid on the Note shall become
immediately due and payable, and Pledgee may proceed as provided in the case of
default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee
agree that the enforceability or invalidity of any provision or provisions of
this Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
-4-
<PAGE> 27
(13) Successors or Assigns. Pledgor and Pledgee agree that all of
the terms of this Security Agreement shall be binding on their respective
successors and assigns, and that the term "Pledgor" and the term "Pledgee" as
used herein shall be deemed to include, for all purposes, the respective
designees, successors, assigns, heirs, executors and administrators.
(14) Governing Law. This Security Agreement shall be interpreted
and governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"PLEDGOR" By: /s/ JAMES L. PICKERING III
---------------------------------------
Address: 224 Lasso Circle
San Ramon CA 94583
"PLEDGEE" Avanex Corporation
By: /s/ WALTER ALESSANDRINI
---------------------------------------
Walter Alessandrini, President
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
------------------------------------------
Stock Option Administrator of
Avanex Corporation
-5-
<PAGE> 1
EXHIBIT 10.8.5
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
shall have the same defined meanings in this Restricted Stock Purchase Agreement
(the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
MARGARET QUINN
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant October 8, 1999
Vesting Commencement Date: October 8, 1999
Exercise Price Per Share $0.58
Total Number of Shares Subject 90,000
to This Stock Purchase Right
Total Exercise Price $52,200.00
Expiration Date January 7, 2000
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual named
in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the exercise price per share set forth in
the Notice of Grant of Stock Purchase Right (the "Exercise
<PAGE> 2
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to 14(c) of the Plan, in the event of
a conflict between the terms and conditions of the Plan and this Agreement, the
terms and conditions of the Plan shall prevail.
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check or promissory note
in the form of Exhibit C secured by the shares pursuant to a Security Agreement
in the form of Exhibit D.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of ninety (90) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each such designee or assignee shall pay the Company
cash equal to the difference between the Repurchase FMV and the aggregate
Repurchase Price of Unreleased Shares to be purchased.
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(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from the
Repurchase Option on October 9, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or
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<PAGE> 4
more of the total voting power represented by the Company's then outstanding
voting securities other than in a private financing transaction approved by the
Board of Directors;
(ii) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company;
(iii) a merger or consolidation in which the Company is a party
and in which the shareholders of the Company before such merger or consolidation
do not retain, directly or indirectly, at a least majority of the beneficial
interest in the voting stock of the Company after such transaction; or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to the
Shares released from the Company's Repurchase Option pursuant to Section 4(d)
above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to in
this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal dishonesty
taken by the Purchaser in connection with his responsibilities as an employee
and intended to result in substantial personal enrichment of the Purchaser, (ii)
conviction of a felony that is injurious to the Company, and (iii) a willful act
by the Purchaser which constitutes gross misconduct and which is injurious to
the Company.
(ii) Disability. "Disability" shall mean that the Purchaser has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Purchaser or the
Purchaser's legal representative (such agreement as to acceptability not to be
unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available
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<PAGE> 5
to the Purchaser immediately prior to such reduction without the Purchaser's
express written consent, a material reduction by the Company in the base
compensation of the Purchaser as in effect immediately prior to such reduction,
or the ineligibility of the Purchaser to continue to participate in any
long-term incentive plan of the Company; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the Purchaser is
entitled immediately prior to such reduction with the result that the
Purchaser's overall benefits package is significantly reduced; (v) the
relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request.
6. Restriction on Transfer. Except for the escrow described in Section 7 or
transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment and the Company shall
hold Escrow Holder harmless from any and all such liability, including attorneys
fees and other expenses of defending against the assertion of any such claim.
(c) If the Company or any assignee exercises its Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
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<PAGE> 6
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser or
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee,
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<PAGE> 7
to the assignee), or (iii) by any combination thereof within thirty (30) days
after receipt of the Notice or in the manner and at the times set forth in the
Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Purchaser's lifetime or on the Purchaser's death by will or
intestacy to the Purchaser's immediate family or a trust for the benefit of the
Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
shall terminate as to any Shares upon the date of the first sale of Common Stock
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
1933 Act.
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
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<PAGE> 8
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A REPURCHASE
OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT
OF FIRST REFUSAL AND REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date of
grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will be
recognized by Purchaser in connection with the exercise of the stock purchaser
right for shares subject to the Repurchase Option, unless an election under
Section 83(b) of the Code is filed with the Internal
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Revenue Service within 30 days of the date of exercise of the right to purchase
stock. The form for making this election is attached as Exhibit A-4 hereto.
Otherwise, as the Company's repurchase right lapses, Purchaser will recognize
compensation income in an amount equal to the difference between the Fair Market
Value of the stock at the time the Company's repurchase right lapses and the
amount paid for the stock, if any (the "Spread"). If Purchaser is an Employee or
former Employee, the Spread will be subject to tax withholding by the Company,
and the Company will be entitled to a tax deduction in the amount at the time
the Purchaser recognizes ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any gain or
loss is treated as capital gain or loss. If the Shares are held for at least one
year, any gain realized on disposition of the shares will be treated as
long-term capital gain for federal income tax purposes. Long-term capital gains
are grouped and netted by holding periods. Net capital gains on assets held for
more than 12 months is capped at 20%. Capital losses are allowed in full against
capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
SECTION 12 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor
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prevent that party from thereafter enforcing each and every other provision of
this Agreement. The rights granted both parties herein are cumulative and shall
not constitute a waiver of either party's right to assert all other legal
remedies available to it under the circumstances.
15. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the internal
substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
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By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ MARGARET QUINN
- -------------------------------------- By: /s/ WALTER ALESSANDRINI
Signature -------------------------------------
Margaret Quinn
- -------------------------------------- Title: President and CEO
Print Name ----------------------------------
Date: October 8, 1999
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EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Margaret Quinn, hereby sell, assign and transfer unto
____________ (__________) shares of the Common Stock of Avanex Corporation
standing in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint ____________
___________________ to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
October 8, 1999.
Dated: _______________, _____ Signature: /s/ MARGARET QUINN
------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
October 8, 1999
Corporate Secretary
Avanex Corporation
40915 Encyclopedia Circle
Fremont, CA 94538-2436
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
2
<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
40915 Encyclopedia Circle
Fremont, CA 94538-2436
PURCHASER: Margaret Quinn
____________________________
____________________________
ESCROW AGENT: Corporate Secretary
Avanex Corporation
40915 Encyclopedia Circle
Fremont, CA 94538-2436
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement (including the exhibits referenced therein)
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of
3
<PAGE> 16
the Escrow Agent, the Purchaser and the Company with respect to the subject
matter hereof, and may not be modified except by means of a writing signed by
the Escrow Agent, the Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
-------------------------------------
Title: President and CEO
----------------------------------
PURCHASER
/s/ MARGARET QUINN
----------------------------------------
(Signature)
Margaret Quinn
----------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
----------------------------------------
Corporate Secretary
4
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, Michael D. Quinn, spouse of Margaret Quinn, have read and approve the
foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: October 8, 1999 Signature: /s/ MICHAEL D. QUINN
--------------------------
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME:
TAXPAYER: Margaret Quinn
SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER:
SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows: 90,000 shares (the "Shares") of the Common Stock of Avanex Corporation
(the "Company").
3. The date on which the property was transferred is:.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares based on the
continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never lapse,
of such property is: $
6. The amount (if any) paid for such property is: $
The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ________, 1999
----------------------------------------
Margaret Quinn, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ________, 1999
----------------------------------------
<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: MARGARET QUINN
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 90,000
DATE: OCTOBER 8, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the Securities.
Purchaser is acquiring these Securities for investment for Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. In this connection, Purchaser understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Purchaser's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one (1) year or any other fixed period in the future. Purchaser
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands that
the Company is under no obligation to register the Securities.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Stock Purchase Right to the Purchaser, the
exercise will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, ninety (90) days
<PAGE> 20
thereafter (or such longer period as any market stand-off agreement may require)
the Securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including: (1) the resale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three (3) month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ MARGARET QUINN
-----------------------
Date: 8 October 1999
--------------
2
<PAGE> 21
SECURITY AGREEMENT
This Security Agreement is made as of October 8, 1999 between Avanex
Corporation ("Pledgee"), Margaret Quinn ("Pledgor") and the Secretary of Pledgee
as "Pledgeholder."
Recitals
A. Pledgor has incurred payment obligations (the "Payment Obligations") to
Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the Pledgor's
shares of Common
Stock of the Pledgee, all options, and similar rights to acquire such
capital stock or interests, and all rights to receive profits or surplus or
other dividends or distributions from the Pledgee to its shareholders, in each
case whether now owned or existing or hereafter acquired or arising, wherever
located, together with all substitutions, replacements, (the "Shares") to secure
performance by Pledgor of the Payment Obligations, all as more specifically set
forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement), Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number __, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement. (2)
<PAGE> 22
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
-2-
<PAGE> 23
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor"
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<PAGE> 24
and the term "Pledgee" as used herein shall be deemed to include, for all
purposes, the respective designees, successors, assigns, heirs, executors and
administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" By: /s/ Margaret Quinn
------------------------------------
Address:
"PLEDGEE" Avanex Corporation
By: /s/ Walter Alessandrini
------------------------------------
Walter Alessandrini, President
"PLEDGEHOLDER" /s/ Judith M. O'Brien
----------------------------------------
Secretary of Avanex Corporation
-4-
<PAGE> 25
PROMISSORY NOTE
$52,200.00 OCTOBER 8, 1999
FOR VALUE RECEIVED, Margaret Quinn ("Borrower") promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of Fifty-Two Thousand
Two Hundred and 00/100 dollars, together with interest on the unpaid principal
hereof from the date hereof at the rate of 6.02% per annum, compounded
semiannually.
Principal and interest shall be due and payable on October 8, 2004. Should
the undersigned fail to make full payment of principal or interest for a period
of 10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement between
Borrower and the Company and dated as of October 8, 1999. This Note is secured
in part by a pledge of the Company's Common Stock under the terms of a Security
Agreement of even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ MARGARET QUINN
---------------------
Margaret Quinn
<PAGE> 1
EXHIBIT 10.8.6
AVANEX CORPORATION
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of October 12, 1999, by and between Avanex
Corporation, a California corporation (the "COMPANY"), and Simon Xiaofan Cao
(the "PURCHASER").
The parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase an aggregate of 680,484 shares of the
Company's Common Stock, no par value (the "SHARES") at a price of $0.58 per
share for an aggregate purchase price of $394,680.72.
2. Payment of Purchase Price. The payment of the purchase price shall be
by delivery of a promissory note in the form attached hereto as EXHIBIT C,
secured by the shares so purchased pursuant to a Pledge Agreement in the form
attached hereto as EXHIBIT D.
3. Repurchase Option. In the event of any voluntary or involuntary
termination of the Purchaser's employment by, or services to, the Company for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below in Section 4),
the Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option, but not the
obligation, for a period of 90 days from such date to repurchase all or any
portion of the Unreleased Shares (as defined below in Section 4) at such time at
the original purchase price per share (the "REPURCHASE PRICE"). The Repurchase
Option shall be exercisable by the Company by written notice to the Purchaser or
the Purchaser's executor (with a copy to the Escrow Agent, as defined below in
Section 6) and shall be exercisable, at the Company's option, (i) by delivery to
the Purchaser or the Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Purchaser's indebtedness, if
any, to the Company equal to the purchase price for the Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals the Repurchase Price times the
number of shares to be repurchased (the "AGGREGATE REPURCHASE PRICE"). Upon
delivery of such notice and the payment of the Aggregate Repurchase Price in any
of the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company. The
Repurchase Option set forth in this Section may be assigned by the Company in
whole or in part in its sole and unfettered discretion.
4. Release of Shares From Repurchase Option.
(a) The Shares shall vest to Purchaser and be released from the
Company's repurchase option as follows: Provided that Purchaser maintains a
continuous status as a Service Provider of the Company, 25% of the Shares shall
be released from the Company's Repurchase Option on October 8, 2000 and an
additional 1/48th of the Shares shall be released from the Company's Repurchase
Option on the last day of each full calendar month thereafter.
<PAGE> 2
Notwithstanding the foregoing, upon any Change of Control (as herein defined)
that number of Unreleased Shares, if any, which, when aggregated with any Shares
previously released from the Repurchase Option, are required to equal fifty
percent (50%) of the Shares shall be released from the Repurchase Option on the
date the event constituting a Change of Control is consummated. The balance of
the Shares subject to the Repurchase Option shall continue to be released from
the Repurchase Option on the same schedule as existed prior to the Change of
Control. For example, if a Change of Control occurs on a date where 25% of
Purchaser's Shares have been released from the Company's Purchase Option, then
an additional 25% of the Shares shall be released from the Purchase Option
pursuant hereto. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
(b) "Change of Control" shall mean any of the following: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company, (ii) a merger or consolidation of the
Company with any other corporation which results in the voting securities of the
Company outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or its parent) less than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity (or
its parent) outstanding immediately after such merger or consolidation, or (iii)
the approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(c) Any of the Shares which have not yet been released from the
Company's repurchase option are referred to herein as "Unreleased Shares."
(d) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's request
(see Section 3).
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Repurchase Option upon the date of such termination.
For the purposes of this Section 4(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the Purchaser
has been unable to substantially perform his duties as the result of his
incapacity due to physical or mental illness,
-2-
<PAGE> 3
and such inability, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Purchaser or the Purchaser's legal representative (such
agreement as to acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Purchaser's express written consent, a substantial reduction,
without good business reasons, of the facilities and perquisites (including
office space and location) available to the Purchaser immediately prior to such
reduction; (iii) without the Purchaser's express written consent, a material
reduction by the Company in the base compensation of the Purchaser as in effect
immediately prior to such reduction, or the ineligibility of the Purchaser to
continue to participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Purchaser is entitled immediately prior to such reduction with the
result that the Purchaser's overall benefits package is significantly reduced;
(v) the relocation of the Purchaser to a facility or a location more than 50
miles from the Purchaser's then present location, without the Purchaser's
express written consent; (vi) any purported termination of the Purchaser by the
Company which is not effected for death or Disability or for Cause, or any
purported termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement by any
successors contemplated in Section 4(f) below.
(f) Successors.
(i) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Section 4 and agree
expressly to perform the obligations under this Section 4 in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Section 4, the term
"COMPANY" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this Section
4(f)(i) or which becomes bound by the terms of this Agreement by operation of
law.
(ii) Purchaser's Successors. The terms of this Section 4 and
all rights of the Purchaser hereunder shall inure to the benefit of, and be
enforceable by, the Purchaser's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
5. Restriction on Transfer.
-3-
<PAGE> 4
(a) Except for the escrow described below in Section 6, none of
the Shares or any beneficial interest therein shall be transferred, encumbered
or otherwise disposed of in any manner until the release of such Shares from the
Repurchase Option in accordance with the provisions of this Agreement.
(b) Before any Shares may be sold or transferred (including
transfer by operation of law), such Shares shall first be offered to the Company
(the "RIGHT OF FIRST Refusal").
(i) Notice. In the event the Purchaser wishes to sell the
Shares, Purchaser shall deliver a notice ("Notice") to the Company stating (A)
his bona fide intention to sell or transfer such Shares, (B) the number of such
Shares to be sold or transferred, (C) the price for which he proposes to sell or
transfer such Shares, and (D) the name of the proposed purchaser or transferee.
(ii) Election to Purchase. Within thirty (30) days after
receipt of the Notice, the Company or its assignee may elect to purchase all or
none of the Shares to which the Notice refers, at the price per share specified
in the Notice. The purchase of the Shares in either such event shall occur at a
closing held at the Company's principal office at a mutually agreed upon time
which in no event shall be more than thirty (30) days following the end of the
time period in which the Company had to elect to purchase such Shares.
(iii) Sale of Shares by Purchaser. If all of the Shares to
which the Notice refers are not elected to be purchased, as provided in this
Section 5(b), Purchaser may sell the Shares to any person named in the Notice at
the price specified in the Notice or at a higher price, provided that such sale
or transfer is consummated within sixty (60) days of the date of said Notice to
the Company, and provided, further, that any such sale is in accordance with all
the terms and conditions hereof.
(iv) Termination of Restrictions. Notwithstanding the
provisions of Section 5(a) above, the Company's Right of First Refusal shall
terminate immediately as to all Shares upon the occurrence of the first to occur
of the following events:
(A) the acquisition of the Company by another entity by
means of the merger or consolidation of the Company with or into another
corporation in which the stock-holders of the Company immediately prior to such
merger or consolidation own less than 50% of the voting securities of the
surviving entity,
(B) the sale of all or substantially all of the assets
of the Company, or
(C) the date upon which a public market exists for the
Company's capital stock (or any other stock issued to purchasers in exchange for
the Shares purchased under this Agreement). For the purpose of this Agreement, a
"Public Market" shall be deemed to exist if (1) such stock is listed on a
national securities exchange (as that term is used in the Securities Exchange
Act of 1934), or (2) such stock is traded on the over-the-counter market and
prices are published daily on business days in a recognized financial journal.
-4-
<PAGE> 5
(v) Assignment. Whenever the Company shall have the right to
purchase Shares under this Section 5, the Company may designate and assign one
or more employees, officers, directors or shareholders of the Company or other
persons or organizations to exercise all of the Company's purchase rights under
this Agreement and purchase all of such Shares; provided that if the fair market
value of the Shares to be purchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the purchase price of the Shares
(determined as described hereinabove) to be purchased, then each such designee
or assignee shall pay the Company cash equal to the difference between the
Repurchase FMV and the purchase price of the Shares which such designee or
assignee shall have the right to purchase.
(vi) Exempt Transfers. The provisions of this Section 5
shall not apply to a transfer of any Shares by Purchaser, either during his
lifetime or on death by will or intestacy to his ancestors, descendants or
spouse, or any custodian or trustee for the account of Purchaser or Purchaser's
ancestors, descendants or spouse; provided, in each such case that the
transferee shall receive and hold such Shares subject to all of the provisions
of this Section 5 and there shall be no further transfer of such Shares except
in accordance herewith.
6. Escrow of Shares. Pursuant to the terms of the Joint Escrow
Instructions attached hereto as EXHIBIT B, the Shares issued under this
Agreement shall be held by the Escrow Agent (as defined in such Joint Escrow
Instructions) along with a stock assignment executed by the Purchaser in blank
in the form attached hereto as EXHIBIT A.
7. Investment Representations. In connection with the purchase of the
Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. The
Purchaser is purchasing the Shares for investment for the Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(b) The Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "COMMISSION"), the statutory basis for such exemption may not be
present if the Purchaser's representations meant that the Purchaser's present
intention was to hold the Shares for a minimum capital gains period under
applicable tax statutes, for a deferred sale, for a market rise, for a sale if
the market does not rise, or for a year or any other fixed period in the future.
(c) The Purchaser further acknowledges and understands that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the
-5-
<PAGE> 6
Shares unless they are registered or such registration is not required in the
opinion of counsel satisfactory to the Company.
8. Stock Certificate Legends. The share certificate evidencing the
Shares issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
requested by the managing underwriters or the Company in connection with the
initial public offering of the Company's Common Stock, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of, assign any legal or beneficial interest in or make a
distribution of any capital stock of the Company held by or on behalf of the
Purchaser or beneficially owned by the Purchaser in accordance with the rules
and regulations of the Securities and Exchange Commission for a period of up to
180 days after the date of the final prospectus relating to the Company's
initial public offering.
10. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split or stock dividend or
other similar change in the Shares which may be made by the Company after the
date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Purchaser understands that the Purchaser
(and not the Company) shall be responsible for the Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary income both (i)
the difference between the fair market value of the Shares
-6-
<PAGE> 7
when the Company granted the Purchaser the right to purchase the Shares and the
fair market value of the Shares on the date of this Agreement, and (ii) the
difference between the amount paid for the Shares and the fair market value of
the Shares as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its repurchase option. In the event the Company has registered under the
Exchange Act, "restriction" with respect to officers, directors and 10%
shareholders also means the period after the purchase of the Shares during which
such officers, directors and 10% shareholders could be subject to suit under
Section 16(b) of the Exchange Act. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Company's repurchase option or 16(b) period expires by filing an election
under Section 83(b) of the Code with the I.R.S. within 30 days from the date of
purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
13. General Provisions.
(a) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company and any purported transfer otherwise shall be null and
void.
-7-
<PAGE> 8
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN "AT WILL" EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
REPURCHASE OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR
IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY
PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
PURCHASER: AVANEX CORPORATION
/s/ SIMON XIAOFAN CAO /s/ WALTER ALESSANDRINI
- ------------------------------ ---------------------------------
Simon Xiaofan Cao
Address: Address:
4571 Meyer Park Circle 42501 Albrae Avenue
Fremont, CA 94538 Fremont, California 94538
-9-
<PAGE> 10
CONSENT OF SPOUSE
I, Not Applicable, spouse of Simon Cao, have read and approve the
foregoing Agreement. In consideration of granting of the right to my spouse to
purchase shares of Avanex Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws of the State of
California or similar laws relating to marital property in effect in the state
of our residence as of the date of the signing of the foregoing Agreement.
Dated: 12-16-99
-----------------------
/s/ Whitney Lu
------------------------------------
Whitney Lu
<PAGE> 11
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Simon Xiaofan Cao, hereby sell, assign and
transfer unto ___________________________________________ (__________) shares of
the Common Stock of Avanex Corporation standing in my name on the books of said
corporation represented by Certificate Number _____ herewith and do hereby
irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati, attorney,
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between Avanex Corporation and the undersigned dated October
12, 1999.
Dated:
------------------------ /s/ SIMON XIAOFAN CAO
------------------------------------
Simon Xiaofan Cao
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 12
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
October 12, 1999
--------------------
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
Ladies and Gentlemen:
As escrow agent (the "Escrow Agent") for both Avanex Corporation, a
California corporation (the "Company"), and the undersigned purchaser of stock
of the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Stock
Purchase Agreement ("Agreement") between the Company and the undersigned (the
"Escrow"), in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
Repurchase Option (as defined in the Agreement), the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness or some combination thereof) for the
number of shares of stock being purchased pursuant to the exercise of the
Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this Escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state
<PAGE> 13
blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of the Agreement and of
this Escrow Agreement, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 90 days after cessation of Purchaser's continuous employment by the
Company, or any parent or subsidiary of the Company, you will deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's repurchase option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith. The Company hereby agrees to
indemnify and hold harmless Escrow Agent from any and all claims, liabilities or
expenses incurred in connection with or as a result of Escrow Agent's actions
hereunder except for actions which are willfully or grossly negligent.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
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<PAGE> 14
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: AVANEX CORPORATION
PURCHASER: Simon Xiaofan Cao
ESCROW AGENT: Secretary of the Company
Judith M. O'Brien
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Judith M. O'Brien
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
-3-
<PAGE> 15
Very truly yours,
AVANEX CORPORATION
/s/ WALTER ALESSANDRINI
-------------------------------
PURCHASER:
/s/ SIMON XIAOFAN CAO
-------------------------------
Simon Xiaofan Cao
ESCROW AGENT:
Secretary of Avanex Corporation
By: /s/ JUDITH M. O'BRIEN
----------------------------
Judith M. O'Brien
-4-
<PAGE> 16
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: Simon Xiaofan Cao SPOUSE:
ADDRESS:
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1999
2. The property with respect to which the election is made is described as
follows: _______________ shares (the "Shares") of the Common Stock of
Avanex Corporation (the "Company").
3. The date on which the property was transferred is: __________, 1999.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares
over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is approximately: $0.15 per share.
6. The amount (if any) paid for such property is: $
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
---------------------------- --------------------------------------
Simon Xiaofan Cao
The undersigned spouse of taxpayer joins in this election.
Dated:
---------------------------- --------------------------------------
Spouse of Taxpayer
<PAGE> 17
EXHIBIT C
PROMISSORY NOTE
$394,680.72
OCTOBER 12, 1999
FOR VALUE RECEIVED, Simon Xiaofan Cao promises to pay to Avanex Corporation
(the "Company"), or order, the principal sum of THREE HUNDRED NINETY-FOUR
THOUSAND SIX HUNDRED EIGHTY AND 72/100THS dollars, together with interest on the
unpaid principal hereof from the date hereof at the rate of 6.02% per annum,
compounded semiannually.
Principal and interest shall be due and payable on October 12, 2003.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement, dated
as of October 12, 1999. This Note is secured in part by a pledge of the
Company's Common Stock under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company,
be accelerated, and the whole unpaid balance on this Note of principal and
accrued interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ SIMON XIAOFAN CAO
---------------------------------
Simon Xiaofan Cao
<PAGE> 18
EXHIBIT D
SECURITY AGREEMENT
This Security Agreement is made as of October 12, 1999 between Avanex
Corporation a ("Pledgee"), and Simon Xiaofan Cao ("Pledgor").
Recitals
A. Pledgor has incurred payment obligations (the "Payment Obligations")
to Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common Stock of the Pledgee, all options, and similar rights
to acquire such capital stock or interests, and all rights to receive profits or
surplus or other dividends or distributions from the Pledgee to its
shareholders, in each case whether now owned or existing or hereafter acquired
or arising, wherever located, together with all substitutions, replacements,
(the "Shares") to secure performance by Pledgor of the Payment Obligations, all
as more specifically set forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement), Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number ___, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE> 19
c. Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees
to cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
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Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By: /s/ SIMON XIAOFAN CAO
------------------------------------
Simon Xiaofan Cao
Address:
-------------------------------
-------------------------------
"PLEDGEE" Avanex Corporation
By: /s/ WALTER ALESSANDRINI
------------------------------------
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
---------------------------------------
Stock Option Administrator of
Avanex Corporation
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<PAGE> 1
EXHIBIT 10.8.7
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
shall have the same defined meanings in this Restricted Stock Purchase Agreement
(the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
ANTHONY FLORENCE
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant November 19, 1999
Vesting Commencement Date: November 15, 1999
Exercise Price Per Share $3.50
Total Number of Shares Subject 130,000
to This Stock Purchase Right
Total Exercise Price: $455,000.00
Expiration Date February 18, 2000
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual named
in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the
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exercise price per share set forth in the Notice of Grant of Stock Purchase
Right (the "Exercise Price"), and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to 14(c) of the Plan,
in the event of a conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan shall prevail.
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check or promissory note
in the form of Exhibit C secured by the shares pursuant to a Security Agreement
in the form of Exhibit D.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of ninety (90) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each
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<PAGE> 3
such designee or assignee shall pay the Company cash equal to the difference
between the Repurchase FMV and the aggregate Repurchase Price of Unreleased
Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from the
Repurchase Option on November 14, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
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<PAGE> 4
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
(ii) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company;
(iii) a merger or consolidation in which the Company is a party
and in which the shareholders of the Company before such merger or consolidation
do not retain, directly or indirectly, at a least majority of the beneficial
interest in the voting stock of the Company after such transaction; or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to the
Shares released from the Company's Repurchase Option pursuant to Section 4(d)
above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms
referred to in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal dishonesty
taken by the Purchaser in connection with his responsibilities as an employee
and intended to result in substantial personal enrichment of the Purchaser, (ii)
conviction of a felony that is injurious to the Company, and (iii) a willful act
by the Purchaser which constitutes gross misconduct and which is injurious to
the Company.
(ii) Disability. "Disability" shall mean that the Purchaser has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Purchaser or the
Purchaser's legal representative (such agreement as to acceptability not to be
unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of
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<PAGE> 5
the Company being acquired and made part of a larger entity (as, for example,
when the Chief Financial Officer of Company remains as such following a Change
of Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination"; (ii) without the
Purchaser's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Purchaser immediately prior to such reduction; (iii)
without the Purchaser's express written consent, a material reduction by the
Company in the base compensation of the Purchaser as in effect immediately prior
to such reduction, or the ineligibility of the Purchaser to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Purchaser is entitled immediately prior to such reduction with the result that
the Purchaser's overall benefits package is significantly reduced; (v) the
relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in Section 7
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise
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<PAGE> 6
of its judgment and the Company shall hold Escrow Holder harmless from any and
all such liability, including attorney's fees and other expenses of defending
against the assertion of any such claim.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser or
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
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<PAGE> 7
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Purchaser's lifetime or on the Purchaser's death by will or
intestacy to the Purchaser's immediate family or a trust for the benefit of the
Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
shall terminate as to any Shares upon the date of the first sale of Common Stock
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
1933 Act.
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<PAGE> 8
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A REPURCHASE
OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT
OF FIRST REFUSAL AND REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day
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period (or such other period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "Market Standoff
Period") following the effective date of a registration statement of the Company
filed under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date of
grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will be
recognized by Purchaser in connection with the exercise of the stock purchaser
right for shares subject to the Repurchase Option, unless an election under
Section 83(b) of the Code is filed with the Internal Revenue Service within 30
days of the date of exercise of the right to purchase stock. The form for making
this election is attached as Exhibit A-4 hereto. Otherwise, as the Company's
repurchase right lapses, Purchaser will recognize compensation income in an
amount equal to the difference between the Fair Market Value of the stock at the
time the Company's repurchase right lapses and the amount paid for the stock, if
any (the "Spread"). If Purchaser is an Employee or former Employee, the Spread
will be subject to tax withholding by the Company, and the Company will be
entitled to a tax deduction in the amount at the time the Purchaser recognizes
ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any gain or
loss is treated as capital gain or loss. If the Shares are held for at least one
year, any gain realized on disposition of the shares will be treated as
long-term capital gain for federal income tax purposes. Long-term capital gains
are grouped and netted by holding periods. Net capital gains on assets held for
more than 12 months is capped at 20%. Capital losses are allowed in full against
capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
SECTION 5 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
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TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
15. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the internal
substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
10
<PAGE> 11
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ ANTHONY A. FLORENCE By: /s/ JESSY CHAO
- ----------------------------------- -------------------------------------
Signature
ANTHONY A. FLORENCE Title: CFO
- ----------------------------------- ----------------------------------
Print Name
Date: November 19, 1999
11
<PAGE> 12
EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Anthony Florence, hereby sell, assign and transfer
unto _________________________ (__________) shares of the Common Stock of Avanex
Corporation standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and appoint
____________________________ to transfer the said stock on the books of the
within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
November 19, 1999.
Dated: _______________, _____ Signature: /s/ ANTHONY FLORENCE
-------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
November 19, 1999
Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
2
<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
PURCHASER: Anthony Florence
_____________________
_____________________
ESCROW AGENT: Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement (including the exhibits referenced therein)
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Escrow Agent, the Purchaser and the Company with respect
3
<PAGE> 16
to the subject matter hereof, and may not be modified except by means of a
writing signed by the Escrow Agent, the Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ JESSY CHAO
------------------------------------
Title: CFO
----------------------------------
PURCHASER
/s/ ANTHONY A. FLORENCE
----------------------------------------
(Signature)
Anthony A. Florence
----------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
----------------------------------------
Corporate Secretary
4
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, _________________________, spouse of Anthony Florence, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: _______________, 1999 Signature: /s/ GAIL FLORENCE
--------------------------
5
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Internal Revenue Code of
1986, to include in his gross income for the current taxable year, the amount of
any compensation taxable to him in connection with his receipt of the property
described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
<TABLE>
<CAPTION>
TAXPAYER SPOUSE
-------- ------
<S> <C> <C>
NAME: Anthony Florence
---------------------------------------- --------------------------------------
ADDRESS: 65 WATERFRONT CIRCLE PITTSBURGH PA 15222
---------------------------------------- --------------------------------------
IDENTIFICATION NO.
---------------------------------------- --------------------------------------
TAXABLE YEAR: 1999 1999
---------------------------------------- --------------------------------------
</TABLE>
2. The property with respect to which the election is made is described as
follows:
3. The date on which the property was transferred is: ________ shares of
Common Stock of Avanex Corporation
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under the
terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained in
such agreement.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $__________.
6. The amount (if any) paid for such property: $__________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: November 19, 1999 /s/ ANTHONY FLORENCE
----------------- ----------------------------------------
Taxpayer Signature
The undersigned spouse of taxpayer joins in this election.
Dated: November 19, 1999 /s/ GAIL R. FLORENCE
----------------- ----------------------------------------
Spouse of Taxpayer Signature
6
<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: ANTHONY FLORENCE
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 130,000 SHARES
DATE: NOVEMBER 19, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the Securities.
Purchaser is acquiring these Securities for investment for Purchaser's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. In this connection, Purchaser understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Purchaser's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one (1) year or any other fixed period in the future. Purchaser
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands that
the Company is under no obligation to register the Securities.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Stock Purchase Right to the Purchaser, the
exercise will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting
<PAGE> 20
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three (3) month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser:
/s/ ANTHONY FLORENCE
----------------------------------------
Date: ________________, ____
-2-
<PAGE> 21
SECURITY AGREEMENT
This Security Agreement is made as of November 19, 1999 between Avanex
Corporation ("Pledgee"), Anthony Florence ("Pledgor") and the Secretary of
Pledgee as "Pledgeholder."
Recitals
A. Pledgor has incurred payment obligations (the "Payment
Obligations") to Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common
Stock of the Pledgee, all options, and similar rights to acquire such
capital stock or interests, and all rights to receive profits or surplus or
other dividends or distributions from the Pledgee to its shareholders, in each
case whether now owned or existing or hereafter acquired or arising, wherever
located, together with all substitutions, replacements, (the "Shares") to secure
performance by Pledgor of the Payment Obligations, all as more specifically set
forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement"), Pledgor, pursuant to the California Commercial Code, hereby
pledges all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number __, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the
Agreement, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
<PAGE> 22
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares
without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and
Pledgee is classified as a "lender" within the meaning of the
regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee
in making any amendments to the Note or providing any additional
collateral as may be necessary to comply with such regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
-2-
<PAGE> 23
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term
-3-
<PAGE> 24
"Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for
all purposes, the respective designees, successors, assigns, heirs, executors
and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" By: /s/ ANTHONY FLORENCE
-------------------------------------
Address:
"PLEDGEE" Avanex Corporation
By: /s/ JESSY CHAO
------------------------------------
Jessy Chao, Chief Financial Officer
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
----------------------------------------
Secretary of Avanex Corporation
-4-
<PAGE> 25
PROMISSORY NOTE
$455,000.00 NOVEMBER 19, 1999
FOR VALUE RECEIVED, Anthony Florence ("Borrower") promises to pay to Avanex
Corporation (the "Company"), or order, the principal sum of Four Hundred
Fifty-Five Thousand and 00/100 dollars, together with interest on the unpaid
principal hereof from the date hereof at the rate of 5.99% per annum, compounded
semiannually.
Principal and interest shall be due and payable on November 19, 2004.
Should the undersigned fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid balance
on this Note of principal and interest shall become immediately due at the
option of the holder of this Note. Payments of principal and interest shall be
made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement between
Borrower and the Company and dated as of November 19, 1999. This Note is secured
in part by a pledge of the Company's Common Stock under the terms of a Security
Agreement of even date herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
/s/ ANTHONY FLORENCE
----------------------------------------
Anthony Florence
<PAGE> 1
EXHIBIT 10.8.8
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock
Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement (the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
JESSY CHAO
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant November 26, 1999
Vesting Commencement Date: November 23, 1999
Exercise Price Per Share $4.00
Total Number of Shares Subject 100,000
to This Stock Purchase Right
Total Exercise Price: $400,000.00
Expiration Date February 25, 2000
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual
named in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the
<PAGE> 2
exercise price per share set forth in the Notice of Grant of Stock Purchase
Right (the "Exercise Price"), and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to 14(c) of the Plan,
in the event of a conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan shall prevail.
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check or promissory note
in the form of Exhibit C secured by the shares pursuant to a Security Agreement
in the form of Exhibit D.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of ninety (90) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each
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<PAGE> 3
such designee or assignee shall pay the Company cash equal to the difference
between the Repurchase FMV and the aggregate Repurchase Price of Unreleased
Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i)One quarter (1/4) of the Shares shall be released from
the Repurchase Option on November 22, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
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<PAGE> 4
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
(ii) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(iii) a merger or consolidation in which the Company is a
party and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the Purchaser
has been unable to substantially perform his duties as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of
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<PAGE> 5
the Company being acquired and made part of a larger entity (as, for example,
when the Chief Financial Officer of Company remains as such following a Change
of Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination"; (ii) without the
Purchaser's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Purchaser immediately prior to such reduction; (iii)
without the Purchaser's express written consent, a material reduction by the
Company in the base compensation of the Purchaser as in effect immediately prior
to such reduction, or the ineligibility of the Purchaser to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Purchaser is entitled immediately prior to such reduction with the result that
the Purchaser's overall benefits package is significantly reduced; (v) the
relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in Section 7
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise
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<PAGE> 6
of its judgment and the Company shall hold Escrow Holder harmless from any and
all such liability, including attorney's fees and other expenses of defending
against the assertion of any such claim.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
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<PAGE> 7
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the date of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
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<PAGE> 8
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A
REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE
OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day
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<PAGE> 9
period (or such other period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "Market Standoff
Period") following the effective date of a registration statement of the Company
filed under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date
of grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will
be recognized by Purchaser in connection with the exercise of the stock
purchaser right for shares subject to the Repurchase Option, unless an election
under Section 83(b) of the Code is filed with the Internal Revenue Service
within 30 days of the date of exercise of the right to purchase stock. The form
for making this election is attached as Exhibit A-4 hereto. Otherwise, as the
Company's repurchase right lapses, Purchaser will recognize compensation income
in an amount equal to the difference between the Fair Market Value of the stock
at the time the Company's repurchase right lapses and the amount paid for the
stock, if any (the "Spread"). If Purchaser is an Employee or former Employee,
the Spread will be subject to tax withholding by the Company, and the Company
will be entitled to a tax deduction in the amount at the time the Purchaser
recognizes ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any
gain or loss is treated as capital gain or loss. If the Shares are held for at
least one year, any gain realized on disposition of the shares will be treated
as long-term capital gain for federal income tax purposes. Long-term capital
gains are grouped and netted by holding periods. Net capital gains on assets
held for more than 12 months is capped at 20%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
SECTION 5 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
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TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
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By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ JESSY CHAO By: /s/ WALTER ALESSANDRINI
- ---------------------- ------------------------------------
Signature
Jessy Chao Title: President and Chief Executive Officer
- ---------------------- -------------------------------------
Print Name
Date: November 26, 1999
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EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Jessy Chao, hereby sell, assign and transfer unto
_________________________ (__________) shares of the Common Stock of Avanex
Corporation standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and appoint
____________________________ to transfer the said stock on the books of the
within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
November 26, 1999.
Dated: _______________, _____ Signature: /s/ JESSY CHAO
-------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
November 26, 1999
Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
2
<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
PURCHASER: Jessy Chao
------------------------------------
------------------------------------
ESCROW AGENT: Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement (including the exhibits referenced therein)
constitute the entire agreement of the parties with respect
3
<PAGE> 16
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Escrow Agent, the Purchaser and the Company
with respect to the subject matter hereof, and may not be modified except by
means of a writing signed by the Escrow Agent, the Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
PURCHASER
/s/ JESSY CHAO
-----------------------------------------
(Signature)
Jessy Chao
-----------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
-----------------------------------------
Corporate Secretary
4
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, _________________________, spouse of Jessy Chao, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: November 26, 1999 Signature: /s/ [SIGNATURE ILLEGIBLE]
-------------------------
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Internal Revenue Code of
1986, to include in his gross income for the current taxable year, the amount of
any compensation taxable to him in connection with his receipt of the property
described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
TAXPAYER SPOUSE
NAME: Jessy Chao
------------------------- ----------------------------
ADDRESS:
------------------------- ----------------------------
IDENTIFICATION NO.
------------------------- ----------------------------
TAXABLE YEAR: 1999 1999
------------------------- ----------------------------
2. The property with respect to which the election is made is described as
follows: 100,000 shares of Common Stock of Avanex Corporation
3. The date on which the property was transferred is: November 26, 1999
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under
the terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained
in such agreement.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is: $400,000.00.
6. The amount (if any) paid for such property: $400,000.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
-------------------------- ---------------------------------
Taxpayer Signature
The undersigned spouse of taxpayer joins in this election.
Dated:
-------------------------- ---------------------------------
Spouse of Taxpayer Signature
<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: JESSY CHAO
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 100,000 SHARES
DATE: NOVEMBER 26, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the
Securities. Purchaser is acquiring these Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one (1) year or any other
fixed period in the future. Purchaser further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Securities.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Stock Purchase Right to the Purchaser, the
exercise will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting
<PAGE> 20
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three (3) month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ JESSY CHAO
--------------
Date: November 26, 1999
-2-
<PAGE> 21
SECURITY AGREEMENT
This Security Agreement is made as of November 26, 1999 between
Avanex Corporation ("Pledgee"), Jessy Chao ("Pledgor") and the Secretary of
Pledgee as "Pledgeholder."
Recitals
A. Pledgor has incurred payment obligations (the "Payment
Obligations") to Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common
Stock of the Pledgee, all options, and similar rights to acquire such
capital stock or interests, and all rights to receive profits or surplus or
other dividends or distributions from the Pledgee to its shareholders, in each
case whether now owned or existing or hereafter acquired or arising, wherever
located, together with all substitutions, replacements, (the "Shares") to secure
performance by Pledgor of the Payment Obligations, all as more specifically set
forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement"), Pledgor, pursuant to the California Commercial Code, hereby
pledges all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number __, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the
Agreement, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
<PAGE> 22
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum
of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve
Board and Pledgee is classified as a "lender" within the meaning
of the regulations under Part 207 of Title 12 of the Code of
Federal Regulations ("Regulation G"), Pledgor agrees to cooperate
with Pledgee in making any amendments to the Note or providing
any additional collateral as may be necessary to comply with such
regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
<PAGE> 23
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term
-3-
<PAGE> 24
"Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for
all purposes, the respective designees, successors, assigns, heirs, executors
and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"PLEDGOR" By: /s/ JESSY CHAO
-------------------------------------
Address:
"PLEDGEE" Avanex Corporation
By: /s/ WALTER ALESSANDRINI
--------------------------------------
Walter Alessandrini, President
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
--------------------------------------
Secretary of Avanex Corporation
-4-
<PAGE> 25
PROMISSORY NOTE
$400,000.00 NOVEMBER 26, 1999
FOR VALUE RECEIVED, Jessy Chao ("Borrower") promises to pay to
Avanex Corporation (the "Company"), or order, the principal sum of Four Hundred
Thousand and 00/100 dollars, together with interest on the unpaid principal
hereof from the date hereof at the rate of 6.2% per annum, compounded
semiannually.
Principal and interest shall be due and payable on November 26,
2004. Should the undersigned fail to make full payment of principal or interest
for a period of 10 days or more after the due date thereof, the whole unpaid
balance on this Note of principal and interest shall become immediately due at
the option of the holder of this Note. Payments of principal and interest shall
be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement
between Borrower and the Company and dated as of November 26, 1999. This Note is
secured in part by a pledge of the Company's Common Stock under the terms of a
Security Agreement of even date herewith and is subject to all the provisions
thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note,
the reasonable costs and attorneys' fees therein of the holder shall be paid by
the undersigned.
/s/ JESSY CHAO
-----------------------------------
Jessy Chao
<PAGE> 1
EXHIBIT 10.8.9
AVANEX CORPORATION
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the 1998 Stock
Plan shall have the same defined meanings in this Restricted Stock Purchase
Agreement (the "Agreement").
I. NOTICE OF GRANT OF STOCK PURCHASE RIGHT
PAUL SHI-QI JIANG
You have been granted the right to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Date of Grant November 26, 1999
Vesting Commencement Date: November 23, 1999
Exercise Price Per Share $4.00
Total Number of Shares Subject 100,000
to This Stock Purchase Right
Total Exercise Price: $400,000.00
Expiration Date February 25, 2000
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
Non-Transferability of Stock Purchase Right.
This Stock Purchase Right may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
II. AGREEMENT
1. Sale of Stock. The Company hereby agrees to sell to the individual
named in the Notice of Grant of Stock Purchase Right (the "Purchaser"), and the
Purchaser hereby agrees to purchase the number of Shares set forth in the Notice
of Grant of Stock Purchase Right, at the
<PAGE> 2
exercise price per share set forth in the Notice of Grant of Stock Purchase
Right (the "Exercise Price"), and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to 14(c) of the Plan,
in the event of a conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan shall prevail.
2. Payment of Purchase Price. Purchaser herewith delivers to the Company
the aggregate Exercise Price for the Shares by cash or check or promissory note
in the form of Exhibit C secured by the shares pursuant to a Security Agreement
in the form of Exhibit D.
3. Purchaser's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Stock
Purchase Right is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Stock Purchase
Right, deliver to the Company his or her Investment Representation Statement in
the form attached hereto as Exhibit B.
4. Repurchase Option.
(a) In the event the Purchaser's continuous status as a Service
Provider terminates for any or no reason (including death or Disability), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company), have an irrevocable, exclusive option for a period
of ninety (90) days from such date to repurchase up to that number of shares
which constitute the Unreleased Shares (as defined in Section 5) at the Exercise
Price per share (the "Repurchase Price") (the "Repurchase Option").
(b) The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder (as defined in Section 7)) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by the Company
canceling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unreleased Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unreleased Shares
being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the
Unreleased Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's Repurchase Option to
purchase all or a part of the Unreleased Shares. If the Fair Market Value of the
Unreleased Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of the
Unreleased Shares, then each
2
<PAGE> 3
such designee or assignee shall pay the Company cash equal to the difference
between the Repurchase FMV and the aggregate Repurchase Price of Unreleased
Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the
Repurchase Option conferred above by giving the requisite notice within ninety
(90) days following Purchaser's termination as a Service Provider, the
Repurchase Option shall terminate.
5. Release of Shares From Repurchase Option.
(a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Repurchase Option. The Shares shall be released from
the Repurchase Option as follows:
(i) One quarter (1/4) of the Shares shall be released from
the Repurchase Option on November 22, 2000; and
(ii) One forty-eighth (1/48) shall be released from the
Repurchase Option each full calendar month elapsing thereafter during all of
which Purchaser was a full time employee of the Company.
(b) Any of the Shares which, from time to time, have not yet been
released from the Repurchase Option are referred to herein as "Unreleased
Shares."
(c) The Shares which have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 7).
(d) Notwithstanding the foregoing, upon a Change of Control, as
defined below, for any reason that occurs while Purchaser is an employee of the
Company, that number of Unreleased Shares, if any, which, when aggregated with
any Shares previously released from the Repurchase Option, are required to equal
fifty percent (50%) of the Shares shall be released from the Repurchase Option
on the date the event constituting a Change of Control is consummated. The
balance of the Shares subject to the Repurchase Option shall continue to be
released from the Repurchase Option on the same schedule (i.e., the same number
of shares shall vest each month) as existed prior to the Change of Control. For
example, if a Change of Control occurs on a date where 25% of Purchaser's Shares
have been released from the Company's Purchase Option, then an additional 25% of
the Shares shall be released from the Purchase Option pursuant hereto. The
remaining 50% of the Shares shall vest at the rate of 1/48th of the Shares per
month thereafter, such that all Shares are fully vested after an additional
24-month period. If a Change of Control occurs on a date where more than 50% of
Purchaser's Shares have already been released from the Company's Purchase
Option, then no additional Shares shall be released from the Purchase Option.
For the purposes of the foregoing, a Change of Control shall mean the
occurrence of any of the following events:
3
<PAGE> 4
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities
other than in a private financing transaction approved by the Board of
Directors;
(ii) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(iii) a merger or consolidation in which the Company is a
party and in which the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at a least majority of the
beneficial interest in the voting stock of the Company after such transaction;
or
(iv) the sale or disposition by the Company of all or
substantially all the Company's assets.
(e) Acceleration Upon Termination of Employment. In addition to
the Shares released from the Company's Repurchase Option pursuant to Section
4(d) above, in the event the Purchaser's employment terminates as a result of an
Involuntary Termination other than for Cause upon or within 12 months after a
Change of Control, all Unreleased Shares shall be released from the Company's
Purchase Option upon the date of such termination.
For the purposes of this Section 5(e), the following terms referred to
in this Agreement shall have the following meanings:
(i) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Purchaser in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Purchaser, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Purchaser which constitutes gross misconduct and
which is injurious to the Company.
(ii) Disability. "Disability" shall mean that the Purchaser
has been unable to substantially perform his duties as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Purchaser or the Purchaser's legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(iii) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Purchaser's express written consent, the significant
reduction of the Purchaser's duties or responsibilities relative to the
Purchaser's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of
4
<PAGE> 5
the Company being acquired and made part of a larger entity (as, for example,
when the Chief Financial Officer of Company remains as such following a Change
of Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination"; (ii) without the
Purchaser's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Purchaser immediately prior to such reduction; (iii)
without the Purchaser's express written consent, a material reduction by the
Company in the base compensation of the Purchaser as in effect immediately prior
to such reduction, or the ineligibility of the Purchaser to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Purchaser is entitled immediately prior to such reduction with the result that
the Purchaser's overall benefits package is significantly reduced; (v) the
relocation of the Purchaser to a facility or a location more than 50 miles from
the Purchaser's then present location, without the Purchaser's express written
consent; (vi) any purported termination of the Purchaser by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.
(f) The Shares which have been released from the Company's
Repurchase Option shall be delivered to the Purchaser at the Purchaser's
request.
6. Restriction on Transfer. Except for the escrow described in Section 7
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
7. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon exercise of the Repurchase Option by the Company, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Purchaser attached as Exhibit A-2 hereto, until such time as the
Company's Repurchase Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise
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<PAGE> 6
of its judgment and the Company shall hold Escrow Holder harmless from any and
all such liability, including attorney's fees and other expenses of defending
against the assertion of any such claim.
(c) If the Company or any assignee exercises its Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Repurchase
Option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's Repurchase Option.
8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this (the "Right of
First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
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<PAGE> 7
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
(i) the Offered Price in the case of Shares that are not Unreleased Shares, or
(ii) in the case of Shares that are Unreleased Shares, the lower of the Offered
Price or the Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), (i) by cash or check, (ii) by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or (iii) by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not transferred to the Proposed Transferee within such period, a
new Notice shall be given to the Company, and the Company and/or its assignees
shall again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Purchaser's lifetime or on the Purchaser's death by
will or intestacy to the Purchaser's immediate family or a trust for the benefit
of the Purchaser's immediate family shall be exempt from the provisions of this
Section, provided that the Purchaser notifies the Company in writing within
thirty (30) days of said transfer. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Agreement, including but not
limited to this Section and Section 4, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the date of the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
7
<PAGE> 8
9. Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
(a) Purchaser understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A
REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE
OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Lock-Up Period. Purchaser hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day
8
<PAGE> 9
period (or such other period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "Market Standoff
Period") following the effective date of a registration statement of the Company
filed under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
11. Tax Consequences. Set forth below is a brief summary as of the date
of grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.
(a) Exercise of Stock Purchase Right. Generally, no income will
be recognized by Purchaser in connection with the exercise of the stock
purchaser right for shares subject to the Repurchase Option, unless an election
under Section 83(b) of the Code is filed with the Internal Revenue Service
within 30 days of the date of exercise of the right to purchase stock. The form
for making this election is attached as Exhibit A-4 hereto. Otherwise, as the
Company's repurchase right lapses, Purchaser will recognize compensation income
in an amount equal to the difference between the Fair Market Value of the stock
at the time the Company's repurchase right lapses and the amount paid for the
stock, if any (the "Spread"). If Purchaser is an Employee or former Employee,
the Spread will be subject to tax withholding by the Company, and the Company
will be entitled to a tax deduction in the amount at the time the Purchaser
recognizes ordinary income with respect to a Stock Purchase Right.
(b) Disposition of Shares. Upon disposition of the Shares, any
gain or loss is treated as capital gain or loss. If the Shares are held for at
least one year, any gain realized on disposition of the shares will be treated
as long-term capital gain for federal income tax purposes. Long-term capital
gains are grouped and netted by holding periods. Net capital gains on assets
held for more than 12 months is capped at 20%. Capital losses are allowed in
full against capital gains, and up to $3,000 against other income.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
12. No Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES
THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
SECTION 5 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
9
<PAGE> 10
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
13. Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party not sending the notice.
14. No Waiver. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Purchaser and his or her heirs, executors, administrators, successors and
assigns.
16. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Purchaser or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
17. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of California.
18. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser.
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<PAGE> 11
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Purchase Right.
PURCHASER: AVANEX CORPORATION
/s/ PAUL SHI-QI JIANG By: /s/ WALTER ALESSANDRINI
- ------------------------- -------------------------------------------
Signature
Paul Shi-Qi Jiang Title: President and Chief Executive Officer
- ------------------------- --------------------------------------------
Print Name
Date: November 26, 1999
11
<PAGE> 12
EXHIBIT A-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Paul Shi-Qi Jiang, hereby sell, assign and
transfer unto _________________________ (__________) shares of the Common Stock
of Avanex Corporation standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint ____________________________ to transfer the said stock
on the books of the within named corporation with full power of substitution in
the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Avanex Corporation and the undersigned dated
November 26, 1999.
Dated: _________, _____ Signature: /s/ PAUL SHI-QI JIANG
----------------------------
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT A-2
JOINT ESCROW INSTRUCTIONS
November 26, 1999
Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
Dear Sirs:
As Escrow Agent for both Avanex Corporation, a California corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement (the "Repurchase Option"), the
Company shall give to Purchaser and you a written notice specifying the number
of shares of stock to be purchased, the purchase price, and the time for a
closing hereunder at the principal office of the Company. Purchaser and the
Company hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
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<PAGE> 14
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within ninety (90) days after cessation of Purchaser's continuous employment by
or services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE> 15
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days' advance written notice to each of the other parties hereto.
COMPANY: Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
PURCHASER: Paul Shi-Qi Jiang
------------------------------
------------------------------
ESCROW AGENT: Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. The Restricted Stock Purchase Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Purchase Agreement (including the exhibits referenced therein)
constitute the entire agreement of the parties with respect
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<PAGE> 16
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Escrow Agent, the Purchaser and the Company
with respect to the subject matter hereof, and may not be modified except by
means of a writing signed by the Escrow Agent, the Purchaser and the Company.
19. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
Very truly yours,
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
PURCHASER
/s/ PAUL SHI-QI JIANG
-----------------------------------------
(Signature)
Paul Shi-Qi Jiang
-----------------------------------------
(Typed or Printed Name)
ESCROW AGENT:
/s/ JUDITH M. O'BRIEN
-----------------------------------------
Corporate Secretary
4
<PAGE> 17
EXHIBIT A-3
CONSENT OF SPOUSE
I, Mary P.L. Chiang, spouse of Paul Shi-Qi Jiang, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, as set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in said Agreement or any shares issued pursuant thereto under the
community property laws or similar laws relating to marital property in effect
in the state of our residence as of the date of the signing of the foregoing
Agreement.
Dated: November 26, 1999 Signature: /s/ MARY P.L. CHIANG
------------------------
<PAGE> 18
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Internal Revenue Code of
1986, to include in his gross income for the current taxable year, the amount of
any compensation taxable to him in connection with his receipt of the property
described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
TAXPAYER SPOUSE
NAME: Paul Shi-Qi Jiang
-------------------------- -----------------------------
ADDRESS:
-------------------------- -----------------------------
IDENTIFICATION NO.
-------------------------- -----------------------------
TAXABLE YEAR: 1999 1999
-------------------------- -----------------------------
2. The property with respect to which the election is made is described as
follows: 100,000 shares of Common Stock of Avanex Corporation
3. The date on which the property was transferred is: November 26, 1999
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under
the terms of an agreement between the taxpayer and the Company. These
restrictions lapse upon the satisfaction of certain conditions contained
in such agreement.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is: $400,000.00.
6. The amount (if any) paid for such property: $400,000.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
---------------------------- ---------------------------------
Taxpayer Signature
The undersigned spouse of taxpayer joins in this election.
Dated:
---------------------------- ---------------------------------
Spouse of Taxpayer Signature
<PAGE> 19
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: PAUL SHI-QI JIANG
COMPANY: AVANEX CORPORATION
SECURITY: COMMON STOCK
AMOUNT: 100,000 SHARES
DATE: NOVEMBER 26, 1999
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
(b) reach an informed and knowledgeable decision to acquire the
Securities. Purchaser is acquiring these Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(c) Purchaser acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one (1) year or any other
fixed period in the future. Purchaser further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Securities.
(d) Purchaser is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Stock Purchase Right to the Purchaser, the
exercise will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting
<PAGE> 20
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three (3) month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Stock Purchase Right, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one (1) year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144; and, in the
case of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two (2) years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(e) Purchaser further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Purchaser understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Purchaser: /s/ PAUL SHI-QI JIANG
----------------------------
Date: November 26, 1999
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<PAGE> 21
SECURITY AGREEMENT
This Security Agreement is made as of November 26, 1999 between
Avanex Corporation ("Pledgee"), Paul Shi-Qi Jiang ("Pledgor") and the Secretary
of Pledgee as "Pledgeholder."
Recitals
A. Pledgor has incurred payment obligations (the "Payment
Obligations") to Pledgee set forth in a Promissory Note of even date herewith.
B. Pledgor desires to provide a security interest in all of the
Pledgor's shares of Common
Stock of the Pledgee, all options, and similar rights to acquire such
capital stock or interests, and all rights to receive profits or surplus or
other dividends or distributions from the Pledgee to its shareholders, in each
case whether now owned or existing or hereafter acquired or arising, wherever
located, together with all substitutions, replacements, (the "Shares") to secure
performance by Pledgor of the Payment Obligations, all as more specifically set
forth in this Pledge Agreement.
NOW, THEREFORE, it is agreed as follows:
(1) Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Stock Purchase Agreement (the
"Agreement"), Pledgor, pursuant to the California Commercial Code, hereby
pledges all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number __, duly endorsed in blank or with executed
stock powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the
Agreement, and the Pledgeholder shall not encumber or dispose of such Shares
except in accordance with the provisions of this Security Agreement.
<PAGE> 22
(2) Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum
of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve
Board and Pledgee is classified as a "lender" within the meaning
of the regulations under Part 207 of Title 12 of the Code of
Federal Regulations ("Regulation G"), Pledgor agrees to cooperate
with Pledgee in making any amendments to the Note or providing
any additional collateral as may be necessary to comply with such
regulations.
(3) Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
(4) Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
(5) Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
-2-
<PAGE> 23
(6) Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Agreement or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
(7) Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
(8) Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
(9) Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
(10) Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
(11) Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
(12) Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(13) Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term
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<PAGE> 24
"Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for
all purposes, the respective designees, successors, assigns, heirs, executors
and administrators.
(14) Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"PLEDGOR" By: /s/ PAUL SHI-QI JIANG
-------------------------------------------
Address:
"PLEDGEE" Avanex Corporation
By: /s/ WALTER ALESSANDRINI
-------------------------------------------
Walter Alessandrini, President
"PLEDGEHOLDER" /s/ JUDITH M. O'BRIEN
-------------------------------------------
Secretary of Avanex Corporation
-4-
<PAGE> 25
PROMISSORY NOTE
$400,000.00 NOVEMBER 26, 1999
FOR VALUE RECEIVED, Paul Shi-Qi Jiang ("Borrower") promises to
pay to Avanex Corporation (the "Company"), or order, the principal sum of Four
Hundred Thousand and 00/100 dollars, together with interest on the unpaid
principal hereof from the date hereof at the rate of 6.2% per annum, compounded
semiannually.
Principal and interest shall be due and payable on November 26,
2004. Should the undersigned fail to make full payment of principal or interest
for a period of 10 days or more after the due date thereof, the whole unpaid
balance on this Note of principal and interest shall become immediately due at
the option of the holder of this Note. Payments of principal and interest shall
be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Stock Purchase Agreement
between Borrower and the Company and dated as of November ___, 1999. This Note
is secured in part by a pledge of the Company's Common Stock under the terms of
a Security Agreement of even date herewith and is subject to all the provisions
thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be due and payable thirty days after the date of such
termination.
Should any action be instituted for the collection of this Note,
the reasonable costs and attorneys' fees therein of the holder shall be paid by
the undersigned.
/s/ PAUL SHI-QI JIANG
-----------------------------------
Paul Shi-Qi Jiang
<PAGE> 1
EXHIBIT 10.9
- --------------------------------------------------------------------------------
AVANEX CORPORATION
SERIES A PREFERRED, SERIES B PREFERRED AND
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 Authorization and Sale of Preferred Stock 1
1.1 Authorization 1
1.2 Sale of the Shares 1
1.3 Additional Sales of Preferred Stock 2
SECTION 2 Closing Date; Delivery 2
2.1 Closing Date 2
2.2 Delivery 3
SECTION 3 Representations and Warranties of the Company 3
3.1 Organization and Standing; Qualification 3
3.2 Corporate Power 4
3.3 Subsidiaries 4
3.4 Capitalization 4
3.5 Authorization 4
3.6 Title to Properties and Assets; Liens, etc 5
3.7 Patents, Trademarks, etc 5
3.8 Agreements 5
3.9 Material Contracts and Commitments 6
3.10 Compliance with Other Instruments, None Burdensome, etc. 6
3.11 Litigation, etc 6
3.12 Employees 6
3.13 Employee Agreements 7
3.14 No Conflict of Interest 7
3.15 No Financial Statements 7
3.16 Insurance 7
3.17 Qualified Small Business Stock 7
3.18 Registration Rights 7
3.19 Governmental Consent, etc 8
3.20 Permits 8
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
3.21 Environmental and Safety Laws 8
3.22 Brokers or Finders 8
3.23 Disclosures 8
3.24 Employee Benefit Plans 8
3.25 Minute Books 8
SECTION 4 Representations and Warranties of the Purchasers 9
4.1 Investment Representations and Covenants of the Purchasers 9
4.2 No Public Market 10
4.3 Receipt of Information 10
4.4 Authorization 11
4.5 Consents 11
SECTION 5 Conditions to Obligations of Purchasers in the Series A Closing 11
5.1 Representations and Warranties Correct 11
5.2 Covenants 11
5.3 Employees 11
5.4 Opinion of Company's Counsel 11
5.5 Compliance Certificate 12
5.6 Blue Sky 12
5.7 Board of Directors 12
5.8 Restated Articles 12
5.9 No Material Adverse Change 12
5.10 Shareholder Rights Agreement 12
5.11 Co-Sale Agreement 12
5.12 Voting Agreement 12
SECTION 6 Conditions to the Obligations of Purchasers in the Series B Closing 12
6.1 Representations 12
6.2 Covenants 13
6.3 Compliance Certificate 13
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
6.4 Fulfillment of Series B Milestones 13
6.5 Opinion of Company's Counsel 13
SECTION 7 Conditions to the Obligations of Purchasers in the Series C Closing 13
7.1 Representations 13
7.2 Covenants 13
7.3 Compliance Certificate 13
7.4 Fulfillment of Series C Milestones 14
7.5 Opinion of Company's Counsel 14
SECTION 8 Conditions to the Obligations of the Company in the Series A Closing 14
8.1 Representations 14
8.2 Blue Sky 14
8.3 Shareholder Rights Agreement 14
8.4 Legal Matters 14
SECTION 9 Conditions to the Obligations of the Company in the Series B Closing 14
9.1 Representations 14
9.2 Blue Sky 15
9.3 Legal Matters 15
SECTION 10 Conditions to the Obligations of the Company in the Series C Closing 15
10.1 Representations 15
10.2 Blue Sky 15
10.3 Legal Matters 15
SECTION 11 Miscellaneous 15
11.1 Governing Law 15
11.2 Survival 15
11.3 Successors and Assigns 16
11.4 Entire Agreement; Amendment 16
11.5 Notices, etc 16
11.6 Delays or Omissions 16
11.7 California Corporate Securities Law 16
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
11.8 Expenses 17
11.9 Finder's Fee 17
11.10 Counterparts 17
11.11 Severability 17
11.12 Gender 17
11.13 Headings 17
</TABLE>
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<PAGE> 6
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
A. Schedule of Purchasers
B. First Amended and Restated Articles of Incorporation
C. Schedule of Exceptions
D. Shareholder Rights Agreement
E. Co-Sale Agreement
F. Voting Agreement
G. Opinion of Wilson Sonsini Goodrich & Rosati
H. Series B Preferred and Series C Preferred Milestones
</TABLE>
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<PAGE> 7
AVANEX CORPORATION
SERIES A PREFERRED, SERIES B PREFERRED AND
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of February 10, 1998, by and among Avanex
Corporation, a California corporation (the "Company"), with its principal office
at 2202 Ensenada Way, San Mateo, California 94403, and the persons and entities
listed on the Schedule of Purchasers attached as Exhibit A hereto (the
"Purchasers").
SECTION 1
Authorization and Sale of Preferred Stock
1.1 Authorization.
(a) Series A Preferred Stock. The Company has, or before the
Series A Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 4,600,000 shares of its Series A
Preferred Stock ("Series A Preferred" or, together with the shares of Series B
Preferred Stock described in Section 1.1(b) below and Series C Preferred Stock
described in Section 1.1(c) below, the "Shares") and up to 4,600,000 shares of
Common Stock issuable upon conversion of the Series A Preferred pursuant to the
First Amended and Restated Articles of Incorporation of the Company, in the form
attached hereto as Exhibit B (the "Restated Articles"). The Series A Preferred
shall be sold for a purchase price of $0.223 per share.
(b) Series B Preferred Stock. The Company has, or before the
Series A Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 6,350,000 shares of its Series B
Preferred Stock ("Series B Preferred" or, as described in Section 1.1(a) above,
the "Shares") and up to 6,350,000 shares of Common Stock issuable upon
conversion of the Series B Preferred pursuant to the Restated Articles. The
Series B Preferred shall be sold for a purchase price of $0.40 per share.
(c) Series C Preferred Stock. The Company has, or before the
Series A Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 7,350,000 shares of its Series C
Preferred Stock ("Series C Preferred" or, as described in Section 1.1(a) above,
the "Shares") and up to 7,350,000 shares of Common Stock issuable upon
conversion of the Series C Preferred pursuant to the Restated Articles. The
Series C Preferred shall be sold for a purchase price of $0.756 per share.
1.2 Sale of the Shares. Subject to the terms and conditions hereof, the
Company will issue and sell to each of the Purchasers, and the Purchasers will
severally buy from the Company, the number of shares (the "Shares") of Series A
Preferred, Series B Preferred and Series C Preferred specified opposite each
Purchaser's name on the Schedule of Purchasers, at the aggregate purchase price
set forth
<PAGE> 8
therein. The Company's agreements with each of the Purchasers are separate
agreements, and the sales of the Shares to each of the Purchasers are separate
sales.
1.3 Additional Sales of Preferred Stock. Any of the authorized shares of
Preferred Stock not sold at the Series A Closing, Series B Closing or Series C
Closing, as defined below, may be sold to one or more additional purchasers at a
subsequent closing(s) to be held at any time before ninety (90) days after the
applicable Closing Date, provided that each such purchaser agrees to be bound by
the terms hereof as a "Purchaser" hereunder and provided further that any such
sale or sales be on terms identical to the terms contained in this Agreement,
and each subsequent Purchaser shall become a party to this Agreement (and
Exhibit A hereto shall be amended to include such subsequent Purchaser) and the
Shareholder Rights Agreement, the form of which is attached hereto as Exhibit D.
The shares of Preferred Stock sold at such additional closing(s) shall be deemed
to be "Shares" hereunder and the purchasers thereof shall be deemed to be
"Purchasers" hereunder.
SECTION 2
Closing Date; Delivery
2.1 Closing Date.
(a) Series A Closing Date. The closing of the purchase and sale
of the Series A Preferred shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, at 10:00 a.m.,
local time, on or prior to February 10, 1998 or at such other time and place
upon which the Company and the Purchasers shall agree (which time and place
shall be referred to as the "Series A Closing" and the date of the Series A
Closing is hereinafter referred to as the "Series A Closing Date").
(b) Series B Closing Date. In addition, within ten (10) business
days following delivery of notice by the Company that the conditions set forth
in Section 6 below have been satisfied, the closing of the purchase and sale of
the Series B Preferred shall be held at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California (which time and place shall be
referred to as the "Series B Closing" and the date of the Series B Closing is
hereinafter referred to as the "Series B Closing Date"). Such Series B Closing
shall be held on such date and at such time as the parties agree and absent such
agreement, on the tenth (10th) business day following delivery of the foregoing
described notice at 10:00 a.m., local time.
(c) Series C Closing Date. In addition, within ten (10) business
days following delivery of notice by the Company that the conditions set forth
in Section 7 below have been satisfied, the closing of the purchase and sale of
the Series C Preferred shall be held at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California (which time and place shall be
referred to as the "Series C Closing" and the date of the Series C Closing is
hereinafter referred to as the "Series C Closing Date"). Such Series C Closing
shall be held on such date and at such time as the
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<PAGE> 9
parties agree and absent such agreement, on the tenth (10th) business day
following delivery of the foregoing described notice at 10:00 a.m., local time.
(d) The Series A Closing, the Series B Closing and the Series C
Closing shall sometimes be referred to individually herein as a "Closing."
2.2 Delivery.
(a) Series A Preferred. At the Series A Closing, the Company will
issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series A Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
(b) Series B Preferred. At the Series B Closing, the Company will
issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series B Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
(c) Series C Preferred. At the Series C Closing, the Company will
issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series C Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
SECTION 3
Representations and Warranties of the Company
Except as set forth on the Schedule of Exceptions attached as Exhibit C
hereto, the Company hereby represents and warrants to the Purchasers as follows:
3.1 Organization and Standing; Qualification. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company is not qualified to do
business as a foreign corporation in any jurisdiction and such qualification is
not presently required.
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<PAGE> 10
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, the
Shareholder Rights Agreement attached hereto as Exhibit D (the "Shareholder
Rights Agreement"), the Co-Sale Agreement attached hereto as Exhibit E (the
"Co-Sale Agreement") and the Voting Agreement attached hereto as Exhibit F, to
sell, issue and deliver the Shares hereunder, to issue the Common Stock issuable
upon conversion of the Shares (the "Conversion Shares") and to carry out and
perform its obligations under the terms of this Agreement, the Shareholder
Rights Agreement, the Co-Sale Agreement and the Voting Agreement.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, of which 4,200,000 shares are issued and
outstanding, 4,600,000 shares of Series A Preferred Stock ("Series A
Preferred"), none of which are issued and outstanding prior to the Series A
Closing Date, 6,350,000 shares of Series B Preferred Stock ("Series B
Preferred"), none of which are issued and outstanding prior to the Series A
Closing Date, and 7,350,000 shares of Series C Preferred, none of which are
issued or outstanding prior to the Series A Closing Date. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable and have been issued in compliance with all applicable federal
and state securities laws. The Company has reserved (i) 4,600,000 shares of
Common Stock for issuance upon conversion of the Series A Preferred, 6,350,000
shares of Common Stock for issuance upon conversion of the Series B Preferred,
and 7,350,000 shares of Common Stock for issuance upon conversion of the Series
C Preferred and (ii) 10,200,000 shares of Common Stock for issuance to employees
pursuant to the Company's 1998 Stock Plan, none of which are subject to
outstanding options, and 7,800,000 of which remain available for future grant.
The Series A Preferred, Series B Preferred and Series C Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Articles. Except as set forth in Exhibit C hereto, and as set forth in the
Shareholder Rights Agreement, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock or other securities
of the Company. Except for the Shareholders Rights Agreement, the Company is not
a party or subject to any agreement or understanding which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company. Assuming the accuracy of each Purchaser's
representations in Section 4 below, upon issuance in accordance with this
Agreement and the Company's Restated Articles, the Shares will have been issued
in compliance with all federal and state securities laws.
3.5 Authorization. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement, the Shareholder Rights Agreement, the Co-Sale
Agreement and the Voting Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares (and the Conversion Shares) and the
performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing. This Agreement, the Shareholder Rights Agreement,
the Co-Sale Agreement and the Voting Agreement, when executed and delivered by
the Company, shall constitute the valid and binding obligations of the Company
enforceable in accordance with their respective terms. The Shares, when
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<PAGE> 11
issued in compliance with the provisions of this Agreement and the Company's
Restated Articles, will be duly and validly issued, fully paid and
nonassessable. The Common Stock issuable upon conversion of the Shares has been
duly and validly reserved and, when issued in compliance with the provisions of
this Agreement and the Company's Restated Articles, will be duly and validly
issued, fully paid and nonassessable.
3.6 Title to Properties and Assets; Liens, etc. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.7 Patents, Trademarks, etc. The Company owns or has the right to use,
free and clear of all liens, charges, claims and restrictions, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses and
proprietary rights necessary to its business as now conducted, and is not
infringing upon or otherwise acting adversely to the right or claimed right of,
to the Company's knowledge, any person under or with respect to any of the
foregoing. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as currently proposed, would violate any
patent, trademark, service mark, trade name, copyright or trade secret or other
proprietary right of any other person or entity. To the Company's knowledge,
after reasonable investigation, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as currently proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Shareholders Rights Agreement or the Co-Sale
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as currently proposed to be
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company does
not believe, after reasonable investigation, that it is or will be necessary to
utilize any inventions of any of the Company's employees (or people it currently
intends to hire) made prior to their employment by the Company.
3.8 Agreements. There are no agreements, understandings, instruments,
contracts or transactions currently in negotiation, which the Company is a party
that may involve (i) obligations (contingent or otherwise) of, or payments to
the Company in excess of, $10,000, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or (iii)
indemnification by the Company with respect to infringements of proprietary
rights.
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3.9 Material Contracts and Commitments. Neither the Company, nor, to the
knowledge of the Company, any third party is in default under any material
contract, agreement or instrument to which the Company is a party.
3.10 Compliance with Other Instruments, None Burdensome, etc. The
Company is not in violation of any term of its Restated Articles or Bylaws, or
in any material respect of any term or provision of any mortgage, indenture,
contract, agreement, instrument, judgment or decree to which it is a party, and
the Company is not in violation of any federal or state judgment, order,
statute, law, rule or regulation applicable to the Company, which violation
would have a material adverse effect on the Company's business. The execution,
delivery and performance of and compliance with this Agreement, the Shareholder
Rights Agreement and the Co-Sale Agreement and the issuance of the Shares and
the Conversion Shares, will not result in any violation of, or conflict with, or
constitute a default under, any material contract, agreement, instrument or
mortgage, or any pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company; and there is no such violation or default or event
which, with the passage of time or giving of notice or both, would constitute a
violation or default which materially and adversely affects the business of the
Company or any of its properties or assets.
3.11 Litigation, etc. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the Company's knowledge, is there any threat
thereof or basis therefor), which, either in any case or in the aggregate, would
result in any material adverse change in the business or financial condition of
the Company or any of its properties or assets, or in any material impairment of
the right or ability of the Company to carry on its business as now conducted or
as proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement, the
Shareholders Rights Agreement or the Co-Sale Agreement, or any action taken or
to be taken in connection herewith or therewith. The foregoing includes, without
limitation, any action, suit, proceeding, or investigation pending or, to the
Company's knowledge, currently threatened involving the prior employment of any
of the Company's employees, such employees' use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, such employees' obligations under any agreements with prior
employers, or negotiations by the Company with potential backers of, or
investors in, the Company or its proposed business. The Company is not a party
to, or to its knowledge, named in any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit or proceeding by the Company currently pending or that the Company
currently intends to initiate.
3.12 Employees. To the Company's knowledge, no employee of the Company
is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees. The
employment of each officer and employee of the Company is terminable at the will
of the Company.
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3.13 Employee Agreements. Each person presently employed by the Company
has executed (or will execute by the Closing Date) an Employment, Confidential
Information and Invention Assignment Agreement in the form previously provided
to or made available to the Purchasers. To the Company's knowledge, neither the
execution, delivery or performance of such agreements, nor the carrying on of
the Company's business as employees by such persons, nor the conduct of the
Company's business as currently proposed will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons is now
obligated.
3.14 No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To the Company's knowledge, none of the Company's
officers or directors, or any members of their immediate families, are, directly
or indirectly, indebted to the Company (other than in connection with purchases
of the Company's stock) or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that officers, directors and/or shareholders of the
Company may own stock in (but not exceeding two percent of the outstanding
capital stock of ) any publicly traded companies that may compete with the
Company. To the Company's knowledge, none of the Company's officers or directors
or any members of their immediate families are, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.15 No Financial Statements. The Company has not prepared any balance
sheet, income statement, statement of changes in financial position and
shareholders' equity or other financial statement and has kept its financial
records on a cash basis since the Company's incorporation on October 24, 1997.
3.16 Insurance. The Company has, or within 30 days following the
Closing, will have in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
3.17 Qualified Small Business Stock. The Company represents and warrants
to the Purchasers that, to the best of its knowledge, the Shares should qualify
as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue code of 1986, as amended as of the date hereof.
3.18 Registration Rights. Except as set forth in the Shareholder Rights
Agreement, the Company is not currently under any obligation to register under
the Securities Act of 1933, as amended (the "Securities Act") any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
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<PAGE> 14
3.19 Governmental Consent, etc. No consent, approval, qualification or
authorization of, or designation, declaration or filing with, any federal, state
or local governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this Agreement, the
Shareholder Rights Agreement and the Co-Sale Agreement, or the offer, sale or
issuance of the Shares (and the Conversion Shares), or the consummation of any
other transaction contemplated hereby, except (a) filing of the Restated
Articles in the office of the Secretary of State of the State of California, and
(b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
(and the Conversion Shares) under the California Corporate Securities Law and
other applicable Blue Sky laws, which filing and qualification, if required,
will be accomplished in a timely manner prior to or promptly upon completion of
the Closing.
3.20 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company and believes it can
obtain without undue burden or expense, any similar authority for the conduct of
its business as currently planned to be conducted. The Company is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
3.21 Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.22 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.23 Disclosures. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate furnished
to the Purchasers pursuant to this Agreement, contains any untrue statement of a
material fact or, when taken together, omits to state a material fact necessary
to make the statements made herein, in light of the circumstances under which
they were made, not misleading. However, as to any projections furnished to the
Purchasers, such projections were prepared in good faith by the Company, but the
Company makes no representation or warranty that it will be able to achieve such
projections. The Company has fully provided each Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Shares.
3.24 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.25 Minute Books. The minute books of the Company made available to the
Purchasers contain summaries of all meetings of directors and shareholders since
the time of incorporation.
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SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:
4.1 Investment Representations and Covenants of the Purchasers.
(a) This Agreement is made by the Company with each Purchaser in
reliance upon such Purchaser's representations and covenants made in this
Section 4, which by its execution of this Agreement each Purchaser hereby
confirms. Each Purchaser represents that the Shares to be received will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting any participation in or otherwise
distributing the same. Each Purchaser further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares or any Common Stock acquired on conversion thereof.
(b) Each Purchaser understands and acknowledges that the offering
of the Shares pursuant to this Agreement will not, and any issuance of Common
Stock on conversion thereof may not, be registered under the Securities Act on
the ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt pursuant to section 4(2) or Section 3(b) of the
Securities Act, and that the Company's reliance on such exemption is predicated
on the Purchasers' representations set forth herein.
(c) Each Purchaser covenants that in no event will it make any
disposition of any of the Shares, or any Conversion Shares acquired upon the
conversion thereof, except in accordance with Section 4 of the Shareholder
Rights Agreement.
(d) Each Purchaser represents that it is experienced in
evaluating recently organized, high technology companies such as the Company, is
able to fend for itself in transactions such as the one contemplated by this
Agreement, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its prospective
investment in the Company, and has the ability to bear the economic risks of the
investment.
(e) Each Purchaser acknowledges and understands that the Shares,
and any Conversion Shares, must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available, and that, except as otherwise provided in the
Shareholder Rights Agreement, the Company is under no obligation to register
either the Shares or Conversion Shares.
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(f) Each Purchaser acknowledges that it has received and reviewed
a copy of Rule 144 promulgated under the Act, which permits limited public
resales of securities acquired in a non-public offering, subject to the
satisfaction of certain conditions. Each Purchaser understands that before the
Shares, or any Conversion Shares, may be sold under Rule 144, the following
conditions must be fulfilled, except as otherwise described below: (i) certain
public information about the Company must be available, (ii) the sale must occur
at least one year after the later of the date the Shares were sold by the
Company or the date they were sold by an affiliate of the Company, (iii) the
sale must be made in a broker's transaction and (iv) the number of Shares sold
must not exceed certain volume limitations. If, however, the sale occurs at
least two years after the Shares were sold by the Company or an affiliate of the
Company, and if the Purchaser is not an affiliate of the Company, the foregoing
conditions will not apply. Each Purchaser understands that the current
information referred to above is not now available and the Company has no
present plans to make such information available.
(g) Each Purchaser acknowledges that in the event the applicable
requirements of Rule 144 are not met, registration under the Securities Act or
compliance with another exemption from registration will be required for any
disposition of its stock. Each Purchaser understands that although Rule 144 is
not exclusive, the Commission has expressed its opinion that persons proposing
to sell restricted securities received in a private offering other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales and that such persons and the brokers who participate in the
transactions do so at their own risk.
(h) Each Purchaser covenants that, in the absence of an effective
registration statement covering the stock in question, it will sell, transfer,
or otherwise dispose of the Shares and any Conversion Shares only in a manner
consistent with its representations and covenants set forth in this Section 4.
In connection therewith each Purchaser acknowledges that the Company shall make
a notation on its stock books regarding the restrictions on transfer set forth
in this Section 4 and shall transfer shares on the books of the Company only to
the extent not inconsistent therewith.
(i) Each Purchaser represents that it is an "accredited investor"
as defined in Rule 501 pursuant to the Securities Act.
4.2 No Public Market. Each Purchaser understands that no public market
now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Shares.
4.3 Receipt of Information. Each Purchaser has received and reviewed
this Agreement and all Exhibits hereto; it, its attorney and its accountant have
had access to, and an opportunity to review all documents and other materials
requested of, the Company; it and they have been given an opportunity to ask any
and all questions of, and receive answers from, the Company concerning the terms
and conditions of the offering and to evaluate the suitability of an investment
in the Shares; and, in evaluating the suitability of an investment in the
Shares, it and they have not relied upon any representations or other
information (whether oral or written) other than as set forth in the documents
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<PAGE> 17
and answers referred to above. The foregoing, however, does not limit or modify
the representations and warranties of the Company in Section 3 of this Agreement
or the right of the Purchasers to rely thereon.
4.4 Authorization. Each of the Purchasers has the full right, power and
authority to enter into and perform the Purchasers' obligations under this
Agreement, the Shareholder Rights Agreement and the Co-Sale Agreement, and this
Agreement and the Shareholder Rights Agreement and the Co-Sale Agreement
constitute valid and binding obligations of the Purchaser enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditor's rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) to the extent that the indemnification provisions
set forth in the Shareholder Rights Agreement may be limited by applicable laws.
4.5 Consents. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Purchaser is required in connection with the valid execution and delivery of
this Agreement, the Shareholder Rights Agreement or the Co-Sale Agreement.
SECTION 5
Conditions to Obligations of Purchasers in the Series A Closing
The Purchasers' obligations to purchase the Series A Preferred at the
Series A Closing are, at the option of each Purchaser, subject to the
fulfillment on or prior to the Series A Closing Date of each of the following
conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of the Series A Closing Date
with the same force and effect as if they had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Series A
Closing Date shall have been performed or complied with in all material
respects.
5.3 Employees. Simon Cao, Jessy Chao and Paul Jiang shall have become
employees of the Company prior to the Series A Closing Date and entered into
Employment, Confidential Information, Invention Assignment and Arbitration
Agreements with the Company.
5.4 Opinion of Company's Counsel. The Purchasers shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated the Series A Closing Date, in substantially the form of
Exhibit G.
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5.5 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate executed by the President of the Company, dated the
Series A Closing Date, and certifying to the fulfillment of the conditions
specified in Sections 5.1, 5.2, and 5.9 of this Agreement, and that he has made,
or caused to be made, such investigations as he deemed necessary in order to
permit him to verify the accuracy of the information set forth in such
certificate.
5.6 Blue Sky. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by any
state for the offer and sale of the Series A Preferred and the Common Stock
issuable upon conversion of the Series A Preferred.
5.7 Board of Directors. On or before the Closing, the Bylaws of the
Company shall provide for a flexible number of directors from four to seven and
fixing the current number of directors at seven. The Board of Directors shall at
the Closing consist of Michael Goguen, Seth Neiman, Todd Brooks, Simon Cao,
Jessy Chao and two vacancies.
5.8 Restated Articles. The Restated Articles shall have been filed with
the Secretary of State of the State of California.
5.9 No Material Adverse Change. There shall have been no material
adverse change in the Company's business or financial condition.
5.10 Shareholder Rights Agreement. The Purchasers and the Company shall
have executed the Shareholder Rights Agreement.
5.11 Co-Sale Agreement. The Company shall have entered into the Co-Sale
Agreement with the Purchasers in the form attached hereto as Exhibit E.
5.12 Voting Agreement. The Company, Simon Cao, Jessy Chao and Paul Jiang
shall have entered into the Voting Agreement with the Purchasers in the form
attached hereto as Exhibit F.
SECTION 6
Conditions to the Obligations of Purchasers in the Series B Closing
The Purchasers' obligations to purchase the Series B Preferred at the
Series B Closing are, at the option of Purchaser, subject to the fulfillment on
or prior to the Series B Closing Date of each of the following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of the Series B Closing Date
with the same force and effect as if they had been made on and as
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of said date with such exceptions as are set forth in Exhibit C attached hereto,
which shall be updated as of the Series B Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Series B Closing Date shall have been performed or complied with.
6.3 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company, executed by the President of the
Company, dated the Series B Closing Date, and certifying, among other things, to
the fulfillment of the conditions specified in Sections 6.1 and 6.2 of this
Agreement.
6.4 Fulfillment of Series B Milestones. The Company shall have achieved
and completed all of the Series B Milestones as set forth in and determined
(with regard to the achievement thereof) in accordance with Exhibit H attached
hereto.
6.5 Opinion of Company's Counsel. The Purchasers shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated the Series B Closing Date, in form and substance
reasonably satisfactory to Purchasers and their special counsel.
SECTION 7
Conditions to the Obligations of Purchasers in the Series C Closing
The Purchasers' obligations to purchase the Series C Preferred at the
Series C Closing are, at the option of each Purchaser, subject to the
fulfillment of the following conditions:
7.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of the Series C Closing Date
with the same force and effect as if they had been made on and as of said date
with such exceptions as are set forth in Exhibit C attached hereto, which shall
be updated as of the Series C Closing Date.
7.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Series C Closing Date shall have been performed or complied with.
7.3 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company, executed by the President of the
Company, dated the Series C Closing Date, and certifying, among other things, to
the fulfillment of the conditions specified in Sections 7.1 and 7.2 of this
Agreement.
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7.4 Fulfillment of Series C Milestones. The Company shall have achieved
and completed all of the Series C Milestones as set forth in and determined
(with regard to the achievement thereof) in accordance with Exhibit H attached
hereto.
7.5 Opinion of Company's Counsel. The Purchasers shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated the Series C Closing Date, in form and substance
reasonably satisfactory to Purchasers and their special counsel.
SECTION 8
Conditions to the Obligations of the Company in the Series A Closing
The Company's obligation to sell and issue the Series A Preferred at the
Series A Closing is, at the option of the Company, subject to the fulfillment as
of the Series A Closing Date of the following conditions:
8.1 Representations. With respect to each Purchaser, the representations
made by such Purchaser in Section 4 hereof shall be true and correct when made,
and shall be true and correct on the Series A Closing Date.
8.2 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Shares.
8.3 Shareholder Rights Agreement. The Purchasers and the Company shall
have entered into the Shareholder Rights Agreement.
8.4 Legal Matters. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 9
Conditions to the Obligations of the Company in the Series B Closing
The Company's obligation to sell and issue the Series B Preferred at the
Series B Closing is, at the option of the Company, subject to the fulfillment as
of the Series B Closing Date of the following conditions:
9.1 Representations. With respect to each Purchaser, the representations
made by such Purchaser in Section 4 hereof shall be true and correct when made,
and shall be true and correct on the
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<PAGE> 21
Series B Closing Date with such exceptions as are set forth in Exhibit C
attached hereto, which shall be updated as of the Series B Closing Date.
9.2 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Shares.
9.3 Legal Matters. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 10
Conditions to the Obligations of the Company in the Series C Closing
The Company's obligation to sell and issue the Series C Preferred at the
Series C Closing is, at the option of the Company, subject to the fulfillment as
of the Series C Closing Date of the following conditions:
10.1 Representations. With respect to each Purchaser, the
representations made by such Purchaser in Section 4 hereof shall be true and
correct when made, and shall be true and correct on the Series C Closing Date
with such exceptions as are set forth in Exhibit C attached hereto, which shall
be updated as of the Series C Closing Date.
10.2 Blue Sky. The Company shall have obtained all necessary blue sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
10.3 Legal Matters. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California, without giving effect to the conflicts of
laws principles thereof.
11.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
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11.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase Shares shall not
be assignable without the consent of the Company.
11.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged,
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge, or termination is
sought; provided, however, that holders of sixty-seven percent (67%) of the
shares of Common Stock issued or issuable upon conversion of the outstanding
Shares and (whether or not converted) not resold to the public may waive or
amend, on behalf of all Purchasers, any provisions hereof, so long as the effect
thereof will be that all such Purchasers and other holders of the Shares will be
treated equally.
11.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person by facsimile or by courier
service or five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, at such
Purchaser's address set forth in Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address and facsimile number set forth at the end of this
Agreement and addressed to the attention of the Corporate Secretary, or at such
other address as the Company shall have furnished to the Purchasers (with a copy
to Judith M. O'Brien, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304; facsimile: (650) 493-6811).
11.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
11.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
-16-
<PAGE> 23
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN
EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
OR SUCH EXEMPTION BEING AVAILABLE.
11.8 Expenses. The Company and the Purchasers shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby; except that, upon the Series A Closing, the Company will
pay at the Series A Closing the reasonable legal fees (up to a maximum of
$10,000) and reasonable expenses upon receipt of a bill therefor, incurred by
Venture Law Group, special counsel to the Purchasers.
11.9 Finder's Fee. The Company and the Purchasers shall each indemnify
and hold the other harmless from any liability for any commission or
compensation in the nature of a finder's fee (including the costs, expenses and
legal fees of defending against such liability) for which the Company or the
Purchaser's, or any of their respective partners, employees, or representatives,
as the case may be, is responsible.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11.11 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
11.12 Gender. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.
11.13 Headings. Headings and the table of contents in this Agreement are
for reference purposes only and shall not be deemed to have an substantive
effect.
-17-
<PAGE> 24
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
AVANEX CORPORATION
a California corporation
By: /s/ SIMON CAO
-------------------------------
Simon X. Cao, President
[Signature page to Preferred Stock Purchase Agreement]
<PAGE> 25
"PURCHASERS"
SEQUOIA CAPITAL VII
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
SEQUOIA TECHNOLOGY PARTNERS VII
A CALIFORNIA LIMITED PARTNERSHIP
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
SQP 1997
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
SEQUOIA 1997 LLC
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
[Signature page to Preferred Stock Purchase Agreement]
<PAGE> 26
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
CROSSPOINT VENTURE PARTNERS 1997
By: /s/ SETH NEIMAN
-------------------------------
Seth Neiman
Partner
[Signature page to Preferred Stock Purchase Agreement]
<PAGE> 27
WS INVESTMENT 98
By: /s/ JUDITH M. O'BRIEN
-------------------------------
Partner
BRADFORD C. O'BRIEN AND JUDITH M. O'BRIEN,
TRUSTEES OF THE O'BRIEN FAMILY TRUST U/D/T
DATED 7/1/92
By: /s/ JUDITH M. O'BRIEN
-------------------------------
[Signature page to Preferred Stock Purchase Agreement]
<PAGE> 28
JAFCO CO., LTD.
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO R-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO JS-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(A) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(B) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY No. 2 INVESTMENT
ENTERPRISE PARTNERSHIP
By: /s/ HITOSHI IMUTA
-------------------------------
Hitoshi Imuta, Chairman
JAFCO America Ventures, Inc.
Its Executive Partner
[Signature page to Preferred Stock Purchase Agreement]
<PAGE> 29
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES A CLOSING
<TABLE>
<CAPTION>
Amount of
Aggregate Cash Cancellation Number
Name of Purchaser Purchase Price Amount of Debt of Shares
----------------- -------------- ------ ------- ---------
<S> <C> <C> <C> <C>
Crosspoint Venture Partners 1997 $ 334,500.00 $ 309,500.00 $ 25,000.00 1,500,000
JAFCO Co., Ltd. $ 13,399.84 60,089
JAFCO R-3 Investment Enterprise $ 13,399.84 60,089
Partnership
JAFCO JS-3 Investment Enterprise $ 13,399.84 60,089
Partnership
JAFCO G6-(A) Investment $ 13,399.84 60,089
Enterprise Partnership
JAFCO G6-(B) Investment $ 13,399.84 60,089
Enterprise Partnership
U.S. Information Technology No. 2 $ 267,500.76 1,199,555
Investment Enterprise Partnership
Sequoia Capital VII, a California $ 306,067.50 $ 281,067.50 $ 25,000.00 1,372,500
Limited Partnership
Sequoia Technology Partners VII, $ 13,380.00 60,000
a California Limited Partnership
SQP 1997 $ 6,208.32 27,840
Sequoia 1997 LLC $ 3,492.18 15,660
Sequoia International Partners $ 5,352.00 24,000
WS Investment 98 $ 5,589.94 25,067
Bradford C. O'Brien and Judith M. $ 1,117.90 5,013
O'Brien, Trustees of the O'Brien
Family Trust U/D/T
dated 7/1/92
TOTAL $1,010,207.80 4,530,080
============= =========
</TABLE>
<PAGE> 30
Series B Closing
<TABLE>
<CAPTION>
Aggregate Number
Name of Purchaser Purchase Price of Shares
----------------- -------------- ---------
<S> <C> <C>
Crosspoint Venture Partners $ 834,000.00 2,085,000
JAFCO Co., Ltd. $ 33,443.20 83,608
JAFCO R-3 Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO JS-3 Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO G6-(A) Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO G6-(B) Investment Enterprise Partnership $ 33,443.20 83,608
U.S. Information Technology Investment Enterprise $ 666,784.00 1,666,960
Partnership
Sequoia Capital VII, a California Limited $ 763,110.00 1,907,775
Partnership
Sequoia Technology Partners VII, a California $ 33,360.00 83,400
Limited Partnership
SQP 1997 $ 15,479.20 38,698
Sequoia 1997 LLC $ 8,706.80 21,767
Sequoia International Partners $ 13,344.00 33,360
WS Investment $ 13,915.00 34,787
Bradford C. O'Brien and Judith M. O'Brien, $ 2,782.80 6,957
Trustees of the O'Brien Family Trust U/D/T
dated 7/1/92
TOTAL $2,518,697.80 6,296,744
============= =========
</TABLE>
<PAGE> 31
SERIES C CLOSING
<TABLE>
<CAPTION>
Aggregate Number
Name of Purchaser Purchase Price of Shares
----------------- -------------- ---------
<S> <C> <C>
Crosspoint Venture Partners $1,825,740.00 2,415,000
JAFCO Co., Ltd. $ 73,211.79 96,841
JAFCO R-3 Investment Enterprise Partnership $ 73,211.79 96,841
JAFCO JS-3 Investment Enterprise Partnership $ 73,211.79 96,841
JAFCO G6-(A) Investment Enterprise Partnership $ 73,211.79 96,841
JAFCO G6-(B) Investment Enterprise Partnership $ 73,211.79 96,841
U.S. Information Technology Investment Enterprise $1,459,681.02 1,930,795
Partnership
Sequoia Capital VII, a California Limited $1,825,740.00 2,415,000
Partnership
Sequoia Technology Partners VII, a California
Limited Partnership
SQP 1997
Sequoia 1997 LLC
Sequoia International Partners
WS Investment $ 30,495.00 40,337
Bradford C. O'Brien and Judith M. O'Brien, $ 6,098.65 8,067
Trustees of the O'Brien Family Trust U/D/T
dated 7/1/92
TOTAL $5,513,813.62 7,293,404
============= =========
</TABLE>
<PAGE> 32
EXHIBIT B
FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE> 33
EXHIBIT C
SCHEDULE OF EXCEPTIONS
<PAGE> 34
EXHIBIT D
SHAREHOLDER RIGHTS AGREEMENT
<PAGE> 35
EXHIBIT E
CO-SALE AGREEMENT
<PAGE> 36
EXHIBIT F
VOTING AGREEMENT
<PAGE> 37
EXHIBIT G
OPINION OF WILSON SONSINI GOODRICH & ROSATI
<PAGE> 38
EXHIBIT H
SERIES B PREFERRED AND SERIES C PREFERRED MILESTONES
<PAGE> 1
EXHIBIT 10.10
- --------------------------------------------------------------------------------
AVANEX CORPORATION
FIRST AMENDED AND RESTATED
SERIES A PREFERRED, SERIES B PREFERRED AND
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
SERIES A CLOSING: FEBRUARY 10, 1998
SERIES B CLOSING: JUNE 29, 1998
SERIES C CLOSING: FEBRUARY 19, 1999
SERIES C SECOND CLOSING: MARCH 25, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
SECTION 1 Authorization and Sale of Preferred Stock...........................................................2
1.1 Authorization.......................................................................................2
1.2 Sale of the Shares..................................................................................2
1.3 Additional Sale(s) of Preferred Stock...............................................................2
SECTION 2 Closing Date; Delivery..............................................................................3
2.1 Closing Date........................................................................................3
2.2 Delivery............................................................................................4
SECTION 3 Representations and Warranties of the Company.......................................................4
3.1 Organization and Standing; Qualification............................................................4
3.2 Corporate Power.....................................................................................5
3.3 Subsidiaries........................................................................................5
3.4 Capitalization......................................................................................5
3.5 Authorization.......................................................................................5
3.6 Title to Properties and Assets; Liens, etc..........................................................6
3.7 Patents, Trademarks, etc............................................................................6
3.8 Agreements..........................................................................................6
3.9 Material Contracts and Commitments..................................................................7
3.10 Compliance with Other Instruments, None Burdensome, etc.............................................7
3.11 Litigation, etc.....................................................................................7
3.12 Employees...........................................................................................7
3.13 Employee Agreements.................................................................................8
3.14 No Conflict of Interest.............................................................................8
3.15 No Financial Statements.............................................................................8
3.16 Insurance...........................................................................................8
3.17 Qualified Small Business Stock......................................................................8
3.18 Registration Rights.................................................................................8
3.19 Governmental Consent, etc...........................................................................9
3.20 Permits.............................................................................................9
3.21 Environmental and Safety Laws.......................................................................9
3.22 Brokers or Finders..................................................................................9
3.23 Disclosures.........................................................................................9
3.24 Employee Benefit Plans..............................................................................9
3.25 Minute Books.......................................................................................10
SECTION 4 Representations and Warranties of the Purchasers...................................................10
4.1 Investment Representations and Covenants of the Purchasers.........................................10
4.2 No Public Market...................................................................................11
4.3 Receipt of Information.............................................................................11
4.4 Authorization......................................................................................12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.5 Consents...........................................................................................12
SECTION 5 Conditions to Obligations of Purchasers in the Series A Closing....................................12
5.1 Representations and Warranties Correct.............................................................12
5.2 Covenants..........................................................................................12
5.3 Employees..........................................................................................12
5.4 Opinion of Company's Counsel.......................................................................13
5.5 Compliance Certificate.............................................................................13
5.6 Blue Sky...........................................................................................13
5.7 Board of Directors.................................................................................13
5.8 Restated Articles..................................................................................13
5.9 No Material Adverse Change.........................................................................13
5.10 Shareholder Rights Agreement.......................................................................13
5.11 Co-Sale Agreement..................................................................................13
5.12 Voting Agreement...................................................................................13
SECTION 6 Conditions to the Obligations of Purchasers in the Series B Closing................................14
6.1 Representations....................................................................................14
6.2 Covenants..........................................................................................14
6.3 Compliance Certificate.............................................................................14
6.4 Fulfillment of Series B Milestones.................................................................14
6.5 Opinion of Company's Counsel.......................................................................14
SECTION 7 Conditions to the Obligations of Purchasers in each Series C Closing...............................14
7.1 Representations....................................................................................14
7.2 Covenants..........................................................................................15
7.3 Compliance Certificate.............................................................................15
7.4 Certificate of Amendment...........................................................................15
7.5 No Material Adverse Change.........................................................................15
7.6 Shareholder Rights Agreement.......................................................................15
7.7 Co-Sale Agreement..................................................................................15
7.8 Voting Agreement...................................................................................15
7.9 Fulfillment of Series C Milestones.................................................................15
7.10 Opinion of Company's Counsel.......................................................................15
SECTION 8 Conditions to the Obligations of the Company in the Series A Closing...............................16
8.1 Representations....................................................................................16
8.2 Blue Sky...........................................................................................16
8.3 Shareholder Rights Agreement.......................................................................16
8.4 Legal Matters......................................................................................16
SECTION 9 Conditions to the Obligations of the Company in the Series B Closing...............................16
9.1 Representations....................................................................................16
9.2 Blue Sky...........................................................................................16
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
9.3 Legal Matters......................................................................................16
SECTION 10 Conditions to the Obligations of the Company in each Series C Closing..............................17
10.1 Representations....................................................................................17
10.2 Blue Sky...........................................................................................17
10.3 Shareholder Rights Agreement.......................................................................17
10.4 Voting Agreement...................................................................................17
10.5 Legal Matters......................................................................................17
SECTION 11 Miscellaneous......................................................................................17
11.1 Governing Law......................................................................................17
11.2 Survival...........................................................................................17
11.3 Successors and Assigns.............................................................................17
11.4 Entire Agreement; Amendment........................................................................18
11.5 Notices, etc.......................................................................................18
11.6 Delays or Omissions................................................................................18
11.7 California Corporate Securities Law................................................................18
11.8 Expenses...........................................................................................19
11.9 Finder's Fee.......................................................................................19
11.10 Counterparts.......................................................................................19
11.11 Severability.......................................................................................19
11.12 Gender.............................................................................................19
11.13 Headings...........................................................................................19
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
A. Schedule of Purchasers
B. First Amended and Restated Articles of Incorporation
C. Schedule of Exceptions
D. First Amended and Restated Shareholder Rights Agreement
E. First Amended and Restated Co-Sale Agreement
F. First Amended and Restated Voting Agreement
G. Form of Opinion of Wilson Sonsini Goodrich & Rosati
H. Series B Preferred and Series C Preferred Milestones
I. Certificate of Amendment to the First Amended and
Restated Articles of Incorporation
</TABLE>
-iv-
<PAGE> 6
AVANEX CORPORATION
FIRST AMENDED AND RESTATED
SERIES A PREFERRED, SERIES B PREFERRED AND
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This First Amended and Restated Series A Preferred, Series B Preferred
and Series C Preferred Stock Purchase Agreement (this "Agreement") is made as of
February 19, 1999, by and among Avanex Corporation, a California corporation
(the "Company"), with its principal office at 42501 Albrae Avenue, Fremont,
California 94538, and the persons and entities listed on the Schedule of
Purchasers attached as Exhibit A hereto (the "Purchasers").
Recitals
A. The Company and certain of the Purchasers entered into that certain
Series A Preferred, Series B Preferred and Series C Preferred Stock Purchase
Agreement on February 10, 1998 (the "Prior Purchase Agreement").
B. Pursuant to the Prior Purchase Agreement, the Company sold 4,530,080
shares of Series A Preferred Stock of the Company to certain Purchasers on
February 10, 1998, and, after the Company had met certain conditions set forth
in the Prior Purchase Agreement, the Company sold 6,296,744 shares of Series B
Preferred Stock of the Company to certain Purchasers on June 29, 1998.
C. The Prior Purchase Agreement provided for, among other things, the
issuance and sale, upon the Company meeting certain milestones set forth in the
Prior Purchase Agreement, of up to 7,350,000 of the Company's Series C Preferred
Stock to certain of the Purchasers.
D. The parties to the Prior Purchase Agreement wish to increase the
number of shares of Series C Preferred Stock of the Company authorized for sale
and issuance by 3,500,000 shares from 7,350,000 to 10,850,000 shares in order to
permit additional investors to become Purchasers under this Agreement.
E. The parties to the Prior Purchase Agreement wish to amend, restate
and supersede the Prior Purchase Agreement in its entirety and to accept the
terms and conditions of this Agreement in lieu of the Prior Purchase Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Purchasers and the Company hereby agree as follows:
SECTION 1
Authorization and Sale of Preferred Stock
<PAGE> 7
1.1 Authorization.
(a) Series A Preferred Stock. The Company has, or before the
Series A Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 4,600,000 shares of its Series A
Preferred Stock ("Series A Preferred" or, together with the shares of Series B
Preferred Stock described in Section 1.1(b) below and Series C Preferred Stock
described in Section 1.1(c) below, the "Shares") and up to 4,600,000 shares of
Common Stock issuable upon conversion of the Series A Preferred pursuant to the
First Amended and Restated Articles of Incorporation of the Company, as amended,
in the form attached hereto as Exhibit B (the "Restated Articles"). The Series A
Preferred shall be sold for a purchase price of $0.223 per share.
(b) Series B Preferred Stock. The Company has, or before the
Series A Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 6,350,000 shares of its Series B
Preferred Stock ("Series B Preferred" or, as described in Section 1.1(a) above,
the "Shares") and up to 6,350,000 shares of Common Stock issuable upon
conversion of the Series B Preferred pursuant to the Restated Articles. The
Series B Preferred shall be sold for a purchase price of $0.40 per share.
(c) Series C Preferred Stock. The Company has, or before the
Series C Closing Date (as that term is hereinafter defined) will have,
authorized the sale and issuance of up to 10,850,000 shares of its Series C
Preferred Stock ("Series C Preferred" or, as described in Section 1.1(a) above,
the "Shares") and up to 10,850,000 shares of Common Stock issuable upon
conversion of the Series C Preferred pursuant to the Restated Articles, as
amended by the Certificate of Amendment to the Restated Articles (the
"Certificate of Amendment") in the form attached hereto as Exhibit I. The Series
C Preferred shall be sold for a purchase price of $0.756 per share.
1.2 Sale of the Shares. Subject to the terms and conditions
hereof, the Company will issue and sell to each of the Purchasers, and the
Purchasers will severally buy from the Company, the number of shares (the
"Shares") of Series A Preferred, Series B Preferred and Series C Preferred
specified opposite each Purchaser's name on the Schedule of Purchasers, at the
aggregate purchase price set forth therein. The Company's agreements with each
of the Purchasers are separate agreements, and the sales of the Shares to each
of the Purchasers are separate sales.
1.3 Additional Sale(s) of Preferred Stock. Any of the authorized
shares of Preferred Stock not sold at the Series A Closing, Series B Closing or
Series C Closing, as defined below, may be sold to one or more additional
purchasers at a subsequent closing(s) to be held at any time before ninety (90)
days after the applicable Closing Date without any further action or approval of
the other parties to this Agreement, provided that each such purchaser agrees to
be bound by the terms hereof as a "Purchaser" hereunder and provided further
that any such sale or sales be on terms identical to the terms contained in this
Agreement, and each subsequent Purchaser shall become a party to this Agreement
(and Exhibit A hereto shall be amended to include such subsequent Purchaser) and
to that certain First Amended and Restated Shareholder Rights Agreement dated as
of the date hereof by and among the Purchasers and
-2-
<PAGE> 8
the Company, in the form attached hereto as Exhibit D (the "Shareholder Rights
Agreement"); and to that certain First Amended and Restated Voting Agreement
dated as of the date hereof by and among the Company, the Purchasers and the
Founders, the form of which is attached hereto as Exhibit F (the "Voting
Agreement"); and that certain First Amended and Restated Co-Sale Agreement dated
as of the date hereof by and among the Company, certain of the Purchasers, and
the Founders named therein, the form of which is attached hereto as Exhibit E
(the "Co-Sale Agreement,") (and together with the Shareholder Rights Agreement
and the Voting Agreement, the "Ancillary Agreements"), and shall have the rights
and obligations of a Purchaser hereunder and thereunder. The shares of Preferred
Stock sold at such additional closing(s) shall be deemed to be "Shares"
hereunder and the purchasers thereof shall be deemed to be "Purchasers"
hereunder. The subsequent closings shall take place at Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304, at 10:00 a.m., local
time, or at such other times and places as the Company and Purchasers acquiring
in the aggregate more than a majority of the shares of Series C Preferred Shares
sold pursuant hereto at such Closing mutually agreed upon orally or in writing
(which each time and place are designated as a "Closing").
SECTION 2
Closing Date; Delivery
2.1 Closing Date.
(a) Series A Closing Date. The closing of the purchase and
sale of the Series A Preferred shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, at 10:00 a.m.,
local time, on or prior to February 10, 1998, or at such other time and place
upon which the Company and the Purchasers shall agree (which time and place
shall be referred to as the "Series A Closing" and the date of the Series A
Closing is hereinafter referred to as the "Series A Closing Date").
(b) Series B Closing Date. In addition, within ten (10)
business days following delivery of notice by the Company that the conditions
set forth in Section 6 below have been satisfied, the closing of the purchase
and sale of the Series B Preferred shall be held at the offices of Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California (which time
and place shall be referred to as the "Series B Closing" and the date of the
Series B Closing is hereinafter referred to as the "Series B Closing Date").
Such Series B Closing shall be held on such date and at such time as the parties
agree and absent such agreement, on the tenth (10th) business day following
delivery of the foregoing described notice at 10:00 a.m., local time.
(c) Series C Closing Date. Provided that the conditions set
forth in Section 7 below have been satisfied, the first closing of the purchase
and sale of the Series C Preferred shall be held on or prior to February 19,
1999, or at such other time and place upon which the Company and the Purchasers
shall agree. The second closing of the purchase and sale of the Series C
Preferred Shall be held on or prior to March 25, 1999, or at such other time and
place upon which the Company and the
-3-
<PAGE> 9
Purchasers shall agree. Such time and place for the first closing, the second
closing and any subsequent closing(s) are each referred to individually herein
as a "Series C Closing," and the date of each such Series C Closing is
hereinafter referred to individually herein as a "Series C Closing Date").
(d) The Series A Closing, the Series B Closing and the Series
C Closing shall sometimes be referred to individually herein as a "Closing."
2.2 Delivery.
(a) Series A Preferred. At the Series A Closing, the Company
will issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series A Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
(b) Series B Preferred. At the Series B Closing, the Company
will issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series B Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
(c) Series C Preferred. At the Series C Closing, the Company
will issue to each Purchaser a certificate or certificates registered in such
Purchaser's name as set forth on the Schedule of Purchasers attached hereto as
Exhibit A, representing the number of shares of Series C Preferred set forth
opposite such Purchaser's name on such Schedule of Purchasers against payment of
the purchase price therefor. Such payment shall be by check or wire transfer
payable to the Company or by the cancellation of outstanding indebtedness.
SECTION 3
Representations and Warranties of the Company
Except as set forth on the Schedule of Exceptions attached as Exhibit C
hereto, the Company hereby represents and warrants to the Purchasers as follows:
3.1 Organization and Standing; Qualification. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company is not qualified to do
business as a foreign corporation in any jurisdiction and such qualification is
not presently required.
-4-
<PAGE> 10
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, the
Shareholder Rights Agreement, the Co-Sale Agreement and the Voting Agreement, to
sell, issue and deliver the Shares hereunder, to issue the Common Stock issuable
upon conversion of the Shares (the "Conversion Shares") and to carry out and
perform its obligations under the terms of this Agreement, the Shareholder
Rights Agreement, the Co-Sale Agreement and the Voting Agreement.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, of which 4,980,000 shares are
issued and outstanding, 4,600,000 shares of Series A Preferred Stock ("Series A
Preferred"), 4,530,080 of which are issued and outstanding prior to the Series C
Closing Date, 6,350,000 shares of Series B Preferred Stock ("Series B
Preferred"), 6,296,744 of which are issued and outstanding prior to the Series C
Closing Date, and 10,850,000 shares of Series C Preferred, none of which are
issued or outstanding prior to the Series C Closing Date. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable and have been issued in compliance with all applicable federal
and state securities laws. The Company has reserved (i) 4,600,000 shares of
Common Stock for issuance upon conversion of the Series A Preferred, 6,350,000
shares of Common Stock for issuance upon conversion of the Series B Preferred,
and 10,850,000 shares of Common Stock for issuance upon conversion of the Series
C Preferred and (ii) 10,200,000 shares of Common Stock for issuance to employees
pursuant to the Company's 1998 Stock Plan, 4,510,501 of which are subject to
outstanding options, and 2,709,499 of which remain available for future grant.
The Series A Preferred, Series B Preferred and Series C Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Articles. Except as set forth in Exhibit C hereto, and as set forth in the
Shareholder Rights Agreement, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock or other securities
of the Company. Except for the Shareholders Rights Agreement, the Company is not
a party or subject to any agreement or understanding which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company. Assuming the accuracy of each Purchaser's
representations in Section 4 below, upon issuance in accordance with this
Agreement and the Company's Restated Articles, the Shares will have been issued
in compliance with all federal and state securities laws.
3.5 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement, the Shareholder Rights
Agreement, the Co-Sale Agreement and the Voting Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares (and the Conversion
Shares) and the performance of the Company's obligations hereunder has been
taken or will be taken prior to the Closing. This Agreement, the Shareholder
Rights Agreement, the Co-Sale Agreement and the Voting Agreement, when executed
and delivered by the Company, shall constitute the valid and binding obligations
of the Company enforceable in accordance with their respective terms. The
Shares, when
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issued in compliance with the provisions of this Agreement and the Company's
Restated Articles, will be duly and validly issued, fully paid and
nonassessable. The Common Stock issuable upon conversion of the Shares has been
duly and validly reserved and, when issued in compliance with the provisions of
this Agreement and the Company's Restated Articles, will be duly and validly
issued, fully paid and nonassessable.
3.6 Title to Properties and Assets; Liens, etc. The Company has
good and marketable title to its properties and assets, and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.
3.7 Patents, Trademarks, etc. The Company owns or has the right to
use, free and clear of all liens, charges, claims and restrictions, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses and
proprietary rights necessary to its business as now conducted, and is not
infringing upon or otherwise acting adversely to the right or claimed right of,
to the Company's knowledge, any person under or with respect to any of the
foregoing. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as currently proposed, would violate any
patent, trademark, service mark, trade name, copyright or trade secret or other
proprietary right of any other person or entity. To the Company's knowledge,
after reasonable investigation, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as currently proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Shareholders Rights Agreement or the Co-Sale
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as currently proposed to be
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company does
not believe, after reasonable investigation, that it is or will be necessary to
utilize any inventions of any of the Company's employees (or people it currently
intends to hire) made prior to their employment by the Company.
3.8 Agreements. There are no agreements, understandings,
instruments, contracts or transactions currently in negotiation, which the
Company is a party that may involve (i) obligations (contingent or otherwise)
of, or payments to the Company in excess of, $10,000, (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company or (iii) indemnification by the Company with respect to infringements of
proprietary rights.
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3.9 Material Contracts and Commitments. Neither the Company, nor,
to the knowledge of the Company, any third party is in default under any
material contract, agreement or instrument to which the Company is a party.
3.10 Compliance with Other Instruments, None Burdensome, etc. The
Company is not in violation of any term of its Restated Articles or Bylaws, or
in any material respect of any term or provision of any mortgage, indenture,
contract, agreement, instrument, judgment or decree to which it is a party, and
the Company is not in violation of any federal or state judgment, order,
statute, law, rule or regulation applicable to the Company, which violation
would have a material adverse effect on the Company's business. The execution,
delivery and performance of and compliance with this Agreement, the Shareholder
Rights Agreement and the Co-Sale Agreement and the issuance of the Shares and
the Conversion Shares, will not result in any violation of, or conflict with, or
constitute a default under, any material contract, agreement, instrument or
mortgage, or any pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company; and there is no such violation or default or event
which, with the passage of time or giving of notice or both, would constitute a
violation or default which materially and adversely affects the business of the
Company or any of its properties or assets.
3.11 Litigation, etc. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the Company's knowledge, is there any threat
thereof or basis therefor), which, either in any case or in the aggregate, would
result in any material adverse change in the business or financial condition of
the Company or any of its properties or assets, or in any material impairment of
the right or ability of the Company to carry on its business as now conducted or
as proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement, the
Shareholders Rights Agreement or the Co-Sale Agreement, or any action taken or
to be taken in connection herewith or therewith. The foregoing includes, without
limitation, any action, suit, proceeding, or investigation pending or, to the
Company's knowledge, currently threatened involving the prior employment of any
of the Company's employees, such employees' use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, such employees' obligations under any agreements with prior
employers, or negotiations by the Company with potential backers of, or
investors in, the Company or its proposed business. The Company is not a party
to, or to its knowledge, named in any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit or proceeding by the Company currently pending or that the Company
currently intends to initiate.
3.12 Employees. To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. The
Company does not have any collective bargaining agreements covering any of its
employees. The employment of each officer and employee of the Company is
terminable at the will of the Company.
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3.13 Employee Agreements. Each person presently employed by the
Company has executed (or will execute by the Closing Date) an Employment,
Confidential Information and Invention Assignment Agreement in the form
previously provided to or made available to the Purchasers. To the Company's
knowledge, neither the execution, delivery or performance of such agreements,
nor the carrying on of the Company's business as employees by such persons, nor
the conduct of the Company's business as currently proposed will conflict with
or result in a breach of the terms, conditions or provisions of or constitute a
default under any contract, covenant or instrument under which any of such
persons is now obligated.
3.14 No Conflict of Interest. The Company is not indebted, directly
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the Company's knowledge, none of the
Company's officers or directors, or any members of their immediate families,
are, directly or indirectly, indebted to the Company (other than in connection
with purchases of the Company's stock) or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company except that officers, directors and/or shareholders of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of ) any publicly traded companies that may compete with the
Company. To the Company's knowledge, none of the Company's officers or directors
or any members of their immediate families are, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.15 No Financial Statements. The Company has not prepared any
balance sheet, income statement, statement of changes in financial position and
shareholders' equity or other financial statement and has kept its financial
records on a cash basis since the Company's incorporation on October 24, 1997.
3.16 Insurance. The Company has, or within 30 days following the
Closing, will have in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
3.17 Qualified Small Business Stock. The Company represents and
warrants to the Purchasers that, to the best of its knowledge, the Shares should
qualify as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue code of 1986, as amended as of the date hereof.
3.18 Registration Rights. Except as set forth in the Shareholder
Rights Agreement, the Company is not currently under any obligation to register
under the Securities Act of 1933, as amended (the "Securities Act") any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
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<PAGE> 14
3.19 Governmental Consent, etc. No consent, approval, qualification
or authorization of, or designation, declaration or filing with, any federal,
state or local governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this Agreement, the
Shareholder Rights Agreement and the Co-Sale Agreement, or the offer, sale or
issuance of the Shares (and the Conversion Shares), or the consummation of any
other transaction contemplated hereby, except (a) filing of the Restated
Articles in the office of the Secretary of State of the State of California, and
(b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
(and the Conversion Shares) under the California Corporate Securities Law and
other applicable Blue Sky laws, which filing and qualification, if required,
will be accomplished in a timely manner prior to or promptly upon completion of
the Closing.
3.20 Permits. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company and believes it can
obtain without undue burden or expense, any similar authority for the conduct of
its business as currently planned to be conducted. The Company is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
3.21 Environmental and Safety Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.22 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.23 Disclosures. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate furnished
to the Purchasers pursuant to this Agreement, contains any untrue statement of a
material fact or, when taken together, omits to state a material fact necessary
to make the statements made herein, in light of the circumstances under which
they were made, not misleading. However, as to any projections furnished to the
Purchasers, such projections were prepared in good faith by the Company, but the
Company makes no representation or warranty that it will be able to achieve such
projections. The Company has fully provided each Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Shares.
3.24 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.25 Minute Books. The minute books of the Company made available
to the Purchasers contain summaries of all meetings of directors and
shareholders since the time of incorporation.
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SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:
4.1 Investment Representations and Covenants of the Purchasers.
(a) This Agreement is made by the Company with each Purchaser
in reliance upon such Purchaser's representations and covenants made in this
Section 4, which by its execution of this Agreement each Purchaser hereby
confirms. Each Purchaser represents that the Shares to be received will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting any participation in or otherwise
distributing the same. Each Purchaser further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares or any Common Stock acquired on conversion thereof.
(b) Each Purchaser understands and acknowledges that the
offering of the Shares pursuant to this Agreement will not, and any issuance of
Common Stock on conversion thereof may not, be registered under the Securities
Act on the ground that the sale provided for in this Agreement and the issuance
of securities hereunder is exempt pursuant to Section 4(2) or Section 3(b) of
the Securities Act, and that the Company's reliance on such exemption is
predicated on the Purchasers' representations set forth herein.
(c) Each Purchaser covenants that in no event will it make any
disposition of any of the Shares, or any Conversion Shares acquired upon the
conversion thereof, except in accordance with Section 4 of the Shareholder
Rights Agreement.
(d) Each Purchaser represents that it is experienced in
evaluating recently organized, high technology companies such as the Company, is
able to fend for itself in transactions such as the one contemplated by this
Agreement, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its prospective
investment in the Company, and has the ability to bear the economic risks of the
investment.
(e) Each Purchaser acknowledges and understands that the
Shares, and any Conversion Shares, must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available, and that, except as otherwise provided in the
Shareholder Rights Agreement, the Company is under no obligation to register
either the Shares or Conversion Shares.
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(f) Each Purchaser acknowledges that it has received and
reviewed a copy of Rule 144 promulgated under the Act, which permits limited
public resales of securities acquired in a non-public offering, subject to the
satisfaction of certain conditions. Each Purchaser understands that before the
Shares, or any Conversion Shares, may be sold under Rule 144, the following
conditions must be fulfilled, except as otherwise described below: (i) certain
public information about the Company must be available, (ii) the sale must occur
at least one year after the later of the date the Shares were sold by the
Company or the date they were sold by an affiliate of the Company, (iii) the
sale must be made in a broker's transaction and (iv) the number of Shares sold
must not exceed certain volume limitations. If, however, the sale occurs at
least two years after the Shares were sold by the Company or an affiliate of the
Company, and if the Purchaser is not an affiliate of the Company, the foregoing
conditions will not apply. Each Purchaser understands that the current
information referred to above is not now available and the Company has no
present plans to make such information available.
(g) Each Purchaser acknowledges that in the event the
applicable requirements of Rule 144 are not met, registration under the
Securities Act or compliance with another exemption from registration will be
required for any disposition of its stock. Each Purchaser understands that
although Rule 144 is not exclusive, the Commission has expressed its opinion
that persons proposing to sell restricted securities received in a private
offering other than in a registered offering or pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and that such persons and the brokers who
participate in the transactions do so at their own risk.
(h) Each Purchaser covenants that, in the absence of an
effective registration statement covering the stock in question, it will sell,
transfer, or otherwise dispose of the Shares and any Conversion Shares only in a
manner consistent with its representations and covenants set forth in this
Section 4. In connection therewith each Purchaser acknowledges that the Company
shall make a notation on its stock books regarding the restrictions on transfer
set forth in this Section 4 and shall transfer shares on the books of the
Company only to the extent not inconsistent therewith.
(i) Each Purchaser represents that it is an "accredited
investor" as defined in Rule 501 pursuant to the Securities Act.
4.2 No Public Market. Each Purchaser understands that no public
market now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Shares.
4.3 Receipt of Information. Each Purchaser has received and
reviewed this Agreement and all Exhibits hereto; it, its attorney and its
accountant have had access to, and an opportunity to review all documents and
other materials requested of the Company; it and they have been given an
opportunity to ask any and all questions of, and receive answers from, the
Company concerning the terms and conditions of the offering and to evaluate the
suitability of an investment in the Shares; and, in evaluating the suitability
of an investment in the Shares, it and they have not relied upon any
representations or other information (whether oral or written) other than as set
forth in the documents
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<PAGE> 17
and answers referred to above. The foregoing, however, does not limit or modify
the representations and warranties of the Company in Section 3 of this Agreement
or the right of the Purchasers to rely thereon.
4.4 Authorization. Each of the Purchasers has the full right,
power and authority to enter into and perform the Purchasers' obligations under
this Agreement, the Shareholder Rights Agreement and the Co-Sale Agreement, and
this Agreement and the Shareholder Rights Agreement and the Co-Sale Agreement
constitute valid and binding obligations of the Purchaser enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditor's rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) to the extent that the indemnification provisions
set forth in the Shareholder Rights Agreement may be limited by applicable laws.
4.5 Consents. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Purchaser is required in connection with the valid execution and delivery
of this Agreement, the Shareholder Rights Agreement or the Co-Sale Agreement.
SECTION 5
Conditions to Obligations of Purchasers in the Series A Closing
The Purchasers' obligations to purchase the Series A Preferred at the
Series A Closing are, at the option of each Purchaser, subject to the
fulfillment on or prior to the Series A Closing Date of each of the following
conditions:
5.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of the Series A Closing Date
with the same force and effect as if they had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Series A
Closing Date shall have been performed or complied with in all material
respects.
5.3 Employees. Simon Cao, Jessy Chao and Paul Jiang shall have
become employees of the Company prior to the Series A Closing Date and entered
into Employment, Confidential Information, Invention Assignment and Arbitration
Agreements with the Company.
5.4 Opinion of Company's Counsel. The Purchasers shall have
received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated the Series A Closing Date, in substantially the
form of Exhibit G.
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5.5 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate executed by the President of the Company, dated the
Series A Closing Date, and certifying to the fulfillment of the conditions
specified in Sections 5.1, 5.2, and 5.9 of this Agreement, and that he has made,
or caused to be made, such investigations as he deemed necessary in order to
permit him to verify the accuracy of the information set forth in such
certificate.
5.6 Blue Sky. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or secured an exemption therefrom, required
by any state for the offer and sale of the Series A Preferred and the Common
Stock issuable upon conversion of the Series A Preferred.
5.7 Board of Directors. On or before the Closing, the Bylaws of
the Company shall provide for a flexible number of directors from four to seven
and fixing the current number of directors at seven. The Board of Directors
shall at the Closing consist of Michael Goguen, Seth Neiman, Todd Brooks, Simon
Cao, Jessy Chao and two vacancies.
5.8 Restated Articles. The Restated Articles shall have been filed
with the Secretary of State of the State of California.
5.9 No Material Adverse Change. There shall have been no material
adverse change in the Company's business or financial condition.
5.10 Shareholder Rights Agreement. The Purchasers and the Company
shall have executed that certain Shareholder Rights Agreement dated February 10,
1998, pursuant to the Prior Purchase Agreement.
5.11 Co-Sale Agreement. The Purchasers and the Company shall have
executed that certain Co-Sale Agreement dated February 10, 1998, pursuant to the
Prior Purchase Agreement.
5.12 Voting Agreement. The Company, Simon Cao, Jessy Chao and Paul
Jiang shall have executed that certain Voting Agreement dated February 10, 1998,
pursuant to the Prior Purchase Agreement.
SECTION 6
Conditions to the Obligations of Purchasers in the Series B Closing
The Purchasers' obligations to purchase the Series B Preferred at the
Series B Closing are, at the option of Purchaser, subject to the fulfillment on
or prior to the Series B Closing Date of each of the following conditions:
6.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on
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and as of the Series B Closing Date with the same force and effect as if they
had been made on and as of said date with such exceptions as are set forth in
Exhibit C attached hereto, which shall be updated as of the Series B Closing
Date.
6.2 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Series B Closing Date shall have been performed or complied with.
6.3 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate of the Company, executed by the President of the
Company, dated the Series B Closing Date, and certifying, among other things, to
the fulfillment of the conditions specified in Sections 6.1 and 6.2 of this
Agreement.
6.4 Fulfillment of Series B Milestones. The Company shall have
achieved and completed all of the Series B Milestones as set forth in and
determined (with regard to the achievement thereof) in accordance with Exhibit H
attached hereto.
6.5 Opinion of Company's Counsel. The Purchasers shall have
received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated the Series B Closing Date, in form and
substance reasonably satisfactory to Purchasers and their special counsel.
SECTION 7
Conditions to the Obligations of Purchasers in each Series C Closing
The Purchasers' obligations to purchase the Series C Preferred at each
Series C Closing are, at the option of each Purchaser, subject to the
fulfillment of the following conditions:
7.1 Representations and Warranties Correct. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of each Series C Closing Date
with the same force and effect as if they had been made on and as of said date
with such exceptions as are set forth in Exhibit C attached hereto, which shall
be updated as of each Series C Closing Date.
7.2 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
each Series C Closing Date shall have been performed or complied with.
7.3 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate of the Company, executed by the President of the
Company, dated each Series C Closing Date, and certifying, among other things,
to the fulfillment of the conditions specified in Sections 7.1 and 7.2 of this
Agreement.
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7.4 Certificate of Amendment. The Certificate of Amendment shall
have been filed with the Secretary of State of the State of California.
7.5 No Material Adverse Change. There shall have been no material
adverse change in the Company's business or financial condition.
7.6 Shareholder Rights Agreement. The Purchasers and the Company
shall have executed the Shareholder Rights Agreement.
7.7 Co-Sale Agreement. The Company and the Founders shall have
entered into the Co-Sale Agreement with the Purchasers.
7.8 Voting Agreement. The Company and the Founders shall have
entered into the Voting Agreement with the Purchasers.
7.9 Fulfillment of Series C Milestones. The Company shall have
achieved and completed all of the Series C Milestones as set forth in and
determined (with regard to the achievement thereof) in accordance with Exhibit H
attached hereto.
7.10 Opinion of Company's Counsel. The Purchasers shall have
received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated each Series C Closing Date, in form and
substance reasonably satisfactory to Purchasers and their special counsel.
SECTION 8
Conditions to the Obligations of the Company in the Series A Closing
The Company's obligation to sell and issue the Series A Preferred at
the Series A Closing is, at the option of the Company, subject to the
fulfillment as of the Series A Closing Date of the following conditions:
8.1 Representations. With respect to each Purchaser, the
representations made by such Purchaser in Section 4 hereof shall be true and
correct when made, and shall be true and correct on the Series A Closing Date.
8.2 Blue Sky. The Company shall have obtained all necessary blue
sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
8.3 Shareholder Rights Agreement. The Purchasers and the Company
shall have entered into the Shareholder Rights Agreement.
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8.4 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
SECTION 9
Conditions to the Obligations of the Company in the Series B Closing
The Company's obligation to sell and issue the Series B Preferred at
the Series B Closing is, at the option of the Company, subject to the
fulfillment as of the Series B Closing Date of the following conditions:
9.1 Representations. With respect to each Purchaser, the
representations made by such Purchaser in Section 4 hereof shall be true and
correct when made, and shall be true and correct on the Series B Closing Date
with such exceptions as are set forth in Exhibit C attached hereto, which shall
be updated as of the Series B Closing Date.
9.2 Blue Sky. The Company shall have obtained all necessary blue
sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
9.3 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
SECTION 10
Conditions to the Obligations of the Company in each Series C Closing
The Company's obligation to sell and issue the Series C Preferred at
each Series C Closing is, at the option of the Company, subject to the
fulfillment as of each Series C Closing Date of the following conditions:
10.1 Representations. With respect to each Purchaser, the
representations made by such Purchaser in Section 4 hereof shall be true and
correct when made, and shall be true and correct on each Series C Closing Date
with such exceptions as are set forth in Exhibit C attached hereto, which shall
be updated as of each Series C Closing Date.
10.2 Blue Sky. The Company shall have obtained all necessary blue
sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
-16-
<PAGE> 22
10.3 Shareholder Rights Agreement. The Purchasers and the Company
shall have entered into the Shareholder Rights Agreement.
10.4 Voting Agreement. The Company, the Founders and the Purchasers
shall have executed the Voting Agreement.
10.5 Legal Matters. All material matters of a legal nature which
pertain to this Agreement and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
SECTION 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California, without giving effect to the
conflicts of laws principles thereof.
11.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
11.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase Shares shall not
be assignable without the consent of the Company.
11.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof. This Agreement shall supersede and cancel all prior agreements between
the parties hereto with regard to the subject matter hereof, including, but not
limited to, the Prior Purchase Agreement. Neither this Agreement nor any term
hereof may be amended, waived, discharged, or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge, or termination is sought; provided, however, that holders of
sixty-seven percent (67%) of the shares of Common Stock issued or issuable upon
conversion of the outstanding Shares and (whether or not converted) not resold
to the public may waive or amend, on behalf of all Purchasers, any provisions
hereof, so long as the effect thereof will be that all such Purchasers and other
holders of the Shares will be treated equally.
11.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person by facsimile or by courier
service or five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, at such
Purchaser's address set forth in Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
-17-
<PAGE> 23
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address and facsimile number set forth at the end of this
Agreement and addressed to the attention of the Corporate Secretary, or at such
other address as the Company shall have furnished to the Purchasers (with a copy
to Judith M. O'Brien, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304; facsimile: (650) 493-6811).
11.6 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
11.7 California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH
QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION
BEING AVAILABLE.
11.8 Expenses. The Company and the Purchasers shall each bear their
own expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby; except that, upon the Series A Closing, the Company will
pay at the Series A Closing the reasonable legal fees (up to a maximum of
$10,000) and reasonable expenses upon receipt of a bill therefor, incurred by
Venture Law Group, special counsel to the Purchasers.
11.9 Finder's Fee. The Company and the Purchasers shall each
indemnify and hold the other harmless from any liability for any commission or
compensation in the nature of a finder's fee (including the costs, expenses and
legal fees of defending against such liability) for which the Company or the
Purchaser's, or any of their respective partners, employees, or representatives,
as the case may be, is responsible.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
-18-
<PAGE> 24
11.11 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
11.12 Gender. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.
11.13 Headings. Headings and the table of contents in this Agreement
are for reference purposes only and shall not be deemed to have an substantive
effect.
[This space intentionally left blank.]
-19-
<PAGE> 25
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
AVANEX CORPORATION
a California corporation
By: /s/ WILLIAM LANFRI
--------------------------------------
William Lanfri, Chief Executive Officer
[Signature page to the First Amended and Restated Preferred Stock
Purchase Agreement]
<PAGE> 26
"PURCHASERS"
SEQUOIA CAPITAL VII
a California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS VII
a California Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
A California Limited Liability Company
By: /s/ MICHAEL GOGUEN
--------------------------------------
Managing Member
CROSSPOINT VENTURE PARTNERS 1997
By: /s/ SETH NEIMAN
--------------------------------------
Seth Neiman
Partner
[Signature page to the First Amended and Restated Preferred Stock
Purchase Agreement]
<PAGE> 27
WS INVESTMENT 98
By: /s/ JUDITH M. O'BRIEN
--------------------------------------
Partner
BRADFORD C. O'BRIEN AND JUDITH M. O'BRIEN,
TRUSTEES OF THE O'BRIEN FAMILY TRUST U/D/T
DATED 7/1/92
By: /s/ JUDITH M. O'BRIEN
--------------------------------------
[Signature page to the First Amended and Restated Preferred Stock
Purchase Agreement]
<PAGE> 28
JAFCO CO., LTD.
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO R-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO JS-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(A) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(B) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY No. 2
INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ HITOSHI IMUTA
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
WILLIAM LANFRI
/s/ WILLIAM LANFRI
-----------------------------------------
[Signature page to the First Amended and Restated Preferred Stock
Purchase Agreement]
<PAGE> 29
ROBERT HAWK
/s/ ROBERT HAWK
-----------------------------------------
[Signature page to the First Amended and Restated Preferred Stock
Purchase Agreement]
<PAGE> 30
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES A CLOSING
<TABLE>
<CAPTION>
Amount of
Aggregate Cash Cancellation of Number
Name of Purchaser Purchase Price Amount Debt of Shares
----------------- --------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Crosspoint Venture Partners 1997 $ 334,500.00 $309,500.00 $25,000.00 1,500,000
JAFCO Co., Ltd. $ 13,399.84 60,089
JAFCO R-3 Investment Enterprise $ 13,399.84 60,089
Partnership
JAFCO JS-3 Investment Enterprise $ 13,399.84 60,089
Partnership
JAFCO G6-(A) Investment Enterprise $ 13,399.84 60,089
Partnership
JAFCO G6-(B) Investment Enterprise $ 13,399.84 60,089
Partnership
U.S. Information Technology No. 2 $ 267,500.76 1,199,555
Investment Enterprise Partnership
Sequoia Capital VII, a California $ 306,067.50 $281,067.50 $25,000.00 1,372,500
Limited Partnership
Sequoia Technology Partners VII, a $ 13,380.00 60,000
California Limited Partnership
SQP 1997 $ 6,208.32 27,840
Sequoia 1997 LLC $ 3,492.18 15,660
Sequoia International Partners $ 5,352.00 24,000
WS Investment 98 $ 5,589.94 25,067
Bradford C. O'Brien and Judith M. $ 1,117.90 5,013
O'Brien, Trustees of the O'Brien Family
Trust U/D/T
dated 7/1/92
TOTAL $1,010,207.80 4,530,080
============= =========
</TABLE>
<PAGE> 31
SERIES B CLOSING
<TABLE>
<CAPTION>
Aggregate Number
Name of Purchaser Purchase Price of Shares
----------------- -------------- ---------
<S> <C> <C>
Crosspoint Venture Partners 1997 $ 834,000.00 2,085,000
JAFCO Co., Ltd. $ 33,443.20 83,608
JAFCO R-3 Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO JS-3 Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO G6-(A) Investment Enterprise Partnership $ 33,443.20 83,608
JAFCO G6-(B) Investment Enterprise Partnership $ 33,443.20 83,608
U.S. Information Technology No. 2 Investment $ 666,784.00 1,666,960
Enterprise Partnership
Sequoia Capital VII, a California Limited $ 834,000.00 2,085,000
Partnership
Sequoia Technology Partners VII, a California
Limited Partnership
SQP 1997
Sequoia 1997 LLC
Sequoia International Partners
WS Investment 98 $ 13,915.00 34,787
Bradford C. O'Brien and Judith M. O'Brien, $ 2,782.80 6,957
Trustees of the O'Brien Family Trust U/D/T
dated 7/1/92
TOTAL $2,518,697.80 6,296,744
============= =========
</TABLE>
<PAGE> 32
SERIES C CLOSING
<TABLE>
<CAPTION>
Aggregate Number
Name of Purchaser Purchase Price of Shares
----------------- -------------- ---------
<S> <C> <C>
Crosspoint Venture Partners 1997 $1,599,999.91 2,116,402
JAFCO Co., Ltd. $ 199,999.80 264,550
U.S. Information Technology No. 2 Investment $ 799,999.96 1,058,201
Enterprise Partnership
Sequoia Capital VII, a California Limited $1,464,000.05 1,936,508
Partnership
Sequoia Technology Partners VII, a California $ 63,999.94 84,656
Limited Partnership
SQP 1997 $ 29,695.68 39,280
Sequoia 1997 LLC $ 16,703.82 22,095
Sequoia International Partners $ 25,600.43 33,863
WS Investment 98 $ 30,494.77 40,337
Bradford C. O'Brien and Judith M. O'Brien, $ 6,098.65 8,067
Trustees of the O'Brien Family Trust U/D/T
dated 7/1/92
William Lanfri $ 296,352.00 392,000
TOTAL $4,532,945.01 5,995,959
------------- -------------
</TABLE>
<PAGE> 33
EXHIBIT B
FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE> 34
EXHIBIT C
SCHEDULE OF EXCEPTIONS
<PAGE> 35
EXHIBIT D
FIRST AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
<PAGE> 36
EXHIBIT E
FIRST AMENDED AND RESTATED CO-SALE AGREEMENT
<PAGE> 37
EXHIBIT F
FIRST AMENDED AND RESTATED VOTING AGREEMENT
<PAGE> 38
EXHIBIT G
FORM OF OPINION OF WILSON SONSINI GOODRICH & ROSATI
<PAGE> 39
EXHIBIT H
SERIES B PREFERRED AND SERIES C PREFERRED MILESTONES
<PAGE> 40
EXHIBIT I
CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE> 1
EXHIBIT 10.11
________________________________________________________________________________
AVANEX CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
________________________________________________________________________________
FIRST CLOSING: SEPTEMBER 14, 1999
SECOND CLOSING: OCTOBER 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 -Authorization and Sale of Preferred Stock............................................1
1.1 Authorization.................................................................1
1.2 Additional Sale(s) of Series D Preferred Stock................................1
SECTION 2 -Closing Date; Delivery...............................................................2
2.1 Closing Date..................................................................2
2.2 Delivery......................................................................2
SECTION 3 -Representations and Warranties of the Company........................................2
3.1 Organization and Standing; Qualification......................................2
3.2 Corporate Power...............................................................2
3.3 Subsidiaries..................................................................3
3.4 Capitalization................................................................3
3.5 Authorization.................................................................3
3.6 Title to Properties and Assets; Liens, etc....................................4
3.7 Patents, Trademarks, etc......................................................4
3.8 Agreements....................................................................4
3.9 Material Contracts and Commitments............................................4
3.10 Compliance with Other Instruments, None Burdensome, etc.......................4
3.11 Litigation, etc...............................................................5
3.12 Employees.....................................................................5
3.13 Employee Agreements...........................................................5
3.14 No Conflict of Interest.......................................................6
3.15 Financial Statements..........................................................6
3.16 Insurance.....................................................................6
3.17 Qualified Small Business Stock................................................6
3.18 Registration Rights...........................................................7
3.19 Governmental Consent, etc.....................................................7
3.20 Permits.......................................................................7
3.21 Environmental and Safety Laws.................................................7
3.22 Brokers or Finders............................................................7
3.23 Disclosures...................................................................7
3.24 Employee Benefit Plans........................................................7
3.25 Minute Books..................................................................8
SECTION 4 -Representations and Warranties of the Purchasers.....................................8
4.1 Investment Representations and Covenants of the Purchasers....................8
4.2 No Public Market..............................................................9
4.3 Receipt of Information........................................................9
4.4 Authorization................................................................10
4.5 Consents.....................................................................10
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 5 -Conditions to the Obligations of Purchasers at the D Closing........................10
5.1 Representations and Warranties Correct.......................................10
5.2 Covenants....................................................................10
5.3 Compliance Certificate.......................................................10
5.4 Certificate of Amendment.....................................................10
5.5 No Material Adverse Change...................................................10
5.6 Shareholder Rights Agreement.................................................10
5.7 Co-Sale Agreement............................................................11
5.8 Voting Agreement.............................................................11
5.9 Opinion of Company's Counsel.................................................11
SECTION 6 -Conditions to the Obligations of the Company in the Closing.........................11
6.1 Representations..............................................................11
6.2 Blue Sky.....................................................................11
6.3 Shareholder Rights Agreement.................................................11
6.4 Voting Agreement.............................................................11
6.5 Legal Matters................................................................11
SECTION 7 -Miscellaneous.......................................................................11
7.1 Governing Law................................................................11
7.2 Survival.....................................................................11
7.3 Successors and Assigns.......................................................12
7.4 Entire Agreement; Amendment..................................................12
7.5 Notices, etc.................................................................12
7.6 Delays or Omissions..........................................................12
7.7 California Corporate Securities Law..........................................12
7.8 Expenses.....................................................................13
7.9 Finder's Fee.................................................................13
7.10 Counterparts.................................................................13
7.11 Severability.................................................................13
7.12 Gender.......................................................................13
7.13 Headings.....................................................................13
</TABLE>
-ii-
<PAGE> 4
EXHIBITS
A. Schedule of Purchasers
B. Second Amended and Restated Articles of Incorporation
C. Schedule of Exceptions
D. Second Amended and Restated Shareholder Rights Agreement
E. Second Amended and Restated Co-Sale Agreement
F. Second Amended and Restated Voting Agreement
G. Form of Opinion of Wilson Sonsini Goodrich & Rosati
-iii-
<PAGE> 5
AVANEX CORPORATION
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (this "Agreement") is
made as of September 14, 1999, by and among Avanex Corporation, a California
corporation (the "Company"), with its principal office at 42501 Albrae Avenue,
Fremont, California 94538, and the persons and entities listed on the Schedule
of Purchasers attached as Exhibit A hereto (including purchasers in subsequent
closings under this Agreement who execute a counterpart signature page to this
Agreement) (the "Purchasers").
WHEREAS, the Company desires to sell up to 3,487,097 shares of Series D
Preferred Stock to the Purchasers pursuant to the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for other and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1
Authorization and Sale of Preferred Stock
1.1 Authorization. The Company has, or before the Closing Date (as that
term is hereinafter defined) will have, authorized the sale and issuance of up
to 3,487,097 shares of its Series D Preferred Stock (hereinafter referred to as
the "Shares" or "Series D Preferred") and up to 3,487,097 shares of Common Stock
issuable upon conversion of the Series D Preferred (the "Conversion Stock")
pursuant to this Agreement and has, or before the Closing Date will have,
authorized the issuance of the shares having the rights, privileges and
preferences set forth in the Second Amended and Restated Certificate of
Incorporation in the form attached hereto as Exhibit B (the "Restated
Articles").
1.2 Additional Sale(s) of Series D Preferred Stock. Any of the
authorized shares of Preferred Stock not sold at the Closing, as defined below,
may be sold to one or more additional purchasers at a subsequent closing(s) to
be held at any time before ninety (90) days after the Closing Date without any
further action or approval of the other parties to this Agreement, provided that
each such purchaser agrees to be bound by the terms hereof as a "Purchaser"
hereunder and provided further that any such sale or sales be on terms identical
to the terms contained in this Agreement, and each subsequent Purchaser shall
become a party to this Agreement (and Exhibit A hereto shall be amended to
include such subsequent Purchaser); and to that certain Second Amended and
Restated Shareholder Rights Agreement dated as of the date hereof by and among
the Purchasers and the Company, in the form attached hereto as Exhibit D (the
"Shareholder Rights Agreement"); and to that certain Second Amended and Restated
Voting Agreement dated as of the date hereof by and among the Company, the
Purchasers and the Founders, the form of which is attached hereto as Exhibit F
(the "Voting Agreement"); and that certain Second Amended and Restated Co-Sale
Agreement dated as of the date hereof by and among the Company, certain of the
Purchasers, and the Founders named therein, the form of which is attached hereto
as Exhibit E (the "Co-Sale
<PAGE> 6
Agreement,") (and together with the Shareholder Rights Agreement and the Voting
Agreement, the "Ancillary Agreements"), and shall have the rights and
obligations of a Purchaser hereunder and thereunder. The shares of Preferred
Stock sold at such additional closing(s) shall be deemed to be "Shares"
hereunder and the purchasers thereof shall be deemed to be "Purchasers"
hereunder. The subsequent closings shall take place at Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304, at 10:00 a.m., local
time, or at such other times and places as the Company and Purchasers acquiring
in the aggregate more than a majority of the shares of Series D Preferred Shares
sold pursuant hereto at such Closing mutually agreed upon orally or in writing
(which each time and place are designated as a "Closing").
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The first closing of the purchase and sale of the
Series D Preferred shall be held at the offices of Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California, at 2:00 p.m., local time, on
September 14, 1999 or at such other time and place upon which the Company and
the Purchasers shall agree (which time and place shall be referred to as the
"Closing," and the date of the Closing is hereinafter referred to as the,
"Closing Date").
2.2 Delivery. At the Closing, the Company will issue to each Purchaser a
certificate or certificates registered in such Purchaser's name as set forth on
the Schedule of Purchasers attached hereto as Exhibit A, representing the number
of shares of Series D Preferred purchased by such Purchaser against payment of
the purchase price therefor. Such payment shall be by check payable to the
Company or by wire transfer.
SECTION 3
Representations and Warranties of the Company
Except as set forth on the Schedule of Exceptions attached as Exhibit C
hereto, the Company hereby represents and warrants to the Purchasers as follows:
3.1 Organization and Standing; Qualification. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of California and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company is not qualified to do
business as a foreign corporation in any jurisdiction and such qualification is
not presently required.
3.2 Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, the
Shareholder Rights Agreement, the Co-Sale Agreement and the Voting Agreement, to
sell, issue and deliver the Shares hereunder, to issue the Common Stock issuable
upon conversion of the Shares (the "Conversion Shares") and to carry out and
perform its obligations under the terms of this Agreement, the Shareholder
Rights Agreement, the Co-Sale Agreement and the Voting Agreement.
-2-
<PAGE> 7
3.3 Subsidiaries. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.
3.4 Capitalization. The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, of which 12,394,194 shares are issued and
outstanding, 4,600,000 shares of Series A Preferred Stock ("Series A
Preferred"), 4,530,080 of which are issued and outstanding prior to the Closing
Date, 6,350,000 shares of Series B Preferred Stock ("Series B Preferred"),
6,296,744 of which are issued and outstanding prior to the Closing Date,
10,850,000 shares of Series C Preferred, 9,032,169 of which are issued or
outstanding prior to the Closing Date, and 3,600,000 shares of Series D
Preferred Stock (Series D Preferred"), none of which are issued or outstanding
prior to the Closing Date. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and have been
issued in compliance with all applicable federal and state securities laws. The
Company has reserved (i) 4,600,000 shares of Common Stock for issuance upon
conversion of the Series A Preferred, 6,350,000 shares of Common Stock for
issuance upon conversion of the Series B Preferred, 10,850,000 shares of Common
Stock for issuance upon conversion of the Series C Preferred, 3,600,000 shares
of Common Stock for issuance upon conversion of the Series D Preferred and (ii)
12,700,000 shares of Common Stock for issuance to employees pursuant to the
Company's 1998 Stock Plan, 1,835,100 of which are subject to outstanding
options, and 470,706 of which remain available for future grant. The Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
have the rights, preferences, privileges and restrictions set forth in the
Restated Articles. Except as set forth in Exhibit C hereto, and as set forth in
the Shareholder Rights Agreement, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of capital stock or other securities
of the Company. Except for the Shareholders Rights Agreement, the Company is not
a party or subject to any agreement or understanding which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company. Assuming the accuracy of each Purchaser's
representations in Section 4 below, upon issuance in accordance with this
Agreement and the Company's Restated Articles, the Shares will have been issued
in compliance with all federal and state securities laws.
3.5 Authorization. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement, the Shareholder Rights Agreement, the Co-Sale
Agreement and the Voting Agreement by the Company, the authorization, sale,
issuance and delivery of the Shares (and the Conversion Shares) and the
performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing. This Agreement, the Shareholder Rights Agreement,
the Co-Sale Agreement and the Voting Agreement, when executed and delivered by
the Company, shall constitute the valid and binding obligations of the Company
enforceable in accordance with their respective terms. The Shares, when issued
in compliance with the provisions of this Agreement and the Company's Restated
Articles, will be duly and validly issued, fully paid and nonassessable. The
Common Stock issuable upon conversion of the Shares has been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement
and the Company's Restated Articles, will be duly and validly issued, fully paid
and nonassessable.
-3-
<PAGE> 8
3.6 Title to Properties and Assets; Liens, etc. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
3.7 Patents, Trademarks, etc. The Company owns or has the right to use,
free and clear of all liens, charges, claims and restrictions, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses and
proprietary rights necessary to its business as now conducted, and is not
infringing upon or otherwise acting adversely to the right or claimed right of,
to the Company's knowledge, any person under or with respect to any of the
foregoing. There are no outstanding options, licenses, or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as currently proposed, would violate any
patent, trademark, service mark, trade name, copyright or trade secret or other
proprietary right of any other person or entity. To the Company's knowledge,
after reasonable investigation, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as currently proposed to be conducted. Neither the execution
nor delivery of this Agreement, the Shareholders Rights Agreement or the Co-Sale
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as currently proposed to be
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company does
not believe, after reasonable investigation, that it is or will be necessary to
utilize any inventions of any of the Company's employees (or people it currently
intends to hire) made prior to their employment by the Company.
3.8 Agreements. There are no agreements, understandings, instruments,
contracts or transactions currently in negotiation, which the Company is a party
that may involve (i) obligations (contingent or otherwise) of, or payments to
the Company in excess of, $10,000, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or (iii)
indemnification by the Company with respect to infringements of proprietary
rights.
3.9 Material Contracts and Commitments. Neither the Company, nor, to the
knowledge of the Company, any third party is in default under any material
contract, agreement or instrument to which the Company is a party.
3.10 Compliance with Other Instruments, None Burdensome, etc. The
Company is not in violation of any term of its Restated Articles or Bylaws, or
in any material respect of any term or provision of any mortgage, indenture,
contract, agreement, instrument, judgment or decree to which it is a party, and
the Company is not in violation of any federal or state judgment, order,
statute, law,
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<PAGE> 9
rule or regulation applicable to the Company, which violation would have a
material adverse effect on the Company's business. The execution, delivery and
performance of and compliance with this Agreement, the Shareholder Rights
Agreement and the Co-Sale Agreement and the issuance of the Shares and the
Conversion Shares, will not result in any violation of, or conflict with, or
constitute a default under, any material contract, agreement, instrument or
mortgage, or any pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company; and there is no such violation or default or event
which, with the passage of time or giving of notice or both, would constitute a
violation or default which materially and adversely affects the business of the
Company or any of its properties or assets.
3.11 Litigation, etc. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the Company's knowledge, is there any threat
thereof or basis therefor), which, either in any case or in the aggregate, would
result in any material adverse change in the business or financial condition of
the Company or any of its properties or assets, or in any material impairment of
the right or ability of the Company to carry on its business as now conducted or
as proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement, the
Shareholders Rights Agreement or the Co-Sale Agreement, or any action taken or
to be taken in connection herewith or therewith. The foregoing includes, without
limitation, any action, suit, proceeding, or investigation pending or, to the
Company's knowledge, currently threatened involving the prior employment of any
of the Company's employees, such employees' use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, such employees' obligations under any agreements with prior
employers, or negotiations by the Company with potential backers of, or
investors in, the Company or its proposed business. The Company is not a party
to, or to its knowledge, named in any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no action,
suit or proceeding by the Company currently pending or that the Company
currently intends to initiate.
3.12 Employees. To the Company's knowledge, no employee of the Company
is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees. The
employment of each officer and employee of the Company is terminable at the will
of the Company.
3.13 Employee Agreements. Each person presently employed by the Company
has executed (or will execute by the Closing Date) an Employment, Confidential
Information and Invention Assignment Agreement in the form previously provided
to or made available to the Purchasers. To the Company's knowledge, neither the
execution, delivery or performance of such agreements, nor the carrying on of
the Company's business as employees by such persons, nor the conduct of the
Company's business as currently proposed will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default under
any contract, covenant or instrument under which any of such persons is now
obligated.
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<PAGE> 10
3.14 No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To the Company's knowledge, none of the Company's
officers or directors, or any members of their immediate families, are, directly
or indirectly, indebted to the Company (other than in connection with purchases
of the Company's stock) or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that officers, directors and/or shareholders of the
Company may own stock in (but not exceeding two percent of the outstanding
capital stock of ) any publicly traded companies that may compete with the
Company. To the Company's knowledge, none of the Company's officers or directors
or any members of their immediate families are, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.15 Financial Statements. The Company has delivered to each Purchaser
its unaudited financial statements (balance sheet and statement of operations
and statement of cash flows at June 30, 1999 and for the fiscal year then ended
(the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of the
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1999 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
3.16 Insurance. The Company has, or within 30 days following the
Closing, will have in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
3.17 Qualified Small Business Stock. The Company represents and warrants
to the Purchasers that, to the best of its knowledge, the Shares should qualify
as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue code of 1986, as amended as of the date hereof.
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<PAGE> 11
3.18 Registration Rights. Except as set forth in the Shareholder Rights
Agreement, the Company is not currently under any obligation to register under
the Securities Act of 1933, as amended (the "Securities Act") any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
3.19 Governmental Consent, etc. No consent, approval, qualification or
authorization of, or designation, declaration or filing with, any federal, state
or local governmental authority on the part of the Company is required in
connection with the valid execution and delivery of this Agreement, the
Shareholder Rights Agreement and the Co-Sale Agreement, or the offer, sale or
issuance of the Shares (and the Conversion Shares), or the consummation of any
other transaction contemplated hereby, except (a) filing of the Restated
Articles in the office of the Secretary of State of the State of California, and
(b) qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
(and the Conversion Shares) under the California Corporate Securities Law and
other applicable Blue Sky laws, which filing and qualification, if required,
will be accomplished in a timely manner prior to or promptly upon completion of
the Closing.
3.20 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company and believes it can
obtain without undue burden or expense, any similar authority for the conduct of
its business as currently planned to be conducted. The Company is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
3.21 Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.22 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.23 Disclosures. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate furnished
to the Purchasers pursuant to this Agreement, contains any untrue statement of a
material fact or, when taken together, omits to state a material fact necessary
to make the statements made herein, in light of the circumstances under which
they were made, not misleading. However, as to any projections furnished to the
Purchasers, such projections were prepared in good faith by the Company, but the
Company makes no representation or warranty that it will be able to achieve such
projections. The Company has fully provided each Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Shares.
3.24 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
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<PAGE> 12
3.25 Minute Books. The minute books of the Company made available to the
Purchasers contain summaries of all meetings of directors and shareholders since
the time of incorporation.
SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:
4.1 Investment Representations and Covenants of the Purchasers.
(a) This Agreement is made by the Company with each Purchaser in
reliance upon such Purchaser's representations and covenants made in this
Section 4, which by its execution of this Agreement each Purchaser hereby
confirms. Each Purchaser represents that the Shares to be received will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting any participation in or otherwise
distributing the same. Each Purchaser further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares or any Common Stock acquired on conversion thereof.
(b) Each Purchaser understands and acknowledges that the offering
of the Shares pursuant to this Agreement will not, and any issuance of Common
Stock on conversion thereof may not, be registered under the Securities Act on
the ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt pursuant to Section 4(2) or Section 3(b) of the
Securities Act, and that the Company's reliance on such exemption is predicated
on the Purchasers' representations set forth herein.
(c) Each Purchaser covenants that in no event will it make any
disposition of any of the Shares, or any Conversion Shares acquired upon the
conversion thereof, except in accordance with Section 4 of the Shareholder
Rights Agreement.
(d) Each Purchaser represents that it is experienced in
evaluating recently organized, high technology companies such as the Company, is
able to fend for itself in transactions such as the one contemplated by this
Agreement, has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its prospective
investment in the Company, and has the ability to bear the economic risks of the
investment.
(e) Each Purchaser acknowledges and understands that the Shares,
and any Conversion Shares, must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available, and that, except as otherwise provided in the
Shareholder Rights Agreement, the Company is under no obligation to register
either the Shares or Conversion Shares.
(f) Each Purchaser acknowledges that it has received and reviewed
a copy of Rule 144 promulgated under the Act, which permits limited public
resales of securities acquired in a
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<PAGE> 13
non-public offering, subject to the satisfaction of certain conditions. Each
Purchaser understands that before the Shares, or any Conversion Shares, may be
sold under Rule 144, the following conditions must be fulfilled, except as
otherwise described below: (i) certain public information about the Company must
be available, (ii) the sale must occur at least one year after the later of the
date the Shares were sold by the Company or the date they were sold by an
affiliate of the Company, (iii) the sale must be made in a broker's transaction
and (iv) the number of Shares sold must not exceed certain volume limitations.
If, however, the sale occurs at least two years after the Shares were sold by
the Company or an affiliate of the Company, and if the Purchaser is not an
affiliate of the Company, the foregoing conditions will not apply. Each
Purchaser understands that the current information referred to above is not now
available and the Company has no present plans to make such information
available.
(g) Each Purchaser acknowledges that in the event the applicable
requirements of Rule 144 are not met, registration under the Securities Act or
compliance with another exemption from registration will be required for any
disposition of its stock. Each Purchaser understands that although Rule 144 is
not exclusive, the Commission has expressed its opinion that persons proposing
to sell restricted securities received in a private offering other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales and that such persons and the brokers who participate in the
transactions do so at their own risk.
(h) Each Purchaser covenants that, in the absence of an effective
registration statement covering the stock in question, it will sell, transfer,
or otherwise dispose of the Shares and any Conversion Shares only in a manner
consistent with its representations and covenants set forth in this Section 4.
In connection therewith each Purchaser acknowledges that the Company shall make
a notation on its stock books regarding the restrictions on transfer set forth
in this Section 4 and shall transfer shares on the books of the Company only to
the extent not inconsistent therewith.
(i) Each Purchaser represents that it is an "accredited investor"
as defined in Rule 501 pursuant to the Securities Act.
4.2 No Public Market. Each Purchaser understands that no public market
now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Shares.
4.3 Receipt of Information. Each Purchaser has received and reviewed
this Agreement and all Exhibits hereto; it, its attorney and its accountant have
had access to, and an opportunity to review all documents and other materials
requested of the Company; it and they have been given an opportunity to ask any
and all questions of, and receive answers from, the Company concerning the terms
and conditions of the offering and to evaluate the suitability of an investment
in the Shares; and, in evaluating the suitability of an investment in the
Shares, it and they have not relied upon any representations or other
information (whether oral or written) other than as set forth in the documents
and answers referred to above. The foregoing, however, does not limit or modify
the representations and warranties of the Company in Section 3 of this Agreement
or the right of the Purchasers to rely thereon.
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<PAGE> 14
4.4 Authorization. Each of the Purchasers has the full right, power and
authority to enter into and perform the Purchasers' obligations under this
Agreement, the Shareholder Rights Agreement and the Co-Sale Agreement, and this
Agreement and the Shareholder Rights Agreement and the Co-Sale Agreement
constitute valid and binding obligations of the Purchaser enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditor's rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) to the extent that the indemnification provisions
set forth in the Shareholder Rights Agreement may be limited by applicable laws.
4.5 Consents. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority on the part of the
Purchaser is required in connection with the valid execution and delivery of
this Agreement, the Shareholder Rights Agreement or the Co-Sale Agreement.
SECTION 5
Conditions to the Obligations of Purchasers at the D Closing
The Purchasers' obligations to purchase the Series D Preferred at the D
Closing are, at the option of each Purchaser, subject to the fulfillment of the
following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made and shall be true and correct on and as of the Closing Date with the
same force and effect as if they had been made on and as of said date with such
exceptions as are set forth in Exhibit C attached hereto, which shall be updated
as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 Certificate of Amendment. The Certificate of Amendment shall have
been filed with the Secretary of State of the State of California.
5.5 No Material Adverse Change. There shall have been no material
adverse change in the Company's business or financial condition.
5.6 Shareholder Rights Agreement. The Purchasers and the Company shall
have executed the Shareholder Rights Agreement.
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<PAGE> 15
5.7 Co-Sale Agreement. The Company and the Founders shall have entered
into the Co-Sale Agreement with the Purchasers.
5.8 Voting Agreement. The Company and the Founders shall have entered
into the Voting Agreement with the Purchasers.
5.9 Opinion of Company's Counsel. The Purchasers shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated each Series D Closing Date, in form and substance
reasonably satisfactory to Purchasers and their special counsel.
SECTION 6
Conditions to the Obligations of the Company in the Closing
The Company's obligation to sell and issue the Series D Preferred at the
Closing is, at the option of the Company, subject to the fulfillment as of the
Closing Date of the following conditions:
6.1 Representations. With respect to each Purchaser, the representations
made by such Purchaser in Section 4 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date with such exceptions as are
set forth in Exhibit C attached hereto, which shall be updated as of the Closing
Date.
6.2 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or have the availability of exemptions therefrom,
required by any state for the offer and sale of the Shares.
6.3 Shareholder Rights Agreement. The Purchasers and the Company shall
have entered into the Shareholder Rights Agreement.
6.4 Voting Agreement. The Company, the Founders and the Purchasers shall
have executed the Voting Agreement.
6.5 Legal Matters. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
Miscellaneous
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California, without giving effect to the conflicts of
laws principles thereof.
7.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
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<PAGE> 16
7.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase Shares shall not
be assignable without the consent of the Company.
7.4 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
This Agreement shall supersede and cancel all prior agreements between the
parties hereto with regard to the subject matter hereof, including, but not
limited to, the Prior Purchase Agreement. Neither this Agreement nor any term
hereof may be amended, waived, discharged, or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge, or termination is sought; provided, however, that holders of
sixty-seven percent (67%) of the shares of Common Stock issued or issuable upon
conversion of the outstanding Shares and (whether or not converted) not resold
to the public may waive or amend, on behalf of all Purchasers, any provisions
hereof, so long as the effect thereof will be that all such Purchasers and other
holders of the Shares will be treated equally.
7.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person by facsimile or by courier
service or five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, at such
Purchaser's address set forth in Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address and facsimile number set forth at the end of this
Agreement and addressed to the attention of the Corporate Secretary, or at such
other address as the Company shall have furnished to the Purchasers (with a copy
to Judith M. O'Brien, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304; facsimile: (650) 493-6811).
7.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
7.7 California Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
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<PAGE> 17
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN
EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
OR SUCH EXEMPTION BEING AVAILABLE.
7.8 Expenses. The Company and the Purchasers shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby.
7.9 Finder's Fee. The Company and the Purchasers shall each indemnify
and hold the other harmless from any liability for any commission or
compensation in the nature of a finder's fee (including the costs, expenses and
legal fees of defending against such liability) for which the Company or the
Purchaser's, or any of their respective partners, employees, or representatives,
as the case may be, is responsible.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
7.11 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.12 Gender. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.
7.13 Headings. Headings and the table of contents in this Agreement are
for reference purposes only and shall not be deemed to have an substantive
effect.
[This space intentionally left blank.]
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<PAGE> 18
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
AVANEX CORPORATION
a California corporation
By: /s/ WALTER ALESSANDRINI
----------------------------------------------
Walter Alessandrini, Chief Executive Officer
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
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<PAGE> 19
"PURCHASERS"
SEQUOIA CAPITAL FRANCHISE FUND
SEQUOIA CAPITAL FRANCHISE
PARTNERS SEQUOIA CAPITAL VII a
California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS VII a
California Limited Partnership
SQP 1997 SEQUOIA 1997 LLC SEQUOIA
INTERNATIONAL PARTNERS By: SC
VII-A Management, LLC A
California Limited Liability
Company
By: /s/ MICHAEL GOGUEN
-------------------------------
Managing Member
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
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<PAGE> 20
CROSSPOINT VENTURE PARTNERS LS 1999
By: /s/ SETH NEIMAN
-------------------------------
Seth Neiman
Partner
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
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<PAGE> 21
JAFCO CO., LTD.
By: /s/ BARRY SCHIFFMAN
-------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
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<PAGE> 22
U.S. INFORMATION TECHNOLOGY No. 2 INVESTMENT
ENTERPRISE PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
-------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
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<PAGE> 23
WS INVESTMENT 99B
By: /s/ JUDITH M. O'BRIEN
-------------------------------
Partner
BRADFORD C. O'BRIEN AND JUDITH M.
O'BRIEN, TRUSTEES OF THE O'BRIEN FAMILY
TRUST U/D/T DATED 7/1/92
By: /s/ JUDITH M. O'BRIEN
-------------------------------
BRUCE MCNAMARA
By: /s/ BRUCE MCNAMARA
-------------------------------
Bruce McNamara
ALISANDE M. ROZYNKO AND WILLIAM C. NIETO AS
COMMUNITY PROPERTY
/s/ ALISANDE M. ROZYNKO
-------------------------------
-------------------------------
THOMAS I. SAVAGE AND JANET S. KIM JTWROS
/s/ THOMAS I. SAVAGE
-------------------------------
IRWIN GROSS
/s/ IRWIN GROSS
-------------------------------
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
-19-
<PAGE> 24
MAYFIELD IX
A Delaware Limited Partnership
By: /s/ TODD BROOKS
-------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
MAYFIELD ASSOCIATES FUND IV
A Delaware Limited Partnership
By: /s/ TODD BROOKS
-------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
[SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
-20-
<PAGE> 25
EXHIBIT A
SCHEDULE OF PURCHASERS
First Closing (September 14, 1999)
<TABLE>
<CAPTION>
Name of Purchaser Aggregate Number
Purchase Price of Shares
-------------- --------------
<S> <C> <C>
Crosspoint Venture Partners LS 1999 $ 5,912,483.50 1,028,258
Mayfield IX $ 2,932,057.25 509,923
Mayfield Associates Fund IV $ 154,318.50 26,838
Sequoia Capital VII, a California Limited Partnership $ 2,999,648.50 521,678
Sequoia Technology Partners VII, a California Limited $ 131,134.50 22,806
Partnership
SQP 1997 $ 60,846.50 10,582
Sequoia 1997 LLC $ 34,224.00 5,952
Sequoia International Partners $ 52,451.50 9,122
Sequoia Capital Franchise Fund
$ 2,370,759.50 412,306
Sequoia Capital Franchise Partners $ 263,419.00 45,812
WS Investment 99B $ 25,001.00 4,348
Bradford C. O'Brien and Judith M. O'Brien, Trustees of the $ 2,001.00 348
O'Brien Family Trust U/D/T dated 7/1/92
Alisande M. Rozynko and William C. Nieto as Community Property $ 5,002.50 870
Thomas I. Savage and Janet S. Kim JTWROS $ 8,004.00 1,392
Irwin Gross $ 5,002.50 870
Bruce McNamara $ 5,002.50 870
TOTAL $14,961,356.25 2,601,975
============== ==============
</TABLE>
Second Closing (October 15, 1999)
<TABLE>
<CAPTION>
Name of Purchaser Aggregate Number
Purchase Price of Shares
-------------- -------------
<S> <C> <C>
JAFCO Co., Ltd. $1,017,888.00 177,024
U.S. Information Technology No. 2 Investment Enterprise $4,071,563.50 708,098
Partnership
TOTAL $5,089,451.50 885,122
------------- -------------
</TABLE>
<PAGE> 26
EXHIBIT B
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE> 27
EXHIBIT C
SCHEDULE OF EXCEPTIONS
<PAGE> 28
EXHIBIT D
SECOND AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
<PAGE> 29
EXHIBIT E
SECOND AMENDED AND RESTATED CO-SALE AGREEMENT
<PAGE> 30
EXHIBIT F
SECOND AMENDED AND RESTATED VOTING AGREEMENT
<PAGE> 31
EXHIBIT G
OPINION OF WILSON SONSINI GOODRICH & ROSATI
<PAGE> 1
EXHIBIT 10.12
AVANEX CORPORATION
SECOND AMENDED AND RESTATED CO-SALE AGREEMENT
This Second Amended and Restated Co-Sale Agreement (this "Co-Sale
Agreement") is made as of September 14, 1999 by and among Avanex Corporation, a
California corporation (the "Company"), Simon Xiaofan Cao, Jessy Chao and Paul
Shi-Qi Jiang (the "Founders"), the purchasers of the Company's Series A
Preferred Stock (the "Series A Preferred"), Series B Preferred Stock (the
"Series B Preferred") and Series C Preferred Stock (the "Series C Preferred")
pursuant to that certain Amended and Restated Series A Preferred, Series B
Preferred and Series C Preferred Stock Purchase Agreement dated February 19,
1999 between the Company and such purchasers (the "Prior Purchasers"), and the
purchasers of the Company's Series D Preferred Stock (the "Series D Preferred")
pursuant to that certain Series D Preferred Stock Purchase Agreement of even
date herewith (the "SERIES D AGREEMENT") between the Company and such purchasers
(including purchasers in subsequent closings under the Series D Agreement who
execute a counterpart signature page to this Agreement) (the "Series D
Purchasers") (the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred are collectively referred to herein as the "Preferred Stock")
(the Prior Purchasers and the Series D Purchasers being collectively referred to
herein as the "Purchasers").
RECITALS
A. The Founders are presently the beneficial owners of Four Million Two
Hundred Thousand (4,200,000) shares of the outstanding Common Stock of the
Company (the "Common Stock"). All said shares and any additional shares of
capital stock of the Company subsequently owned by the Founders are herein
collectively referred to as the "Co-Sale Shares";
B. Pursuant to that certain Amended and Restated Series A Preferred,
Series B Preferred and Series C Preferred Stock Purchase Agreement dated
February 19, 1999 (the "Prior Purchase Agreement"), the Purchasers thereto
acquired from the Company Four Million Five Hundred Thirty Thousand Eighty
(4,530,080) shares of the Company's Series A Preferred Stock (the "Series A
Preferred Stock"), after the Company met certain conditions set forth in the
Prior Purchase Agreement, Six Million Two Hundred Ninety Six Thousand Seven
Hundred Forty Four (6,296,744) shares of the Company's Series B Preferred Stock
(the "Series B Preferred Stock"), and, after the Company met certain conditions
set forth in the Prior Purchase Agreement, nine million thirty-two thousand one
hundred sixty-nine (9,032,169) shares of the Company's Series C Preferred Stock
(the "Series B Preferred Stock"). In connection with the Prior Purchase
Agreement, the Purchasers thereto, the Founders and the Company entered into
that certain First Amended and Restated Co-Sale Agreement dated February 19,
1999 (the "Prior Co-Sale Agreement");
C. Pursuant to the Series D Agreement, the Company shall sell to the
Series D Purchasers up to Three Million Four Hundred Eighty-Seven Thousand
Ninety-Seven (3,487,097) shares of the Company's Series D Preferred Stock (the
"Series D Preferred Stock");
Second Amended and Restated Co-Sale Agreement
1
<PAGE> 2
D. The obligations of each of the Purchasers to purchase its respective
amount of Series D Preferred Stock is conditioned upon, among other things, the
execution and delivery by the Founders, each of the Purchasers, and the Company
of this Co-Sale Agreement;
E. The Founders have agreed to grant the Purchasers the opportunity to
participate, upon the terms and conditions set forth in this Co-Sale Agreement,
in certain subsequent sales of the Co-Sale Shares made by the Founders to induce
the Purchasers to acquire shares of the Company's Preferred Stock; and
F. The parties to the Prior Co-Sale Agreement wish to amend, restate and
supersede such agreement and adopt this Co-Sale Agreement in lieu thereof.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the Purchasers, the Founders and the Company agree as follows:
AGREEMENT
1. Definitions
(a) "Common Stock Equivalents" shall mean the Company's Common Stock
then outstanding and the shares of Common Stock then issuable upon conversion of
all outstanding Preferred Stock, options and other securities convertible into
Common Stock of the Company or convertible into securities convertible into
Common Stock of the Company.
(b) "Transactions" shall mean any transaction or series of related
transactions which require the giving of notice by a Founder in accordance with
Section 2(a).
(c) "Participant" shall mean a Purchaser who elects to participate
in a Founder's sale pursuant to Section 2(b) or Section 3(b).
2. Sales by a Founder
(a) Before a Founder attempts to transfer any Co-Sale Shares in one
or more transactions, such Founder shall promptly notify all Purchasers and the
Company of the terms and conditions of the transaction at least twenty (20) days
prior to the proposed closing date of the transaction.
(b) A Purchaser shall have the right, exercisable upon written
notice to such Founder within ten (10) days after receipt of the Founder's
notice pursuant to Section 2(a), to participate in the Founder's sale of Co-Sale
Shares pursuant to the specified terms and conditions of such Transaction. The
Founder shall have the exclusive right to determine the terms and conditions of
such sale and the Participants participating in any such sale shall each pay a
pro rata share of the reasonable expenses reasonably incurred by the Founder in
connection therewith. In order to participate in the Founder's sale of Common
Stock, a Participant may be required to sell Common Stock in the Transaction
and, accordingly, may be required to convert such Participant's Preferred Stock
into Common Stock immediately prior to the closing of the Transaction. To the
extent one or
2
<PAGE> 3
more of the Purchasers exercise such right of participation in accordance with
the terms and conditions set forth below, the number of shares of Common Stock
which the Founder may sell in the Transaction shall be correspondingly reduced.
The right of participation of each of the Participants shall be subject to the
following terms and conditions.
(i) Each of the Participants may sell all or any part of
that number of shares of Common Stock Equivalents of the Company then held by
such Participant equal to the product obtained by multiplying (x) the aggregate
number of shares of Common Stock Equivalents covered by the Transaction by (y) a
fraction, the numerator of which is the number of shares of Common Stock
Equivalents owned by the Participant prior to the Transaction, and the
denominator of which is the aggregate number of shares of Common Stock
Equivalents outstanding prior to the Transaction.
(ii) Each of the Participants shall effect its
participation in the sale by delivering to the Founder for transfer to the
purchase offeror one or more certificates, properly endorsed for transfer, which
represent the number of shares of Common Stock Equivalents which the Participant
elects to sell pursuant to this Section 2(b).
(c) The certificates which the Participants deliver to the Founders
pursuant to Section 2(b) shall be transferred by the Founders to the purchase
offeror in consummation of the Transaction pursuant to the terms and conditions
specified in the Section 2(a) notice to the Participants, and the Founders shall
promptly thereafter remit to each Participant that portion of the sale proceeds
to which the Participant is entitled by reason of its participation in such
sale.
(d) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more Transactions made by the Founders shall
not adversely affect their rights to participate in subsequent Transactions
which satisfy the circumstances specified in Section 2(a).
(e) The provisions of Section 2(a) shall not apply to (i) any pledge
of Co-Sale Shares made by a Founder which creates a mere security interest,
provided the pledgee shall furnish the Participants with a written agreement
providing that such pledgee shall be bound by and comply with all provisions of
this Co-Sale Agreement applicable to the Founder, (ii) the sale or other
transfer by a Founder or any transferee of a Founder, on a cumulative basis, of
up to 1% of the number of Co-Sale Shares held by such Founder or transferee on
the date of this Agreement in any twelve-month period (as adjusted for stock
splits, stock dividends or other recapitalizations), (iii) any transfer by a
Founder or any transferee or beneficiary of a Founder to his spouse, siblings,
parents or lineal descendants, or a trust or trusts for the benefit of any of
them, provided the transferee or beneficiary shall furnish the Participant with
a written agreement to be bound by and comply with all provisions of this
Agreement applicable to the Founders, (iv) any transfer in connection with (x)
the merger or consolidation of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the surviving or continuing entity of such merger,
consolidation or reorganization, so long as such merger, consolidation, or other
corporate reorganization shall have been approved by the Purchasers, or (y) the
sale of all or substantially all of the assets of the Company, (v) any transfer
in connection with an underwritten public offering of the Company's Common Stock
registered under the Securities Act of 1933, as
3
<PAGE> 4
amended, (vi) any sale, assignment or transfer of Co-Sale Shares in connection
with the repurchase of unvested shares of Common Stock by the Company pursuant
to contractual arrangements and (vii) any sale made with the unanimous approval
of the Board of Directors.
3. Prohibited Transfers
(a) In the event a Founder should sell any Co-Sale Shares in
contravention of the participation rights of the Purchasers under this Agreement
(a "Prohibited Transfer"), the Purchasers shall have the put option provided in
Section 3(b) below, and the Founder shall be bound by the applicable provisions
of such put option.
(b) In the event of a Prohibited Transfer, each Purchaser shall have
the option to sell to the Founder a number of shares of Common Stock Equivalents
of the Company equal (after giving effect to any stock dividends, stock splits
or other recapitalization) to the number of shares such Purchaser would have
been entitled to sell if the Founder had complied with the provisions of Section
2 on the following terms and conditions:
(i) The price per share at which the shares are to be sold
to the Founder shall be equal to the price per share paid by the third party
purchaser or purchasers to the Founder.
(ii) The Purchaser shall deliver to the Founder, within ten
(10) days after it has received written notice of the Prohibited Transfer, the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer.
(iii) The Founder shall, upon receipt of the
certificates for the shares subject to the put option, pay the aggregate Section
3(b) purchase price therefor, by certified check or bank draft made payable to
the order of the Participants exercising the Section 3(b) option, and shall
reimburse the Participants for any additional expenses, including legal fees and
expenses, incurred in effecting such purchase and resale.
(iv) The parties agree that the foregoing is a liquidated
damages provision, and not a penalty, which is reasonable in light of the
difficulty of determining damages for the breach hereof.
(c) Notwithstanding the foregoing, any attempt to transfer shares of
the Company in violation of Section 2 hereof shall be void, and the Company
agrees that it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of the
number of the Founders and Purchasers having the right to amend this Co-Sale
Agreement as provided below.
4. Legended Certificates
(a) Each certificate representing the Co-Sale Shares now or
hereafter owned by the Founders or any permitted assignee in accordance
herewith, shall be endorsed with the following legend:
4
<PAGE> 5
"THE SALE OF TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND AMONG
THE ORIGINAL OWNER OF THESE SHARES AND CERTAIN SHAREHOLDERS OF THE ISSUER.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY
OF THE ISSUER.
(b) Each Founder hereby agrees to imprint the foregoing legend on
all certificates of Co-Sale Shares now or hereafter in such Founder's possession
and further agrees that the Company may instruct its transfer agent to impose
transfer restrictions on the shares represented by such certificates to enforce
the provisions of this Co-Sale Agreement. Such legend and transfer restrictions
referenced above shall be removed upon termination of this Co-Sale Agreement in
accordance with the provisions of Section 5(a).
5. Miscellaneous Provisions
(a) This Co-Sale Agreement shall terminate and no longer be in
effect upon the earlier of (i) the liquidation, dissolution or winding up of the
Company, (ii) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company, (iii) the closing of a
firm underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, (the "Securities Act")
covering the offer and sale of securities for the account of the Company to the
public, (iv) the closing of the acquisition of the Company by another entity by
means of merger or consolidation resulting in the exchange of the outstanding
shares of the Company's capital stock for securities or consideration issued, or
caused to be issued, by the acquiring entity or its subsidiary which are
registered under the Securities Act, or (v) the sale of all or substantially all
of the assets of the Company. In addition, this Co-Sale Agreement shall
terminate with respect to a particular Founder six months after the termination
of his employment and consulting relationship with the Company, or at such time
as the Company is required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended.
(b) Each Founder represents and warrants that (subject to any
community property rights of such Founder's spouse) he or she is the sole legal
and beneficial owner of the Co-Sale Shares and that no other person has any
interest in such shares.
(c) All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given upon personal delivery to the party to be
notified or three (3) days after deposit in the United States mail, by
registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth in the records of the Company or at such other
address as such party may designate by ten days' advance written notice to the
other parties hereto.
(d) The rights and obligations of the parties hereunder shall inure
to the benefit of and be binding upon, their respective successors, assigns and
legal representatives.
(e) In the event one or more of the provisions of this Co-Sale
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity,
5
<PAGE> 6
illegality or unenforceability shall not affect any other provisions of this
Co-Sale Agreement, and this Co-Sale Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(f) Any provision of this Co-Sale Agreement may be amended, waived
or modified only upon the written consent of (i) the Company, (ii) the holders
of a majority of the outstanding shares of the Company's Preferred Stock (or
Common Stock issued upon conversion thereof), acting together as a single class
and (iii) the Founders, provided that any Purchaser may waive any of his rights
hereunder without obtaining the consent of any other Purchaser.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
(h) In the event of any dispute involving the terms hereof, the
prevailing parties shall be entitled to collect reasonable legal fees and
expenses from the other party(ies) to the dispute.
(i) This Co-Sale Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(j) This Co-Sale Agreement constitutes the full and entire
understanding and agreement between the parties regarding the subject matter
hereof. This Co-Sale Agreement shall supersede and cancel all prior agreements
between the parties hereto with regard to the subject matter hereof, including,
but not limited to, the Prior Co-Sale Agreement.
[This space intentionally left blank.]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Co-Sale Agreement on the day and year indicated above.
"COMPANY"
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
--------------------------------------
Walter Alessandrini, Chief Executive
Officer
Address: 42501 Albrae Avenue
Fremont, CA 94538
7
<PAGE> 8
"PURCHASERS"
SEQUOIA CAPITAL FRANCHISE FUND
SEQUOIA CAPITAL FRANCHISE PARTNERS
SEQUOIA CAPITAL VII
a California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS VII
a California Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partner
By: /s/ MICHAEL GOGUEN
--------------------------------------
Managing Member
8
<PAGE> 9
CROSSPOINT VENTURE PARTNERS 1997
By: /s/ SETH NEIMAN
--------------------------------------
Seth Neiman
Partner
CROSSPOINT VENTURE PARTNERS LS 1999
By: /s/ SETH NEIMAN
--------------------------------------
Seth Neiman
Partner
9
<PAGE> 10
WS INVESTMENT 98
By: /s/ JUDITH M. O'BRIEN
--------------------------------------
Partner
WS INVESTMENTS 99B
By: /s/ JUDITH M. O'BRIEN
--------------------------------------
Partner
BRADFORD C. O'BRIEN AND
JUDITH M. O'BRIEN, TRUSTEES OF THE
O'BRIEN FAMILY
TRUST U/D/T DATED 7/1/92
By: /s/ JUDITH M. O'BRIEN
--------------------------------------
BRUCE MCNAMARA
/s/ BRUCE MCNAMARA
-----------------------------------------
ALISANDE M. ROZYNKO AND WILLIAM C. NIETO
AS COMMUNITY PROPERTY
/s/ ALISANDE M. ROZYNKO
-----------------------------------------
THOMAS I. SAVAGE AND JANET S. KIM JTWROS
/s/ THOMAS I. SAVAGE
-----------------------------------------
-----------------------------------------
IRWIN GROSS
/s/ IRWIN GROSS
-----------------------------------------
10
<PAGE> 11
JAFCO CO., LTD.
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO R-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO JS-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(A) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(B) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY NO. 2
INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
--------------------------------------
JAFCO Co., Ltd.
Its Executive Partner
11
<PAGE> 12
MAYFIELD IX
A Delaware Limited Partnership
By: /s/ TODD BROOKS
--------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
MAYFIELD ASSOCIATES FUND IV
A Delaware Limited Partnership
By: /s/ TODD BROOKS
--------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
12
<PAGE> 13
"FOUNDERS"
/s/ SIMON X. CAO
-----------------------------------------
Simon X. Cao
/s/ JESSY CHAO
-----------------------------------------
Jessy Chao
/s/ PAUL SHI-QI JIANG
-----------------------------------------
Paul Shi-Qi Jiang
13
<PAGE> 1
EXHIBIT 10.12.1
AVANEX CORPORATION
SECOND AMENDED AND RESTATED VOTING AGREEMENT
This Second Amended and Restated Voting Agreement (the "Agreement") is
made as of the 14th day of September, 1999, by and among Avanex Corporation, a
California corporation (the "Company"), Simon X. Cao, Jessy Chao and Paul Shi-Qi
Jiang (the "Founders"), and the holders of shares of Preferred Stock listed on
Exhibit A (collectively, the "Purchasers" and individually, each a "Purchaser").
RECITALS
A. Pursuant to that certain Amended and Restated Series A Preferred,
Series B Preferred and Series C Preferred Stock Purchase Agreement (the "Prior
Purchase Agreement"), the Purchasers thereto purchased (i) 4,530,080 shares of
Series A Preferred Stock of the Company (the "Series A Preferred"), (ii) after
the Company met certain conditions set forth in the Prior Purchase Agreement,
6,296,744 shares of Series B Preferred Stock of the Company (the "Series B
Preferred"), (iii) after the Company met certain conditions set forth in the
Prior Purchase Agreement, 9,032,169 shares of Series C Preferred Stock of the
Company (the "Series C Preferred"). In connection with the Prior Purchase
Agreement, the Purchasers thereto, the Company and the Founders entered into
that certain First Amended and Restated Voting Agreement dated February 19, 1999
(the "Prior Voting Agreement").
B. The Company and the Purchasers have entered into that Series D
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith, pursuant to which the Company shall, after meeting certain conditions
set forth in the Purchase Agreement, sell Purchasers up to 3,487,097 shares of
Series D Preferred Stock of the Company (the "Series D Preferred") (the Series A
Preferred, Series B Preferred, the Series C Preferred and the Series D Preferred
are hereinafter collectively referred to as the "Preferred Stock").
C. The Company's Second Amended and Restated Articles of Incorporation
(the "Articles") provide that the holders of shares of Common Stock, voting as a
separate class, shall be entitled to elect two directors (the "Common
Directors") and, the holders of shares of Preferred Stock, voting as a separate
class, shall be entitled to elect three directors; provided, however, that under
certain circumstances the number of directors the holders of Preferred Stock are
entitled to elect may be reduced to two (the "Preferred Directors"). The
Articles further provide that any additional directors (the "Independent
Directors") shall be elected by the holders of the Preferred Stock and the
holders of Common Stock voting as a single class.
D. A condition to the Purchasers' obligations under the Purchase
Agreement is that the Company, the Founders and the Purchasers enter into this
Agreement for the purpose of setting forth the terms and conditions pursuant to
which the Purchasers and the Founders shall vote their shares of the Company's
voting stock in favor of certain designees to the Company's Board of Directors.
The Company, the Purchasers and the Founders each desire to facilitate the
voting arrangements set forth in this Agreement, and the sale and purchase of
shares of Preferred Stock pursuant to the Purchase Agreement, by agreeing to the
terms and conditions set forth below.
<PAGE> 2
E. The parties to the Prior Voting Agreement desire to amend, restate
and supersede such agreement and adopt this Agreement in lieu thereof.
AGREEMENT
The parties agree as follows:
1. ELECTION OF DIRECTORS
(a) BOARD REPRESENTATION. At each annual meeting of the
shareholders of the Company, or at any meeting of the shareholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written consent, with respect to the election of the Independent Directors, the
Founders and the Purchasers agree to vote or act with respect to their shares so
as to elect those Independent Directors designated by a majority vote of the
Common Directors and the Preferred Directors all voting together.
(b) APPOINTMENT OF DIRECTORS. In the event of the resignation,
death, removal or disqualification of an Independent Director, a majority of the
Common Directors and the Preferred Directors voting together shall promptly
nominate a new Independent Director, and, at the next annual meeting of the
shareholders of the Company, or at any meeting of the shareholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written consent, with respect to the election of the Independent Directors, then
each Purchaser and Founder shall vote its shares of capital stock of the Company
to elect such nominee to the Board of Directors.
2. NO REVOCATION. The voting agreements contained herein are coupled
with an interest and may not be revoked during the term of this Agreement.
3. CHANGE IN NUMBER OF DIRECTORS. The Founders and the Purchasers will
not vote for any amendment or change to the Articles of Incorporation or Bylaws
providing for the election of more than seven (7) or less than five (5)
directors, or any other amendment or change to the Articles of Incorporation
Bylaws inconsistent with the terms of this Agreement.
4. LEGENDS. Each certificate representing shares of the Company's
capital stock held by Founders or Purchasers or any assignee of the Founders or
Purchasers shall bear the following legend:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT BY AND
AMONG THE COMPANY AND CERTAIN SHAREHOLDERS OF THE COMPANY (A COPY OF
WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST
IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO
AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING
AGREEMENT."
-2-
<PAGE> 3
5. TERMINATION. This Agreement shall terminate upon the earlier of (a) a
firm commitment underwritten public offering by the Company of shares of its
Common Stock pursuant to a registration statement under the Securities Act of
1933, as amended, or (b) the sale, conveyance, disposal, or encumbrance of all
or substantially all of the Company's property or business or the Company's
merger into or consolidation with any other corporation (other than a
wholly-owned subsidiary corporation) or if the Company effects any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, provided that this
Section 5 shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Company.
6. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b) AMENDMENTS AND WAIVERS. Any term hereof may be amended or
waived only with the written consent of the Company, the Founders, and holders
of at least sixty-seven (67%) the Preferred Stock. Any amendment or waiver
effected in accordance with this Section 6(b) shall be binding upon the Company,
the holders of Preferred Stock and any holder of Founders' Shares, and each of
their respective successors and assigns.
(c) ADDITIONAL PARTIES. The parties to this Agreement acknowledge
that the Company's Preferred Stock may be sold in multiple closings pursuant to
the Purchase Agreement, and agree that all of the purchasers of Preferred Stock
pursuant to such agreement can be added as parties to this Agreement, with all
of the rights and obligations of Purchasers under this Agreement without any
further action or approval by other parties to this Agreement.
(d) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient on the date of delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified
at such party's address or fax number as set forth on the signature page or on
Exhibit A hereto, or as subsequently modified by written notice.
(e) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(f) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and
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<PAGE> 4
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(i) ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto. This
Agreement shall supersede and cancel all prior agreements between the parties
hereto with regard to the subject matter hereof, including, but not limited to,
the Prior Voting Agreement.
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<PAGE> 5
The parties hereto have executed this Voting Agreement as of the date
first written above.
"COMPANY"
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
-----------------------------------
Walter Alessandrini, Chief Executive Officer
Address: 42501 Albrae Avenue
Fremont, CA 94538
[Signature page to the Second Amended and Restated Voting Agreement]
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<PAGE> 6
"FOUNDERS"
/s/ SIMON X. CAO
--------------------------------------
Simon X. Cao
/s/ JESSY CHAO
--------------------------------------
Jessy Chao
/s/ PAUL SHI-QI JIANG
--------------------------------------
Paul Shi-Qi Jiang
[Signature page to the Second Amended and Restated Voting Agreement]
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<PAGE> 7
"PURCHASERS"
SEQUOIA CAPITAL FRANCHISE
FUND
SEQUOIA CAPITAL FRANCHISE
PARTNERS
SEQUOIA CAPITAL VII
a California Limited
Partnership
SEQUOIA TECHNOLOGY PARTNERS
VII
a California Limited
Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
A California Limited Liability
Company,
its General Partner
By: /s/ MICHAEL GOGUEN
-------------------------------------------
Managing Member
[Signature page to the Second Amended and Restated Voting Agreement]
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<PAGE> 8
CROSSPOINT VENTURE PARTNERS 1997
By: /s/ Seth Neiman
--------------------------------
Seth Neiman
Partner
CROSSPOINT VENTURE PARTNERS LS 1999
By: /s/ Seth Neiman
--------------------------------
Seth Neiman
Partner
[Signature page to the Second Amended and Restated Voting Agreement]
-8-
<PAGE> 9
MAYFIELD IX
A Delaware Limited Partnership
By: /s/ TODD BROOKS
---------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
MAYFIELD ASSOCIATES FUND IV
A Delaware Limited Partnership
By: /s/ TODD BROOKS
---------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
JAFCO CO., LTD.
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO R-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO JS-3 INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(A) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(B) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY NO. 2
INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
---------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
[Signature page to the Second Amended and Restated Voting Agreement]
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<PAGE> 1
EXHIBIT 10.12.2
AVANEX CORPORATION
SECOND AMENDED AND RESTATED
SHAREHOLDER RIGHTS AGREEMENT
This Second Amended and Restated Shareholder Rights Agreement (this
"Agreement") is made as of this 14th day of September, 1999, by and among Avanex
Corporation, a California corporation (the "Company"), the purchasers of the
Company's Series A Preferred Stock (the "Series A Preferred"), Series B
Preferred Stock (the "Series B Preferred") and Series C Preferred Stock (the
"Series C Preferred") pursuant to that certain Amended and Restated Series A
Preferred, Series B Preferred and Series C Preferred Stock Purchase Agreement
dated February 19, 1999 between the Company and such purchasers (the "Prior
Purchasers"), and the purchasers of the Company's Series D Preferred Stock (the
"Series D Preferred") pursuant to that certain Series D Preferred Stock Purchase
Agreement of even date herewith (the "SERIES D AGREEMENT") between the Company
and such purchasers (including purchasers in subsequent closings under the
Series D Agreement who execute a counterpart signature page to this Agreement)
(the "Series D Purchasers") (the Series A Preferred, Series B Preferred, Series
C Preferred and Series D Preferred are collectively referred to herein as the
"Preferred Stock") (the Prior Purchasers and the Series D Purchasers being
collectively referred to herein as the "Purchasers").
WHEREAS, the Company and Series D Purchasers entered into the Series D
Preferred Purchase Agreement pursuant to which the Company agreed to grant to
Series D Purchasers registration rights upon the terms hereinafter set forth;
WHEREAS, the Company, the Prior Purchasers have entered into that
certain First Amended Shareholders' Rights Agreement dated February 19, 1999
(the "PRIOR AGREEMENT");
WHEREAS, pursuant to Section 24 of the Prior Agreement, the Prior
Agreement may be amended as set forth herein with the Company's prior written
consent and the holders of a majority of the outstanding Registrable Securities
under such Prior Agreement;
WHEREAS, the parties hereto consisting of the Company, the Founders, the
Prior Purchasers and the Series D Purchasers desire to amend, restate and
supersede in their entirety the Prior Agreement as set forth herein to modify
certain provisions thereof;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
Agreement
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any successor agency.
<PAGE> 2
"Registrable Securities" shall mean (i) shares of the Company's
Common Stock issued or issuable upon the conversion of the Series A Preferred,
Series B Preferred, or Series C Preferred or Series D Preferred; (ii) any Common
Stock of the Company or other securities issued or issuable in respect of shares
of the Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred; and (iii) shares of the Company's Common Stock or other securities
issued or issuable with respect to, or in exchange for or in replacement of
shares of the Company's Common Stock issued or issuable upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
or other securities convertible into or exercisable for the Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred upon any stock
split, stock dividend, recapitalization, or similar event; provided, however,
that any shares described in clauses (i)-(iii) above which have been resold to
the public or can be sold pursuant to Rule 144 of the Securities Act (as defined
below) shall cease to be Registrable Securities.
"Holder" shall mean each Purchaser and any transferee of
Registrable Securities who, pursuant to Section 15 below, is entitled to
registration rights hereunder.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof (or any similar
legend).
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 5, 6 and 9 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, accounting fees of the Company, and the expense of any special
audits incident to or required by any such registration.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
2. Restrictions on Transferability. The Restricted Securities shall not
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder of Restricted Securities will cause any proposed
transferee of the Restricted Securities held by such Holder to agree to take and
hold such Restricted Securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred, (ii)
shares of the Company's Common Stock issued upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred, and
(iii) any other securities issued in respect of the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred and Common Stock issued upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred upon any stock
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<PAGE> 3
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 4 below) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
4. Notice of Proposed Transfers. The Holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than (i) a transfer not involving a change
in beneficial ownership, or (ii) in transactions involving the distribution
without consideration of Restricted Securities by a Purchaser to any of its
partners, or retired partners, or to the estate of any of its partners or
retired partners, (iii) a transfer to an affiliated fund or partnership, (iv)
transfers in compliance with Rule 144, so long as the Company is furnished with
satisfactory evidence of compliance with such Rule), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall, if
the Company so requests, be accompanied (except in transactions in compliance
with Rule 144) by either (i) an unqualified written opinion of legal counsel who
shall be reasonably satisfactory to the Company, addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend if in the opinion of counsel for the Company such legend is not required
in order to establish compliance with any provisions of the Securities Act.
5. Requested Registration.
(a) Request for Registration. If at any time after the earlier
of (i) five years from September 14, 1999 or (ii) six months after the closing
date of the first registration statement filed by the Company covering an
underwritten offering of any of its securities to the general public, the
Company shall receive from any Holder or group of Holders holding at least a
majority of the Registrable Securities (the "Initiating Holders") a written
request that the Company effect any
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<PAGE> 4
registration, qualification or compliance with respect to at least thirty
percent (30%) of the shares of Registrable Securities, or such lesser number of
shares of Registrable Securities if the reasonably anticipated aggregate
proceeds of such offering exceed $15,000,000, the Company will:
(x) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders holding
Registrable Securities; and
(y) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 20 days after receipt of such written notice from the
Company;
Provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 5:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has effected two such
registrations pursuant to this Section 5(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(C) Within six months following the effective date
of a registration statement previously filed by the Company.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders. If, however, the Company shall furnish to the
Initiating Holders a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its shareholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to defer
such filing for a period of not more than 120 days after receipt of the request
of the Initiating Holder, provided, however, that the Company may not utilize
this right more than once in any twelve-month period.
(b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 5(a) and the Company shall include such information in the
written notice referred to in Section 5(a)(x). The right of any Holder to
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<PAGE> 5
registration pursuant to Section 5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by a majority in interest of the Holders) and to the
extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 5, if the managing underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then, subject to the provisions of Section 5(a), the
Company shall so advise all Holders and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders requesting inclusion in the registration in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the managing underwriter's marketing limitation shall be included in such
registration.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the other Holders. The Registrable
Securities and/or other securities so withdrawn shall also be withdrawn from
registration; provided, however, that if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company may offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 5(b). If the registration does not become
effective due to the withdrawal of Registrable Securities, then either (1) the
Holders requesting registration shall reimburse the Company for expenses
incurred in complying with the request or (2) the aborted registration shall be
treated as effected for purposes of Section 5(a)(B).
6. Company Registration.
(a) Notice of Registration. If the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective requested registration
rights, other than (i) a registration relating solely to employee benefit plans,
(ii) a registration relating solely to a transaction pursuant to Rule 145 of the
Securities Act, or (iii) a registration on Form S-3 solely for the purpose of
registering shares issued in a non-underwritten offering in connection with a
merger, combination or acquisition, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from the
Company, by any Holder or Holders.
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<PAGE> 6
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting to the extent provided herein. The Company
shall (together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 6, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities and other securities to be distributed through such underwriting,
provided that the Company may limit, to the extent so advised by the
underwriters, the amount of Registrable Securities to be included in the
registration by the Holders to an amount not less than 30% of the total number
of securities included in the offering, unless such offering is the initial
public offering of the Company's securities, in which case all Registrable
Securities may be excluded from such offering. No Registrable Securities
excluded from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the other Holders. The Registrable
Securities and/or other securities so withdrawn shall also be withdrawn from
registration; provided, however, that if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company may offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 6(b).
(c) In all registered public offerings, whether underwritten
or not, the amount of Registrable Securities of Holders which are included in
such registration, in accordance with the limitations set forth in Section
6(a)(ii) above, shall be allocated to the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities which would be
held by each of such Holders assuming conversion of all outstanding Series A
Preferred, Series B Preferred and Series C Preferred as of the date of the
notice given pursuant to this Section 6.
7. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 5(a), Section 6 and Section 9 shall be borne by the Company. All Selling
Expenses relating to securities registered by the Holders shall be borne by the
Holders of such securities pro rata on the basis of the number of shares so
registered.
8. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least 120 days or
until the distribution described in the registration statement has been
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<PAGE> 7
completed; provided, however, that such one 120-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(g) Cause such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
9. Registration on Form S-3. In addition to the rights set forth in
Section 5, if the Holders holding at least 30% of the Registrable Securities
request in writing that the Company file a registration statement on Form S-3
(or any successor thereto) for a public offering of shares of Registrable
Securities the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000, and the Company is a registrant entitled to use Form
S-3 to register securities for such an offering, the Company shall use its best
efforts to cause such shares to be registered for the offering on such form (or
any successor thereto). The Company will promptly give written notice of
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<PAGE> 8
the request for the proposed registration to all other Holders and include all
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within 30 days after
receipt of such written notice from the Company. The substantive provisions of
Section 5(b) shall be applicable to each registration initiated under this
Section 9. A Holder or group of Holders is entitled to an unlimited number of
Form S-3 registrations; provided, however, that the Company shall be required to
file no more than one (1) such registration statement during any 12-month
period.
10. Termination of Registration Rights. The registration rights granted
pursuant to this Agreement shall terminate (i) as to all Holders on the fifth
anniversary of the closing of the Company's initial public offering and (ii) as
to any Holder, at such time after the Company's initial public offering as the
Registrable Securities held by such Holder represents 1% or less of the
outstanding Common Stock of the Company and such Holder is able to sell such
Registrable Securities under Rule 144 or such Holder is able to sell all
Registrable Securities held by it pursuant to Rule 144(k) promulgated under the
Securities Act.
11. Lockup Agreement. In consideration for the Company agreeing to its
obligations under this Agreement each Holder of Registrable Securities and each
transferee pursuant to Section 15 hereof agrees, in connection with the first
registration of the Company's securities, upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities or other securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) from the effective date of such
registration as the Company or the underwriters may specify; provided, however
that all executive officers and directors of the Company must enter into similar
Lock-Up Agreements as well. Each Holder agrees that the Company may instruct its
transfer agent to place stop transfer notations in its records to enforce the
provisions of this Section 11.
12. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers, directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Holder, each of its officers, directors and
partners and
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<PAGE> 9
such Holder's legal counsel and independent accountants, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, legal counsel, independent accountants, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an amount equal to the
gross proceeds before expenses and commissions to each such Holder of
Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
12 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnified Party (together with
all other Indemnified Parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding; and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent, but only to the extent,
that the
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<PAGE> 10
Indemnifying Party's ability to defend against such claim or litigation is
impaired as a result of such failure to give notice. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
13. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
14. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) Use its best efforts to then file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements); and
(c) Furnish to Holders of Registrable Securities forthwith
upon request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act and
the Securities Exchange Act of 1934 (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Holder of Registrable Securities may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Holder to sell any such
securities without registration.
15. Transfer of Registration Rights. The right to cause the Company to
register securities granted hereunder may be assigned to a transferee or
assignee who acquires at least 500,000 shares of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred (or Common Stock issued on
conversion thereof) (as adjusted for stock splits, reverse stock splits or
similar events after the date hereof), provided that the Company is given
written notice of such assignment prior to such assignment. In addition, rights
to cause the Company to register securities may be freely assigned (a) to any
constituent partner or retired partner of a Holder, where such Holder is a
partnership, (b) to any affiliate (as that term is defined in Rule 405
promulgated by the Commission under the Securities Act), (c) to any officer,
director or principal shareholder thereof, where such Holder is a corporation or
(d) to the spouse, children, grandchildren or spouse of such children or
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<PAGE> 11
grandchildren of any Holder or to trusts for the benefit of any Holder or such
persons where the Holder is a natural person.
16. Subsequent Grant of Registration Rights. The Company shall not grant
rights to have securities other than the Registrable Securities registered under
the Securities Act that are pari passu or superior to the registration rights
granted herein without the written consent of the holders of a majority of the
shares of Series A Preferred, Series B Preferred, Series C Preferred and Series
D Preferred (or Common Stock issued upon conversion thereof) (voting together as
a single class on an as converted basis).
17. Company Covenants. The Company hereby covenants and agrees as
follows:
17.1 Annual Financial Information. The Company will furnish to
each Purchaser for so long as such Purchaser is a holder of any shares of Series
A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
purchased by such person pursuant to the Agreement (or Common Stock issued upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred), as soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
national standing selected by the Company.
17.2 Quarterly Financial Information and Financial Plan. The
Company will furnish the following reports to each Purchaser for so long as such
Purchaser is a holder of at least 500,000 shares of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred (or Common Stock issued upon
conversion of Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred or a combination of such Series A Preferred, Series B
Preferred, Series C Preferred and Common Stock) (adjusted for stock splits,
reverse stock splits or similar events after the date hereof).
(a) As soon as practicable after the end of each fiscal
quarter (except for the fiscal quarter ending December 31 of each year), and in
any event with 45 days thereafter, consolidated balance sheets of the Company
and its subsidiaries, if any, as of the end of such quarter, and cash flow
statements and consolidated statements of income for each quarter and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied, all in reasonable detail and signed,
subject to changes resulting from year-end audit adjustments, by the principal
financial or accounting officer of the Company, together with a comparison of
such statements to the Company's operating plan then in effect and approved by
its Board of Directors.
(b) As soon as available (but in any event within 10 days
after the commencement of its fiscal year), a summary of the financial plan of
the Company for each fiscal year, including (but not limited to) a cash flow
projection and operating budget, calculated monthly, as contained in its
operating plan approved by the Company's Board of Directors.
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<PAGE> 12
17.3 Assignment of Rights to Financial Information. The rights to
receive information pursuant to Section 17.1 may be assigned or otherwise
conveyed by any Purchaser or subsequent transferee to any transferee of shares
of Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred (or Common Stock issued upon conversion thereof). The rights specified
in Section 17.2 may be assigned or otherwise conveyed by a Purchaser or
subsequent transferee only to a transferee who acquires at least 500,000 shares
of Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred (or Common Stock issued upon conversion thereof) (adjusted for stock
splits, reverse stock splits or similar events after the date hereof).
17.4 Inspection. The Company shall permit each Purchaser for so
long as such Purchaser is eligible to receive reports under Section 17.2 at such
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Purchaser; provided, however, that the Company shall not be obligated
pursuant to this Section 17.4 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
17.5 Employment, Confidential Information and Invention
Assignment Agreement. The Company will require each person employed by the
Company, whether at present or in the future, to execute an Employment,
Confidential Information and Invention Assignment Agreement in a form approved
by the Company's Board of Directors as a condition of such employment.
17.6 Vesting of Employee Stock. All stock and options to acquire
stock of the Company granted to employees of the Company pursuant to a stock
grant, option plan or purchase plan or other employee stock incentive program
approved by the Board of Directors will be subject to four year vesting, except
as otherwise approved by the Company's Board of Directors.
17.7 Confidentiality Agreement. Each Purchaser and any successor
or assign of such Purchaser, who receives from the Company or its agents,
directly or indirectly, any information which the Company has not made generally
available to the public, pursuant to the preparation and execution of this
Agreement or disclosure in connection therewith or pursuant to the provisions of
this Section 17, acknowledges and agrees that such information is confidential
and for its use only in connection with evaluating its investment in the
Company, and further agrees that it will not disseminate such information to any
person other than its accountant, investment advisor or attorney and that such
dissemination shall be only for purposes of evaluating its investment.
17.8 Termination of Covenants. Notwithstanding anything to the
contrary set forth herein, the covenants set forth in this Section 17 shall
terminate and be of no further force or effect after the date upon which the
first registration statement filed by the Company under the Securities Act in
connection with an underwritten public offering of its securities first becomes
effective ("IPO").
18. Rights of First Refusal. The Company hereby grants to each Purchaser
who holds at least 600,000 shares of Registrable Securities the right of first
refusal to purchase its pro rata share of "New Securities" (as defined in this
Section 18) that the Company may, from time to time propose to sell and issue.
Such pro rata share, for purposes of this right of first refusal, is the ratio
of (X) the number of shares of Common Stock immediately prior to the issuances
of New Securities then
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<PAGE> 13
owned by such Purchaser or issuable upon the conversion of the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred then
owned by such Purchaser (including shares issuable upon exercise of options or
warrants held by such Purchaser), to (Y) the total number of shares of Common
Stock immediately prior to the issuances of New Securities then outstanding,
after giving effect to the conversion of all outstanding convertible securities
(including the Series A Preferred Stock, Series B Preferred, Series C Preferred
and Series D Preferred) and the exercise of all outstanding options. This right
of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock and Preferred
Stock of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include the
following:
(i) the Series A Preferred, the Series B Preferred, the
Series C Preferred or any agreement or commitment to issue any of the foregoing;
(ii) shares of Common Stock, or options to purchase shares
of Common Stock (including all options granted by the Company prior to the date
of this Agreement), issued or granted to officers, directors and employees of,
or consultants to, the Company pursuant to a stock grant, employee restricted
stock purchase agreement, option plan or purchase plan or other stock incentive
program (collectively, the "Plans");
(iii) shares of Common Stock issuable upon conversion of
the Series A Preferred, Series B Preferred and Series C Preferred;
(iv) securities of the Company offered to the public
pursuant to a firm commitment underwritten public offering pursuant to a
registration statement filed under the Securities Act;
(v) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(vi) securities of the Company issued in connection with
equipment lease financing transactions, real estate leases or bank financing
transactions the principal purpose of which is not to raise equity funding;
(vii) securities issued to corporate partners or in
connection with other strategic alliances if the Board of Directors agrees that
such transaction should be excluded from operation of this Section 18; and
(viii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company.
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<PAGE> 14
(b) In the event that Company proposes to undertake an
issuance of New Securities, it shall give each Purchaser written notice of its
intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Purchaser shall
have twenty (20) business days after receipt of such notice to agree to purchase
its pro rata share of such New Securities at the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. If any Purchaser fails
to agree to purchase its full pro rata share within such twenty (20) business
day period, the Company shall give the Purchasers who did so agree (the
"Electing Purchasers") notice of the number of shares which were not subscribed
for. Such notice may be by telephone if followed by written confirmation within
two days. The Electing Purchasers shall have five (5) business days from the
date of such notice to agree to purchase their pro rata share of all of the New
Securities not purchased by such non-purchasing Purchasers.
(c) In the event that Purchasers fail to exercise in full the
right of first refusal within the twenty (20) business day plus five (5)
business day period specified above, the Company shall have one hundred twenty
(120) days thereafter to sell (or enter into an agreement pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within sixty
(60) days from the date of said agreement) the New Securities respecting which
the rights of the Purchasers were not exercised at a price and upon terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within such one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within sixty (60) days from the date of such agreement) the
Company shall not thereafter issue or sell any New Securities, without first
offering such New Securities to the Purchasers and in the manner provided above.
(d) The right of first refusal granted under this Section 18
shall expire upon an IPO.
(e) This right of first refusal is nonassignable except to any
transferee to whom registration rights may be transferred pursuant to Section 15
of this Agreement.
19. Governing Law. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
20. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto. This
Agreement shall supersede and cancel all prior agreements between the parties
hereto with regard to the subject matter hereof, including, but not limited to,
the Prior Rights Agreement.
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<PAGE> 15
21. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person by facsimile or by courier
service or five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, at such
Purchaser's address set forth in Exhibit A, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have furnished the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address and facsimile number set forth at the end of this
Agreement and addressed to the attention of the Corporate Secretary, or at such
other address as the Company shall have furnished to the Purchasers (with a copy
to Judith M. O'Brien, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304; facsimile: (650) 493-6811).
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
23. Additional Parties. The parties to this Agreement acknowledge that
the Company's Preferred Stock may be sold in multiple closings pursuant to the
Purchase Agreement, and the parties hereto agree that all of the purchasers of
Preferred Stock pursuant to the Purchase Agreement can be added as parties to
this Agreement and granted all of the rights of Purchasers under this Agreement
without any further action or approval by other parties to this Agreement.
24. Amendment. Any provision of this Agreement may be amended, waived or
modified upon the written consent of the Company and the Holders of a majority
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section shall be binding upon each Holder of Registrable Securities
and the Company. Any Purchaser may waive any of its rights or the Company's
obligations hereunder without obtaining the consent of any other person.
25. Headings. Headings and the table of contents in this Agreement are
for reference purposes only and shall not be deemed to have an substantive
effect.
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<PAGE> 16
IN WITNESS WHEREOF, the undersigned have executed this Second Amended
and Restated Shareholder Rights Agreement as of the date set forth above.
"COMPANY"
AVANEX CORPORATION
By: /s/ WALTER ALESSANDRINI
--------------------------------------------
Walter Alessandrini, Chief Executive Officer
Address: 42501 Albrae Avenue
Fremont, CA 94538
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
<PAGE> 17
"PURCHASERS"
SEQUOIA CAPITAL FRANCHISE FUND
SEQUOIA CAPITAL FRANCHISE PARTNERS
SEQUOIA CAPITAL VII
a California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS VII
a California Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
A California Limited Liability Company,
its General Partners
By: /s/ MICHAEL L. GOGUEN
------------------------------------------
Managing Member
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
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<PAGE> 18
CROSSPOINT VENTURE PARTNERS 1997
By: /s/ SETH NEIMAN
------------------------------------------
Seth Neiman
Partner
CROSSPOINT VENTURE PARTNERS LS 1999
By: /s/ SETH NEIMAN
------------------------------------------
Seth Neiman
Partner
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
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<PAGE> 19
WS INVESTMENT 98
By: /s/ JUDITH M. O'BRIEN
------------------------------------------
Partner
WS INVESTMENT 99B
By: /s/ JUDITH M. O'BRIEN
------------------------------------------
Partner
BRADFORD C. O'BRIEN AND JUDITH M. O'BRIEN,
TRUSTEES OF THE O'BRIEN FAMILY TRUST
U/D/T DATED 7/1/92
By: /s/ JUDITH M. O'BRIEN
------------------------------------------
BRUCE MCNAMARA
/s/ BRUCE MCNAMARA
---------------------------------------------
ALISANDE M. ROZYNKO AND WILLIAM C. NIETO
AS COMMUNITY PROPERTY
/s/ ALISANDE M. ROZYNKO
---------------------------------------------
THOMAS I. SAVAGE AND JANET S. KIM JTWROS
/s/ THOMAS I. SAVAGE
---------------------------------------------
---------------------------------------------
IRWIN GROSS
/s/ IRWIN GROSS
---------------------------------------------
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
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<PAGE> 20
JAFCO CO., LTD.
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO R-3 INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO JS-3 INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(A) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
JAFCO G6-(B) INVESTMENT ENTERPRISE
PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO America Ventures, Inc.
Its Executive Partner
U.S. INFORMATION TECHNOLOGY NO. 2
INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ BARRY SCHIFFMAN
------------------------------------------
JAFCO Co., Ltd.
Its Executive Partner
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
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<PAGE> 21
MAYFIELD IX
A Delaware Limited Partnership
By: /s/ TODD BROOKS
------------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
MAYFIELD ASSOCIATES FUND IV
A Delaware Limited Partnership
By: /s/ TODD BROOKS
------------------------------------------
Mayfield IX Management, L.L.C.
Its General Partner
[SIGNATURE PAGE SECOND AMENDED AND RESTATED SHAREHOLDERS RIGHTS AGREEMENT]
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<PAGE> 1
EXHIBIT 10.13
REVOLVING CREDIT AND SECURITY AGREEMENT
DATED AS OF JULY 8, 1999
BY AND BETWEEN
AVANEX CORPORATION
AND
COMERICA BANK-CALIFORNIA
<PAGE> 2
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND SECURITY AGREEMENT ("Agreement") is made and
delivered this 8th day of July, 1999, by and between Avanex Corporation, a
California corporation ("Borrower"), and COMERICA BANK-CALIFORNIA, a California
banking corporation ("Bank").
WITNESSETH
WHEREAS, Borrower desires to obtain certain credit facilities from the
Bank, as herein provided; and,
WHEREAS, Bank is willing to provide such credit facilities to and in
favor of Borrower, subject to the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, Borrower and Bank agree as follows:
SECTION 1: DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following respective meanings:
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" and "INVENTORY" shall have the
respective meanings assigned to them in the UCC on the date of this Agreement.
"ACCOUNT DEBTOR" shall mean the party who is obligated on or under any
Account.
"ADVANCE(S)" shall mean a borrowing requested by Borrower and made by
Bank under the Revolving Credit pursuant to Section 2.1 of this Agreement.
"AFFILIATE" shall mean, when used with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AFFILIATE RECEIVABLES" shall mean, as of any time of determination, any
amounts in respect of loans or advances owing to Borrower from any of its
Subsidiaries or Affiliates at such time.
"AGREEMENT" shall mean this Revolving Credit and Security Agreement, as
it may be amended from time to time.
"BANK EXPENSES" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents,
provided that such costs and expenses incurred in connection with the
preparation and negotiation of the Loan Documents shall not exceed $4,000.00;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of appeal
or review, or those incurred in any Insolvency Proceeding), whether or not suit
is brought.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
1
<PAGE> 3
"BASE RATE" shall mean that annual rate of interest designated by Bank
as its base rate, which rate may not be the lowest rate of interest charged by
Bank to any of its customers, and which rate is changed by Bank from time to
time, plus three quarters of a percent (0.75%).
"BORROWING BASE" shall mean the sum of: (a) seventy-five percent (75%)
of Borrower's Eligible Accounts after deducting therefrom all payments,
adjustments and credits applicable thereto, increasing to eighty percent (80%)
of Borrower's Eligible Accounts after deducting therefrom all payments,
adjustments and credits applicable thereto upon Borrower raising a minimum of
$5,000,000.00 in new equity; and, (b) $300,000.00 thru July 31, 2000; and, (c)
$750,000.00 which will decrease by $62,500.00 per month beginning August 31,
1999.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or
holiday, on which the Bank is open to carry on all or substantially all of its
normal commercial lending business in California.
"COLLATERAL" shall mean the property described on Exhibit A attached
hereto.
"COLLATERAL DOCUMENTS" shall mean all security agreements, assignments,
stock pledge agreements, mortgages, deeds of trust, guarantees and other
collateral documents executed by Borrower, or any other Person(s), and delivered
to Bank prior to or as of the date hereof, or from time to time subsequent
hereto, in connection with this Agreement, or any of the Loan Documents, or the
Indebtedness, to secure the payment and performance of the Indebtedness, as such
collateral documents may be amended from time to time, including, without
limitation, those Collateral Documents identified in this Agreement.
"CONTINGENT OBLIGATIONS" shall mean, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices.
"CURRENT ASSETS" shall mean, in respect of a Person and as of any
applicable date of determination, all (a) unrestricted cash, marketable
securities, or certificates of deposit, (b) non-affiliated accounts receivable,
(c) United States government securities, (d) claims against the United States
government, and (e) inventories (held for sale in the ordinary course of
business) of such Person.
"CURRENT LIABILITIES" shall mean, in respect of a Person and as of any
applicable date of determination, (a) all liabilities of such Person that should
be classified as current in accordance with GAAP, including, without limitation,
any portion of the principal of the Notes classified as current at such time,
plus (b) to the extent not otherwise included, all liabilities of the Borrower
to any of its Affiliates whether or not classified as current in accordance with
GAAP.
"CURRENT RATIO" shall mean, in respect of a Person and as of any
applicable date of determination thereof, the ratio of Current Assets to Current
Liabilities.
"DEBT" shall mean, as of any applicable date of determination thereof,
all items of indebtedness, obligation or liability of a Person, whether matured
or unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP. In the case of Borrower, the term "Debt" shall include,
without limitation, the Indebtedness.
"DEBT-TO-WORTH RATIO" shall mean, in respect of a Person and as of any
applicable date of determination thereof, the ratio of (a) the total Debt of
such Person at such time, to (b) the Tangible Net Worth of such Person at such
time.
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"DEFAULT" shall mean any condition or event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
"ELIGIBLE ACCOUNT" shall mean an Account (but shall not include interest
and service charges thereon) arising in the ordinary course of Borrower's which
meets each of the following requirements:
(a) It is not owing more than thirty (30) days after the date of
the original invoice or other writing evidencing such Account;
(b) It is not owing by an Account Debtor who has failed to pay
twenty-five percent (25%) or more of the aggregate amount of its
Accounts owing to Borrower within ninety (90) days after the date of the
respective invoices or other writings evidencing such Accounts;
(c) It arises from the sale or lease of goods and such goods
have been shipped or delivered to the Account Debtor under such Account;
or it arises from services rendered and such services have been
performed;
(d) It is evidenced by an invoice, dated not later than the date
of shipment or performance, rendered to such Account Debtor or some
other evidence of billing acceptable to Bank;
(e) It is not evidenced by any note, trade acceptance, draft or
other negotiable instrument or by any chattel paper, unless such note or
other document or instrument previously has been endorsed and delivered
by Borrower (or the relevant Subsidiary) to Bank;
(f) It is a valid, legally enforceable obligation of the Account
Debtor thereunder, and is not subject to any offset, counterclaim or
other defense on the part of such Account Debtor or to any claim on the
part of such Account Debtor denying liability thereunder in whole or in
part;
(g) It is not subject to any sale of accounts, any rights of
offset, assignment, lien or security interest whatsoever other than to
Bank;
(h) It is not owing by a Subsidiary or Affiliate of Borrower,
nor by an Account Debtor which (i) does not maintain its chief executive
office in the United States of America, (ii) is not organized under the
laws of the United States of America, or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any
state, province, municipality or other instrumentality thereof;
(i) It is not an account owing by the United States of America
or any state or political subdivision thereof, or by any department,
agency, public body corporate or other instrumentality of any of the
foregoing, unless all necessary steps are taken to comply with the
Federal Assignment of Claims Act of 1940, as amended, or with any
comparable state law, if applicable, and all other necessary steps are
taken to perfect Bank's security interest in such Account;
(j) It is not owing by an Account Debtor for which Borrower or
any of its Subsidiaries has received a notice of (i) the death of the
Account Debtor or any partner of the Account Debtor, (ii) the
dissolution, liquidation, termination of existence, insolvency or
business failure of the Account Debtor, (iii) the appointment of a
receiver for any part of the property of the Account Debtor, or (iv) an
assignment for the benefit of creditors, the filing of a petition in
bankruptcy, or the commencement of any proceeding under any bankruptcy
or insolvency laws by or against the Account Debtor;
(k) It is not an account billed in advance, payable on delivery,
for consigned goods, for guaranteed sales, for unbilled sales, for
progress billings, payable at a future date in accordance with its
terms, subject to a retainage or holdback by the Account Debtor or
insured by a surety company;
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(l) It is not owing by any Account Debtor whose obligations
Bank, acting in its sole discretion, shall have notified Borrower are
not deemed to constitute Eligible Accounts:
(m) That portion of Accounts owed by any single account debtor,
including Subsidiaries and Affiliates, that do not exceed twenty percent
(20%) of all Eligible Accounts; except (l) as approved by Bank in
writing including an 80% advance rate to Fujitsu, MCI, Nortel and Lucent
until December 31, 1999 at which time the advance rate will reduce to no
more than 40% of eligible accounts receivable; and,
(n) Accounts the collection of which Bank reasonably determines,
after consultation with Borrower, to be doubtful.
An Account which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be an Eligible Account.
"EQUIPMENT" shall mean all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ENVIRONMENTAL LAW(S)" shall mean all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal, state, local,
foreign or other governmental or quasi-governmental authority or body (or any
agency, instrumentality or political subdivision thereof) pertaining to the
environment or to any hazardous materials or wastes, toxic substances,
flammable, explosive or radioactive materials, asbestos, and/or other similar
materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in Section 9 of this Agreement.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"INDEBTEDNESS" shall mean all obligations of Borrower to Bank under this
Agreement, together with all other indebtedness and obligations of Borrower to
Bank under any other agreement, now existing or hereafter arising.
"INVESTMENT" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.5.
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.5.
"LOAN DOCUMENTS" shall mean collectively, this Agreement and any other
agreement or instrument executed pursuant to or in connection with the
Indebtedness, this Agreement or the other Loan Documents, as such documents may
be amended from time to time.
"LOANS" shall mean, collectively, the "Revolving Credit and Security
Agreement" and any loans which Bank in its sole discretion has made or may
hereafter make to Borrower, and "Loan" shall mean any of them.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
financial or other condition of Borrower or any of its Subsidiaries, or upon
Borrower's or any of its Subsidiaries' ability to perform their respective
obligations under any of the Loan Documents, or upon the enforceability of this
Agreement or any of the other Loan Documents.
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"NET INCOME" shall mean the net income (or loss) of a Person for any
applicable period of determination, determined in accordance with GAAP, but
excluding, in any event:
(a) Any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments or fixed or capital
assets, and any taxes on the excluded gains and any tax deductions or
credits on account on any excluded losses; and,
(b) In the case of Borrower, net earnings of any Person in which
Borrower has an ownership interest, unless such net earnings shall have
actually been received by Borrower in the form of cash distributions.
"PERMITTED INDEBTEDNESS" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of
business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby), and
indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited
hereby);
(f) Subject to the $3,000,000 cap in clause (g), indebtedness
secured by Permitted Liens;
(g) Capital leases or indebtedness in an aggregate amount
incurred in each fiscal year not to exceed $3,000,000 incurred solely to
purchase equipment which is secured in accordance with clause (c) of
"Permitted Liens" below and is not in excess of the lesser of the
purchase price of such equipment or the fair market value of such
equipment on the date of acquisition;
(h) Other Indebtedness not otherwise permitted by Section 8.4
not exceeding $100,000 in the aggregate outstanding at any time; and
(i) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (h)
above, provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
"PERMITTED INVESTMENT" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State
thereof maturing no more than one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from
the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more
than one (1) year from the date of investment therein issued by Bank;
and (iv) any Investments permitted by Borrower's investment
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policy, as amended from time to time, provided that such investment
policy and any such amendment thereto has been approved by Bank.
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transaction in the
ordinary course of business;
(d) Investments accepted in connection with Transfers permitted
by Section 8.2;
(e) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in
the best interests of Borrower, (ii) travel advances, employee
relocation loans and other employee loans and advances in the ordinary
course of business, and (iii) loans to employees, officers or directors
relating to the purchase of equity securities of Borrower or its
Subsidiaries pursuant to employee stock purchase plans or agreements
approved by Borrower's Board of Directors;
(f) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of
business;
(g) Investments pursuant to or arising under currency agreements
or interest rate agreements entered into in the ordinary course of
business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that
this paragraph (h) shall not apply to Investments by Borrower in any
Subsidiary;
(i) Investments constituting acquisitions permitted under
Section 8.6;
(j) Deposit accounts of Borrower in which Bank has a Lien prior
to any other Lien;
(k) Deposit accounts of any subsidiaries maintained in the
ordinary course of business;
(l) Investments or Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed
$100,000 in the aggregate;
(m) Other Investments not otherwise permitted by Section .8 not
exceeding $100,000 in the aggregate outstanding at any time; and
(n) Investments not to exceed $100,000 in the aggregate
consisting of joint ventures and strategic partnership consisting of the
development or licensing of technology or the providing of technical
support.
"PERMITTED LIENS" shall mean:
(a) Liens, security interests, mortgages and encumbrances in
favor of the Bank;
(b) Liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and for which no interest,
late charge or penalty is attaching or which is being contested in good
faith by appropriate proceedings and, if requested by Bank, bonded in an
amount and manner satisfactory to Bank;
(c) Liens, not delinquent, created by statute in connection with
worker's compensation, unemployment insurance, social security and
similar statutory obligations;
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(d) Liens of mechanics, materialmen, carriers, warehousemen or
other like statutory or common law liens securing obligations incurred
in good faith in the ordinary course of business that are not yet due
and payable;
(e) Encumbrances consisting of existing or future zoning
restrictions, existing recorded rights-of-way, existing recorded
easements, existing recorded private restrictions or existing or future
public restrictions on the use of real property, none of which
materially impairs the use of such property in the operation of the
business for which it is used and none of which is violated in any
material respect by any existing or proposed structure or land use;
(f) Liens existing as of the date hereof as more particularly
described in Schedule I attached to this Agreement;
(g) Deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money) or to secure indemnity, performance or other similar
bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations
(other than liens arising under ERISA or environmental liens) or surety
or appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
(h) Liens (i) upon or in any Equipment, other than Equipment
financed hereunder, acquired or held by Borrower or any of its
Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the
time of its acquisition, provided that the Lien is confined solely to
the property so acquired and improvements thereof, and the proceeds of
such Equipment;
(i) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred
solely for the purpose of financing the lease of such Equipment
(including Liens pursuant to leases permitted pursuant to Section 8.2
and Liens arising from UCC financing statements regarding leases
permitted by this Agreement);
(j) Leases or subleases and licenses and sublicenses granted to
others in the ordinary course of Borrower's business not interfering in
any material respect with the business of Borrower and its Subsidiaries
taken as a whole, and any interest or title of a lessor, licensor or
under any lease or license;
(k) Liens or assets (including the proceeds thereof and
accessions thereto that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation
that existed at the time it became or becomes a Subsidiary); provided
such Liens are not granted in contemplation or in connection with the
acquisition of such asset by Borrower or a Subsidiary;
(l) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.1(g);
(m) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of customs duties in connection with
the importation of goods;
(n) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens
with respect to amounts on deposit, where arising by operation of law or
by contract, in connection with arrangement entered in to with banks in
the ordinary course of business;
(o) Earn-out and royalty obligations existing on the date hereof
or entered into in connection with an acquisition permitted by Section
8.2 or Section 8.6;
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(p) Liens on insurance proceeds in favor of insurance companies
granted solely as security for financed premiums; and
(q) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described
in clauses (f), (h), (i), (j), (k) and (o) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"PERSON" OR "PERSON" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
"QUICK ASSETS" shall mean, in respect of a Person and as of any
applicable date of determination, the total cash, marketable securities and
accounts receivable of such Person.
"QUICK RATIO" shall mean, in respect of a Person and as of any
applicable date of determination thereof, the ratio of Quick Assets to Current
Liabilities.
"REVOLVING CREDIT" shall mean a Loan made, or to be made, under the
revolving credit loan facility to be advanced to Borrower by the Bank pursuant
to Section 2 of this Agreement.
"REVOLVING CREDIT MATURITY DATE" shall mean October 1, 2000.
"SUBORDINATED DEBT" shall mean indebtedness of Borrower to third parties
which has been subordinated to the indebtedness pursuant to a subordination
agreement in form and substance satisfactory to Bank.
"SUBSIDIARY" shall mean any corporation (whether now existing or
hereafter organized or acquired) in which more than fifty percent (50%) of the
outstanding securities having ordinary voting power for the election of
directors, as of any applicable date of determination, shall be owned directly,
or indirectly through one or more Subsidiaries, by Borrower.
"TANGIBLE EFFECTIVE NET WORTH" shall mean, with respect to any Person
and as of any applicable date of determination, Tangible Net Worth plus
Subordinated Debt.
"TANGIBLE NET WORTH" shall mean, with respect to any Person and as of
any applicable date of determination, the excess of (a) the net book value of
all assets of such Person (excluding Affiliate Receivables, patent rights,
trademarks, trade names, franchises, copyrights, licenses, goodwill, and all
other intangible assets of such Person), after all appropriate deductions in
accordance with GAAP (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization), over (b) all Debt of
such Person at such time.
"UCC" shall mean the California Uniform Commercial Code.
1.2 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be determined and construed in accordance with GAAP.
1.3 Singular and Plural. Where the context herein requires, the singular
number shall be deemed to include the plural, the masculine gender shall include
the feminine and neuter genders, and vice versa.
SECTION 2: REVOLVING CREDIT
2.1 Revolving Credit Commitment. Subject to the terms and conditions of
this Agreement, the Bank agrees to make Advances of the Revolving Credit to
Borrower at any time and from time to time from the effective date hereof until
(but not including) the Revolving Credit Maturity Date. The aggregate principal
amount of Advances shall not exceed (a) $3,750,000.00 or the Borrowing Base,
whichever is less. Subject to the terms and conditions of this Agreement,
amounts hereunder may be repaid and reborrowed at any time prior to the
Revolving
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Credit Maturity Date. Borrower may prepay all or part of the outstanding
Advances without premium or penalty. If at anytime the outstanding Advances
exceed the lesser of $3,750,000.00 or the Borrowing Base, Borrower shall
immediately pay Bank, in cash, the amount of such excess.
2.2 Accrual and Payment of Interest and Maturity. The Revolving Credit,
and all principal and interest outstanding thereunder, shall mature and become
due and payable in full on the Revolving Credit Maturity Date. Each Advance
shall, from and after the date of such Advance, bear interest at a per annum
rate equal to the Base Rate. Interest on the unpaid balance of all Advances
outstanding under the Revolving Credit from time to time shall be payable on
August 1, 1999, and continuing on a like day of each successive calendar month
thereafter, until the Revolving Credit Maturity Date, when all unpaid principal,
interest and other amounts owing under the Revolving Credit shall be due and
payable.
2.3 Requests for Advances. Borrower may request an Advance under the
Revolving Credit only after delivery to Bank of a Request for Advance executed
by an authorized officer of Borrower, subject to the following:
(a) Each such Request for Advance shall set forth the
information required on the Request for Advance form annexed hereto as
Exhibit "B" (or such other form as acceptable to Bank), including,
without limitation, the proposed amount and date of such Advance, which
date must be a Business Day;
(b) Each such Request for Advance shall be delivered to Bank by
3:00 p.m. California time on the proposed date of Advance; and,
(c) A Request for Advance, once delivered to Bank, shall not be
revocable by Borrower.
(d) Bank may make Advances under the Revolving Credit upon the
telephonic or facsimile request of Borrower, which Borrower shall
confirm in writing by delivering to Bank, on or before 11:00 a.m. on the
next Business Day following such Advance with a duly executed Request
for Advance and Borrower shall indemnify and hold Bank harmless for any
damages or loss suffered by Bank as a result of reliance on such
telephonic or facsimile request.
2.4 Disbursement of Advances. Subject to the terms and conditions of
this Agreement, Bank shall make available to Borrower the amount of the Advance
so requested on the date of such Advance by credit to an account of Borrower
maintained with Bank or to such other account or third party as Borrower may
reasonably direct.
2.5 Facility Fee. On the date hereof, a facility fee in the amount of
Twenty-two thousand two-hundred fifty Dollars ($22,250.00), shall be due, earned
and nonrefundable upon execution of the Loan Documents.
2.6 Warrant. On the date hereof, an executed Warrant To Purchase Stock,
dated July 8, 1999, shall be furnished to the Bank concurrent with execution of
the Loan documents.
SECTION 3: PAYMENTS, RECOVERIES AND COLLECTIONS
3.1 Interest Computations. In the event the Base Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Base Rate is
changed, by an amount equal to such change in the Base Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
3.2 Bank's Books and Records. The amount and date of each Loan
hereunder, the amount from time to time outstanding, the applicable interest
rate in respect of each Loan, and the amount and date of any repayment
hereunder, shall be noted on Bank's books and records, which shall be conclusive
evidence thereof, absent manifest error; provided, however, any failure by Bank
to make any such notation, or any error in any such notation, shall not relieve
Borrower of its obligations to pay to Bank all amounts owing to Bank under or
pursuant to this Agreement and each of the other Loan Documents, in each case,
when due in accordance with the terms hereof or thereof.
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3.3 Payments on Non-Business Day. In the event that any payment of any
principal, interest, fees or any other amounts payable by Borrower under or
pursuant to this Agreement, or under any other Loan Document shall become due on
any day which is not a Business Day, such due date shall be extended to the next
succeeding Business Day, and, to the extent applicable, interest shall continue
to accrue and be payable at the applicable rate(s) for and during any such
extension.
3.4 Payment Procedures. All sums payable by Borrower to Bank under or
pursuant to this Agreement, or any other Loan Document, whether principal,
interest, or otherwise, shall be paid, when due, directly to Bank at the office
of Bank identified on the signature page of this Agreement, or at such other
office of Bank as Bank may designate in writing to Borrower from time to time,
in immediately available United States funds, and without setoff, deduction or
counterclaim. Bank may, in its discretion, charge any and all deposit or other
accounts (including, without limitation, any account evidenced by a certificate
of deposit or time deposit) of Borrower maintained with Bank for all or any part
of any Indebtedness then due and payable; provided, however, that such
authorization shall not affect Borrower's obligations to pay all Indebtedness,
when due, whether or not any such account balances maintained by Borrower with
Bank are insufficient to pay any amounts then due.
3.5 Default Rate. Notwithstanding anything to the contrary set forth
herein, in the event that and so long as any Event of Default shall have
occurred and be continuing or exist, all Indebtedness outstanding shall bear
interest at a rate equal to the then applicable interest rate plus three percent
(3%), which interest, in any case, shall be payable upon demand.
3.6 Receipt of Payments by Bank. Any payment by Borrower of any of the
Indebtedness made by mail will be deemed tendered and received by Bank only upon
actual receipt thereof by Bank at the address designated for such payment,
whether or not Bank has authorized payment by mail or in any other manner, and
such payment shall not be deemed to have been made in a timely manner unless
actually received by Bank on or before the date due for such payment, time being
of the essence. Borrower expressly assumes all risks of loss or liability
resulting from non-delivery or delay of delivery of any item of payment
transmitted by mail or in any other manner. Acceptance by Bank of any payment in
an amount less than the amount then due shall be deemed an acceptance on account
only, and any failure to pay the entire amount then due shall constitute and
continue to be an Event of Default hereunder, and at any time thereafter, and
until the entire amount then due has been paid in full, Bank shall be entitled
to exercise any and all rights and remedies conferred upon and otherwise
available to Bank hereunder or any of the other Loan Documents upon the
occurrence and during the continuance of any such Event of Default. Prior to the
occurrence of any Event of Default hereunder, Borrower shall have the right to
direct the application of any and all payments made to Bank by Borrower
hereunder to the respective Indebtedness. Borrower waives the right to direct
the application of any and all payments received by Bank from and on behalf of
Borrower at any time or times after the occurrence and during the continuance of
any Event of Default hereunder. Borrower further agrees that after the
occurrence and during the continuance of any Event of Default hereunder, or
prior to the occurrence of any Event of Default hereunder if Borrower has failed
to direct such application, Bank shall have the continuing exclusive right to
apply and to reapply any and all payments received by Bank at any time or times
hereafter, whether as voluntary payments, proceeds from any Collateral, offsets,
or otherwise, against the Indebtedness in such order and in such manner as Bank
may, in its sole discretion, deem advisable, notwithstanding any entry by Bank
upon any of its books and records. Borrower hereby expressly agrees that, to the
extent that Bank receives any payment or benefit of or otherwise upon any of the
Indebtedness, and such payment or benefit, or any part thereof, is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid to a trustee, receiver, or any other party under any bankruptcy
act, state or federal law, common law, or equitable cause, then to the extent of
such payment or benefit, the Indebtedness, or part thereof, intended to be
satisfied shall be revived and continued in full force and effect as if such
payment or benefit had not been made by Borrower or received by Bank, and,
further, any such repayment by Bank shall be added to and be deemed to be
additional Indebtedness.
SECTION 4: CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Indebtedness
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except for Permitted Liens, such security
interest constitutes a valid, first priority security interest
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in the presently existing Collateral, and will constitute a valid, first
priority security interest in Collateral acquired after the date hereof, in each
case, to the extent that a security interest in such Collateral can be perfected
by the filing of a financing statement or, in the case of Collateral consisting
of instruments, documents, chattel paper or certificated securities, to the
extent that Bank takes possession of such Collateral. Borrower acknowledges that
Bank may place a "hold" on any deposit account pledged as Collateral to secure
the Indebtedness. Bank agrees to execute and deliver to Borrower from time to
time such subordination agreements as Borrower may request and as are necessary
to give to other lenders which finance equipment for Borrower a first priority
security interest in the equipment financed so long as the Liens and the
Indebtedness incurred with respect to such equipment financing are permitted
under this Agreement. Notwithstanding the foregoing, the security interest
granted herein shall not extend to and the term "Collateral" shall not include
any property, rights or licenses to the extent the granting of a security
interest therein (i) would be contrary to applicable law or (ii) is prohibited
by or would constitute a default under any agreement or document governing such
property, rights or licenses (but only to the extent such prohibition is
enforceable under applicable law, including without limitation Section 9318 of
the Code); provided that immediately and automatically upon the ineffectiveness,
lapse or termination of any such prohibition or restriction, the Collateral
shall include such property, rights or licenses, and Borrower shall be deemed to
have granted a security interest in all such rights and interests as if such
prohibition or restriction had never been in effect. Notwithstanding termination
of this Agreement, Bank's Lien on the Collateral shall remain in effect for so
long as any Indebtedness is outstanding.
4.2 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Rights to Inspect. Bank (through any of its officers, employers, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral. Notwithstanding any provision of this
Agreement to the contrary, except upon the occurrence and during the
continuation of an Event of Default, Borrower shall not be required to disclose,
permit the inspection, examination, copying or making extracts of, or discuss,
any document, information or other matter that (i) constitutes non-financial
trade secrets or non-financial proprietary information, or (ii) the disclosure
of which to Bank, or their designated representative, is then prohibited by (a)
law, or (b) an agreement binding on the Borrower that was not entered into by
the Borrower for the primary purpose of concealing information from the Bank.
SECTION 5: CONDITIONS PRECEDENT
5.1 The obligation of the Bank to make the initial Loan under or
pursuant to this Agreement, Bank shall have received the following, all in form
and substance satisfactory to Bank:
(a) The Loan Documents;
(b) Evidence of the authorization of the Loan Documents and
incumbency of Borrower's officers; and,
(c) Such additional documents or certificates as may be required
by Bank and/or required under the terms of any and every Collateral
Document.
5.2 Conditions Precedent to Disbursement of All Loans. The obligation of
Bank to make any Loan under this Agreement, including the initial Loan
hereunder, shall be further subject to the satisfaction of each of the following
conditions precedent on or before any disbursement under such Loan:
(a) Representations and Warranties. Each of the representations
and warranties of Borrower, and any other Person who is a party to any
of the Loan Documents, under this Agreement and any of the other Loan
Documents shall be true and correct in all material respects.
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<PAGE> 13
(b) No Default or Material Adverse Change. No Default or Event
of Default shall have occurred and be continuing; there shall have been
no material adverse change in the condition (financial or otherwise),
properties, business, or operations of Borrower, any of its
Subsidiaries, or any guarantor since the date of the most recent
financial statements delivered to Bank in accordance with the terms of
this Agreement; and no provision of law, any order of any court or other
agency of government, or any regulation, rule or interpretation thereof,
shall reasonably be expected to have had any Material Adverse Effect on
the validity or enforceability of this Agreement, or any other Loan or
Collateral Documents.
SECTION 6: REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
6.1 Authority. Borrower is a corporation duly organized and existing in
good standing under the laws of the State of California and is duly qualified
and authorized to do business as a corporation in each jurisdiction where the
character of its assets or the nature of its activities makes such qualification
necessary, except for jurisdictions as to which any failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.
6.2 Due Authorization: Noncontravention. Execution, delivery and
performance by Borrower of this Agreement, each of the Loan Documents, and any
and all other documents and instruments required under this Agreement and/or to
which it is a party or is otherwise bound are within the corporate powers of
Borrower, have been duly authorized by all necessary corporate action, and are
not in contravention of law or the terms of Borrower's Articles of
Incorporation, Bylaws, or other constitutional documents or any agreement to
which Borrower is party or by which it is bound.
6.3 Title to Property. Borrower has good and valid title to all property
and assets purported to be owned by it, including those assets identified on the
financial statements most recently delivered by Borrower to and accepted by
Bank, free and clear of all security interests, liens, mortgages, or other
encumbrances.
6.4 Name: Location of Chief Executive Office. Borrower has not done
business and will not, without at least thirty (30) days prior written notice to
Bank, do business under any name other than that specified on the signature page
hereof. Borrower's chief executive office is located at 42501 Albrae Street,
Fremont, California 94538 and Borrower covenants and agrees that it will not,
during the term of this Agreement, without prior written notification to Bank,
relocate said chief executive office.
6.5 Solvency. the fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities: the
Borrower is not left with unreasonably small capital after the transaction
contemplated by this Agreement: Borrower is now and shall be at all times
solvent and able to pay its debts (including trade debts) as they mature.
6.6 No Material Adverse Change in Financial Statement. All consolidated
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to Bank
on or about the date of this Agreement.
6.7 Subsidiaries. There are no directly or indirectly owned Subsidiaries
of Borrower, except as set forth in Schedule 2 attached hereto, which Schedule
sets forth the percentage of ownership of Borrower in each such Subsidiary as of
the date of this Agreement.
6.8 Taxes. Borrower and each of its Subsidiaries have each filed, on or
before their respective due dates, all material federal, state, local and
foreign tax returns which are required to be filed, or have obtained extensions
for filing such tax returns, and is not delinquent in filing such returns in
accordance with such extensions, and have paid all taxes which have become due
pursuant to those returns or pursuant to any assessments received by
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<PAGE> 14
any such party, as the case may be, to the extent such taxes have become due,
except to the extent such tax payments are being actively and diligently
contested in good faith by appropriate proceedings.
6.9 No Defaults. There exists no default under the provisions of any
instrument or agreement evidencing, governing or otherwise relating to any Debt
of Borrower or any of its Subsidiaries, or connected with any of the Permitted
Liens, or with respect to any other agreement, a default under which could
reasonably be expected to have a Material Adverse Effect.
6.10 Actions, Suits, Litigation or Proceedings. There are no actions,
suits, litigation or proceedings, at law or in equity, and no proceedings before
any arbitrator or by or before any governmental commission, board, bureau, or
other administrative agency, pending, or, to the best knowledge of Borrower,
threatened against or affecting Borrower or any of its Subsidiaries, or any
properties or rights of Borrower or any of its Subsidiaries, which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
Neither Borrower nor any of its Subsidiaries is under investigation by, or is
operating under any restrictions imposed by, any regulatory body or authority.
6.11 Compliance with Laws. Borrower and its Subsidiaries have each
complied with all applicable laws, including, without limitation, Environmental
Laws, to the extent that failure to so comply could have a Material Adverse
Effect. Neither Borrower nor any of its Subsidiaries maintains or contributes to
any employee benefit plan subject to Title IV of ERISA. Furthermore, neither
Borrower nor any of its Subsidiaries has incurred any accumulated funding
deficiency within the meaning of ERISA or incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") in connection with any employee benefit
plan established or maintained by Borrower or any of its Subsidiaries, and no
reportable event or prohibited transaction, as defined in ERISA, has occurred
with respect to such plans. Neither Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, nor is Borrower or any of its Subsidiaries "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. Neither Borrower nor any of its Subsidiaries is engaged principally,
or as one of its important activities, directly or indirectly, in the business
of extending credit for the purpose of purchasing or carrying margin stock, and
none of the proceeds of any of the Loans will be used, directly or indirectly,
to purchase or carry any margin stock or made available by Borrower or any of
its Subsidiaries in any manner to any other Person to enable or assist such
Person in purchasing or carrying margin stock.
6.12 Consents, Approvals and Filings, Etc. Except as have been
previously obtained or as otherwise expressly provided in this Agreement, no
authorization, consent, approval, license, qualification or formal exemption
from, nor any filing, declaration or registration with, any court, environmental
agency or regulatory authority or other governmental body or any securities
exchange, and no material authorization, consent or approval from any other
Person, is required in connection with the execution, delivery and performance
by Borrower of this Agreement, or any of the other Loan Documents. All such
authorizations, consents, approvals, licenses, qualifications, exemptions,
filings, declarations and registrations which have previously been obtained or
made, as the case may be, are in full force and effect and are not the subject
of any attack, or to the knowledge of Borrower, any threatened attack, in any
material respect, by appeal, direct proceeding or otherwise.
6.13 Environmental Representations. (a) Neither Borrower nor any of its
Subsidiaries has received any notice of any violation of any Environmental
Law(s); and neither Borrower nor any of its Subsidiaries is a party to any
litigation or administrative proceeding, nor, so far as is known by Borrower, is
any litigation or administrative proceeding threatened against Borrower or any
of its Subsidiaries which, in any case, (i) asserts or alleges that Borrower or
any of its Subsidiaries violated any Environmental Law(s), (ii) asserts or
alleges that Borrower or any of its Subsidiaries is required to clean up,
remove, or take any other remedial or response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous materials, or
(iii) asserts or alleges that Borrower or any of its Subsidiaries is required to
pay all or a portion of any past, present or future clean-up, removal or other
remedial or response action which arises out of or is related to the disposal,
depositing, discharge, leaking or other release of any hazardous materials by
Borrower or any of its Subsidiaries, and which, either singularly or in the
aggregate, could have a Material Adverse Effect upon the business, operations,
conditions (financial or otherwise), performance or properties of Borrower or
any of its Subsidiaries.
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<PAGE> 15
6.13.1 To the best of Borrower's knowledge, there are no
conditions existing currently which could subject Borrower or any of its
Subsidiaries to damages, penalties, injunctive relief or clean-up costs
under any applicable Environmental Law(s), or which require, or are
likely to require, clean-up, removal, remedial action or other response
pursuant to any applicable Environmental Law(s) by Borrower or any of
its Subsidiaries, and which, in any case, either singularly or in
aggregate, could have a Material Adverse Effect upon the business,
operations, conditions (financial or otherwise), performance or
properties of Borrower or any of its Subsidiaries.
6.13.2 Neither Borrower nor any of its Subsidiaries is subject
to any judgment, decree, order or citation related to or arising out of
any applicable Environmental Law(s), which, either singularly or in the
aggregate, could have a Material Adverse Effect upon the business,
operations, conditions (financial or otherwise), performance or
properties of Borrower or any of its Subsidiaries; and, to the best of
Borrower's knowledge, neither Borrower nor any of its Subsidiaries has
been named or listed as a potentially responsible party by any
governmental body or agency in any matter arising under any applicable
Environmental Law(s).
6.13.3 Borrower and each of its Subsidiaries have all material
permits, licenses and approvals required under applicable Environmental
Laws, where the failure to so obtain or maintain any such permits,
licenses or approvals could have a Material Adverse Effect upon the
business, operations, conditions (financial or otherwise), performance
or properties of Borrower or any of its Subsidiaries.
6.14 Warranties, Representations and Agreements. Each warranty,
representation and agreement contained in this Agreement shall be automatically
deemed repeated with each Advance and shall be conclusively presumed to have
been relied on by Bank regardless of any investigation made or information
possessed by Bank. The warranties, representations and agreements set forth
herein shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall give, or cause to be given,
to Bank, either now or hereafter.
6.15 Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
6.16 Accuracy of Information. The Financial Statements of Borrower and
its Subsidiaries, previously furnished to Bank, have been prepared in accordance
with GAAP, are complete and correct in all material respects, and fairly present
the financial condition of Borrower and the consolidated financial condition of
Borrower and its Subsidiaries, and the results of their respective operations as
of the dates and for the periods covered thereby; and since the date(s) of said
financial statements, there has been no material adverse change in the financial
condition of Borrower or any of its Subsidiaries. Neither Borrower nor any of
its Subsidiaries has any material contingent obligations, liabilities for taxes,
long-term leases, or long-term commitments not disclosed by, or reserved against
in, such financial statements. Borrower and each of its Subsidiaries is solvent,
able to pay its respective debts as they mature, has capital sufficient to carry
on its business and has assets the fair market value of which exceed its
liabilities, and Borrower will not be rendered insolvent, under-capitalized or
unable to pay debts generally as they become due by the execution or performance
of this Agreement, or any of the other Loan Documents to which it is a party or
by which it is otherwise bound.
SECTION 7: AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to make
any Loan(s) under this Agreement, and thereafter, so long as any Indebtedness
remains outstanding under this Agreement, it will, and, as applicable, it will
cause its Subsidiaries to:
7.1 Preservation of Existence, Etc. Preserve and maintain its existence
and such of its rights, licenses, and privileges as are material to the business
and operations conducted by it; qualify and remain qualified to do business in
each jurisdiction in which such qualification is material to its business and
operations or ownership of its properties, continue to conduct and operate its
business substantially as conducted and operated during the present and
preceding calendar year; at all times maintain, preserve and protect all of its
franchises and trade names and preserve all the remainder of its property and
keep the same in good repair, working order and condition.
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7.2 Keeping of Books. Keep proper books of record and account in which
full and correct entries shall be made of all of its financial transactions and
its assets and businesses so as to permit the presentation of financial
statements prepared in accordance with GAAP; and permit Bank, or its
representatives, at reasonable times and intervals, at Borrower's cost and
expense, to visit all of Borrower's and each of its Subsidiary's offices,
discuss their respective financial matters with their officers, employees,
directors and independent certified public accountants.
7.3 Reporting Requirements. Furnish to Bank, or cause to be furnished to
Bank, the following:
(a) As soon as possible, and in any event within three (3)
calendar days after becoming aware of the occurrence or existence of
each Default or Event of Default hereunder or any material adverse
change in the financial condition of Borrower, any of its Subsidiaries
or any Guarantor, a written statement of the chief financial officers of
Borrower (or in his or her absence, a responsible senior officer of
Borrower), setting forth details of such Default, Event of Default or
change, and the action which Borrower has taken, or has caused to be
taken, or proposes to take, or to cause to be taken, with respect
thereto;
(b) As soon as available, and in any event within ninety (90)
days after and as of the end of each fiscal year of Borrower, a balance
sheet and statement of profit and loss and surplus reconciliation and a
statement of cash flows of Borrower, for and as of such fiscal year then
ending, in each case, prepared on a reviewed basis by independent
certified public accountants satisfactory to Bank, and certified by the
chief financial officer of Borrower as to consistency with prior
financial reports and accounting periods, accuracy, and fairness of
presentation;
(c) As soon as available, and in any event within thirty (30)
days after and as of the end of each calendar month, including the last
calendar month of each of Borrower's fiscal years, a balance sheet and
statement of profit and loss and surplus reconciliation and a statement
of cash flows of Borrower for and as of the month then ending and for
and as of that portion of the fiscal year of Borrower then ending, in
each case, certified by the chief financial officer of Borrower as to
consistency with prior financial reports and accounting periods,
accuracy, and fairness of presentation;
(d) As soon as available, and in any event within twenty (20)
days after and as of the end of each calendar month, agings and reports
of Borrower's accounts receivable and accounts payable, in each case, in
form and detail satisfactory to Bank.
(e) Simultaneously with the financial statements to be delivered
to Bank pursuant to Sections 7.3(b) and (c) above, a Compliance
Certificate in substantially the form of attached Exhibit C, dated as of
the end of such month or year, as the case may be; and,
(f) Promptly, and in form and detail to be satisfactory to the
Bank, such other information as Bank may reasonably request from time to
time.
7.4 Financial Covenants. Borrower shall maintain the following financial
ratios and covenants on a consolidated and non-consolidated basis:
* Tangible Net Worth. Maintain a Tangible Net Worth, as of the last day of each
calendar month, of not less than $2,500,000.00 which shall increase by 75% of
new equity and by 75% of any net profit on a quarterly basis.
* Quick Ratio. Maintain a Quick Ratio, as of the last day of each calendar
month, of not less than the following during each of the respective periods:
<TABLE>
<CAPTION>
Period Amount
- --------------------------------------------------------- --------
<S> <C>
From the date of this Agreement through November 30, 1999 1.00:1
At all times from and after December 31, 1999 1.50:1
</TABLE>
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<PAGE> 17
* Profitability Borrower shall have a maximum net loss of Five-Hundred Thousand
Dollars ($500,000.00) for the quarter ending December 31, 1999. Thereafter
Borrower to be profitable on a quarterly basis allowing one loss quarter per
fiscal year not to exceed Three-Hundred Thousand Dollars ($300,000.00).
* New Equity. Borrower shall raise new equity in a minimum amount of
$5,000,000.00 by November 30, 1999.
7.5 Inspections. Permit Bank, through its authorized attorneys,
accountants and representatives, at Borrower's cost and expense, to examine
Borrower's and each of its Subsidiary's, books, accounts, records, ledgers and
assets and properties of every kind and description, wherever located, at all
reasonable times during normal business hours, upon reasonable oral or written
request of Bank.
7.6 Indemnification. Indemnify and save Bank harmless from any and all
losses, costs, damages, liabilities and expenses, including, without limitation,
reasonable attorneys' fees, incurred by Bank in connection with any of the Loan
Documents or any transactions contemplated thereby or the Collateral and any
failure by Borrower or any Subsidiary to comply with any laws, including any
Environmental Laws.
7.7 Governmental and Other Approvals. Apply for, obtain and/or maintain
in effect, as applicable, all authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations (whether
with any court, governmental agency, regulatory authority, securities exchange
or otherwise) which are necessary in connection with the execution, delivery
and/or performance by Borrower and its Subsidiaries of this Agreement, the Loan
Documents, or any other documents or instruments to be executed and/or delivered
by Borrowers, or any of its Subsidiaries, in connection therewith or herewith
and the transactions consummated or to be consummated hereunder or thereunder.
7.8 Insurance. Maintain insurance coverage on its physical assets and
against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature (including, without
limitation, loss of rent and/or business interruption insurance and boiler and
machinery insurance), and in the event of acquisition of additional property,
real or personal, or of the incurrence of additional risks of any nature,
increase such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate; and in the case of all
policies covering property subject to Collateral Documents or property in which
the Bank shall have a security interest of any kind whatsoever, other than those
policies protecting against casualty liabilities to strangers, all such
insurance policies shall provide that the loss payable thereunder shall be
payable to Borrower (or other Person providing Collateral pursuant hereto) and
Bank, with mortgagee's clauses in favor of and satisfactory to Bank for all such
policies, and such policies shall also provide that they may not be canceled or
changed without thirty (30) days' prior written notice to Bank. Upon the request
of Bank, all of said policies, or copies thereof, including all endorsements
thereon and those required hereunder, shall be deposited with Bank.
7.9 Environmental Covenants. (a) Comply in all material respects with
all applicable Environmental Laws, and maintain all material permits, licenses
and approvals required under applicable Environmental Laws, where the failure to
do so could have a Material Adverse Effect upon the business, operations,
condition (financial or otherwise) performance or properties of Borrower, of any
of its Subsidiaries, or could have a Material Adverse Effect upon Borrower's, or
any of its Subsidiaries', ability to perform their respective obligations under
this Agreement or any of the other Loan Documents, or could materially adversely
affect the enforceability of this Agreement or any of the other Loan Documents.
7.9.1 Promptly notify Bank, in writing, as soon as Borrower
becomes aware of any condition or circumstance which makes any of the
environmental representations or warranties set forth in this Agreement
incomplete, incorrect or inaccurate in any material respect as of any
date; and promptly provide to Bank, immediately upon receipt thereof,
copies of any material correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other document from any source
asserting or alleging a violation of any Environmental Laws by either
Borrower, or any of its Subsidiaries, or of any circumstance or
condition which requires or may require, a financial contribution by
Borrower, or any of its Subsidiaries,
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or a clean-up, removal, remedial action or other response by or on
behalf of Borrower, or any of its Subsidiaries, under applicable
Environmental Law(s), or which seeks damages or civil, criminal, or
punitive penalties from Borrower, or any of its Subsidiaries, or any
violation or alleged violation of Environmental Law(s).
7.10 Year 2000 Compliant. Perform a comprehensive review and assessment
of all of Borrower's and any of its Subsidiaries' systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems to ensure, to the extent reasonably commercially practicable,
that (i) Borrower and any of its Subsidiaries' become Year 2000 Compliant in a
timely manner. As used in this Section, "Year 2000 Compliant" shall mean, in
regard to any entity, that all software, hardware, firmware, equipment, goods or
systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall, immediately upon request,
provide to Bank such certifications or other evidence of Borrower's and any of
its Subsidiaries' compliance with the terms of this Section as Bank may from
time to time require.
7.11 Principal Depository. Borrower shall maintain its principal bank
accounts with Bank as of the effective date of this Agreement or within a
reasonable time, not to exceed two (2) months, thereafter.
7.12 Inventory; Location. Borrower shall keep the Inventory only at the
following locations: 42501 Albrae Street - Fremont, CA 94538 and 405
International Parkway - Richardson, TX 75082 and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.
7.13 Inventory: Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than
one-hundred thousand Dollars ($100,000.00).
SECTION 8: NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank is committed to make
any Loan under this Agreement, and thereafter, so long as any Indebtedness
remains outstanding under this Agreement or any Note, it will not, and it will
not allow its Subsidiaries to, without the prior written consent of Bank:
8.1 Capital Structure, Business Objects or Purpose. Purchase, acquire or
redeem any of its capital stock, or enter into any reorganization or
recapitalization or reclassify its capital stock, or make any material change in
its capital structure or general business objects or purpose.
8.2 Mergers or Dispositions. Enter into any merger or consolidation,
whether or not the surviving corporation thereunder, or sell, lease, transfer,
relocate or dispose of all, substantially all, or any material part of its
assets (whether in a single transaction or in a series of transactions), other
than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries; (iii) Transfers of worn-out or
obsolete Equipment or Equipment financed by other vendors; (iv) Transfers which
constituted liquidation of Investments permitted under Section 8.8; and (v)
other Transfers not otherwise permitted by this Section 7.1 not exceeding One
Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year.
8.3 Guaranties. Guarantee, endorse, or otherwise become secondarily
liable for or upon the obligations or Debt of others (whether directly or
indirectly), except:
(a) Guaranties in favor of and satisfactory to Bank; and
(b) Endorsements for deposit or collection in the ordinary
course of business.
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8.4 Indebtedness. Become or remain obligated for any Debt, except:
(a) Indebtedness and other Debt from time to time outstanding
and owing to Bank.
(b) Current unsecured trade, utility or non-extraordinary
accounts payable arising in the ordinary course of business;
(c) Purchase money indebtedness incurred for the purpose of
purchasing or acquiring fixed assets, so long as the amount of such
purchase money indebtedness incurred by Borrower and its Subsidiaries
does not exceed three-million Dollars ($3,000,000.00), in aggregate, for
any fiscal year of Borrower;
(d) Debt and capital leases outstanding as of the date hereof
more particularly described in Schedule 1 attached hereto; and
(e) any other Permitted Indebtedness (without duplication of
clauses (a)-(d), above, and subject in any case to the $3,000,000 cap on
capital expenditures).
8.5 Encumbrances. Create, incur, assume or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge upon, or create, suffer
or permit to exist any lien, security interest in, or encumbrance upon any of
its property or assets, whether now owned or hereafter acquired, except for
Permitted Liens.
8.6 Acquisitions. Purchase or otherwise acquire or become obligated for
the purchase of all or substantially all of the assets or business interests of
any person, firm or corporation or any shares of stock of any corporation,
trusteeship or association or in any other manner effectuate or attempt to
effectuate an expansion of present business by acquisition; provided that this
Section 8.6 shall not apply to (i) the purchase of inventory, equipment, or
intellectual property rights in any transaction valued at less than $100,000 in
the ordinary course of business or (ii) transactions among Subsidiaries or among
Borrower and its Subsidiaries in which Borrower is the surviving entity.
8.7 Dividends. Declare or pay dividends on, or make any other
distribution (whether by reduction of capital or otherwise) in respect of any
shares of its capital stock, except (a) dividends payable by a Subsidiary to
Borrower; (b) dividends payable solely in stock; (c) conversion of any of its
convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange therefore, and (d) redemption,
repurchase or acquisition of any shares of its capital stock payable upon an
employee's termination pursuant to its employee stock option, repurchase, or
similar plan: provided, however, that after giving effect to such redemption,
repurchase or acquisition, Borrower shall be in full compliance with the terms
of this Agreement.
8.8 Investments. Make or allow to remain outstanding any investment
(whether such investment shall be of the character of investment in shares of
stock, evidences of indebtedness or other securities or otherwise) in, or any
loans or advances to, any Person, firm, corporation or other entity or
association, other than:
(a) Borrower's current ownership interests in those Subsidiaries
of Borrower identified on Schedule 2 attached hereto:
(b) Any investment in direct obligations of the United States of
America or any agency thereof, or in certificates of deposit issued by
Bank, maintained consistent with Borrower's or such Subsidiary's
business practices prior to the date hereof; provided, that no such
investment shall mature more than ninety (90) days after the date when
made or the issuance thereof; and
(c) Any other Permitted Investment
8.9 Transactions with Affiliates. Enter into any transaction with any of
their stockholders, officers, employees, partners or any of their Affiliates,
except, subject to the terms hereof, transactions in the ordinary course
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of business and on terms not less favorable than would be usual and customary in
similar transactions between Persons dealing at arm's length.
8.10 Prepayment of Indebtedness. Prepay any Debt (or take any actions
which impose an obligation to prepay), except, subject to the terms hereof or
thereof, Indebtedness or other Debt payable to Bank.
8.11 Pension Plans. Except in compliance with this Agreement, enter
into, maintain, or make contribution to, directly or indirectly, any Pension
Plan that is subject to ERISA.
8.12 Subordinate Indebtedness. Subordinate any indebtedness due to it
from any Person to indebtedness of other creditors of such Person.
8.13 No Further Negative Pledges. Enter into or become subject to any
agreement (other than this Agreement or the Loan Documents) (a) prohibiting the
guaranteeing by Borrower or any of its Subsidiaries of any obligations, (b)
prohibiting the creation or assumption of any lien or encumbrance upon the
properties or assets of Borrower or any of its Subsidiaries, whether now owned
or hereafter acquired, or (c) requiring an obligation to become secured (or
further secured) if another obligation is secured or further secured.
8.14 Accounts Receivable. Sell or assign any Account, account
receivable, note or trade acceptance, except to the Bank.
8.15 Capital Expenditures. Make Capital Expenditures during Borrower's
fiscal year ending on or about June 30, 2000, in excess of three-million Dollars
($3,000,000.00) in aggregate, or in excess of three-million Dollars
($3,000,000.00) in aggregate, on a non-cumulative basis, in any fiscal year of
Borrower thereafter.
8.16 Inventory. That Inventory is not now and shall not at any time or
times hereafter be located or stored with a bailee, warehouseman, or other third
party without Bank's prior written consent, and, in such event, Borrower will
concurrently therewith cause any such bailee, warehouseman, or other third party
to issue and deliver to Bank, in a form acceptable to Bank, warehouse receipts
in Bank's name evidencing the storage of Inventory or other evidence of Bank's
prior rights in the Inventory. In any event, Borrower shall instruct any third
party to hold all such Inventory for Bank's account subject to Bank's security
interests and its instructions.
SECTION 9: EVENTS OF DEFAULTS
9.1 Events of Default. The occurrence or existence of any of the
following conditions or events shall constitute an "Event of Default" hereunder:
(a) Upon non-payment of any principal, interest or other sums
due to Bank under this Agreement or any other agreement or if any
guarantor shall fail to pay, when due, any indebtedness, obligation or
liability whatsoever of any such guarantor to Bank:
(b) Any default in the observance or performance of any of the
conditions, covenants or agreements of Borrower set forth in Sections 6,
7 or 8 of this Agreement;
(c) Default in the observance or performance of any of the other
conditions, covenants or agreements of Borrower set forth in this
Agreement (other than as provided in (a) or (b) above), and continuance
thereof for a period of thirty (30) days;
(d) Any representation or warranty made by Borrower, or by any
other Person (other than Bank), herein or in any other Loan Document
shall be untrue or incorrect in any material respect;
(e) Any default or event of default, as the case may be, in the
observance or performance of any of the conditions, covenants or
agreements of Borrower or any other Person (excluding Bank) set forth in
any of the Collateral Documents, or in any of the other Loan Documents,
and continuation thereof beyond any applicable period of grace or cure
provided with respect thereto;
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(f) Any default by Borrower, any guarantor, or any of their
respective Subsidiaries, in the payment of any Debt (other than Debt
owing to Bank), or in the observance or performance of any conditions,
covenants or agreements related or given with respect thereto or any
other agreement, the failure to perform under which could reasonably be
expected to have a Material Adverse Effect and, in each such case,
continuation thereof beyond any applicable grace or cure period;
(g) The rendering of one or more judgments or decrees for the
payment of money in excess of the sum of two-hundred-fifty thousand
Dollars ($250,000.00), in the aggregate, against Borrower, any
guarantor, or any of their respective Subsidiaries, and such judgment(s)
or decree(s) shall remain unvacated, unbonded or unstayed, by appeal or
otherwise, for a period of thirty (30) consecutive days after the date
of entry;
(h) If there shall be any change in the management, ownership or
control of Borrower, whether by reason of incapacity, death,
resignation, termination or otherwise, which, in Bank's sole judgment,
shall have a Material Adverse Effect upon the future prospects for the
successful operation by Borrower, of its businesses as conducted before
such change, or its ability to pay and perform its liabilities and
obligations under this Agreement, the Indebtedness, or the Loan
Documents;
(i) The failure by Borrower, any guarantor, or any of their
respective Subsidiaries, to meet the minimum funding requirements under
ERISA with respect to any Pension Plan established or maintained by it;
the occurrence of any "reportable event", as defined in ERISA, which
could constitute grounds for termination by the PBGC of any Pension Plan
or for the appointment by the appropriate United States District Court
of a trustee to administer such Pension Plan, and such reportable event
is not corrected and such determination is not revoked within thirty
(30) days after notice thereof has been given to the plan administrator
or Borrower, any such Guarantor, or the respective Subsidiary(ies), as
the case may be; or the institution of any proceedings by the PBGC to
terminate any such Pension Plan or to appoint a trustee by the
appropriate United States District Court to administer any such Pension
Plan;
(j) If Borrower, any guarantor, or any of their respective
Subsidiaries, becomes insolvent or generally fails to pay, or admits in
writing its inability to pay, its debts as they mature, or applies for,
consents to, or acquiesces in the appointment of a trustee, receiver,
liquidator, conservator or other custodian for Borrower, any guarantor,
or any such Subsidiary, or a substantial part of their respective
property, or makes a general assignment for the benefit of creditors; or
files a voluntary petition in bankruptcy or in the absence of such
filing application, consent or acquiescence, a trustee, receiver,
liquidator, conservator or other custodian is appointed for Borrower,
any guarantor, or any of their respective Subsidiaries, or for a
substantial part of their respective property, and the same is not
discharged within thirty (30) days; or any bankruptcy, reorganization,
debt arrangement, or other proceedings under any bankruptcy or
insolvency law, or any dissolution or liquidation proceeding, is
instituted by or against Borrower, any guarantor, or any of their
respective Subsidiaries, and, if instituted against Borrower, such
guarantor, or any such Subsidiary, the same is consented to or
acquiesced in by Borrower, any guarantor, or any such Subsidiary, as the
case may be, or otherwise remains undismissed for thirty (30) days; or
any warrant of attachment is issued against any substantial part of the
property of Borrower, any guarantor or any of their respective
Subsidiaries, which is not released within thirty (30) days of service
thereof;
(k) If any Collateral Document shall be terminated, revoked, or
otherwise rendered void or unenforceable, in any case, without Bank's
prior written consent;
(l) If any circumstance occurs that has a Material Adverse
Effect, or if there is a material impairment of the value or priority of
Bank's security interests in the Collateral;
(m) If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant
or levy has not been removed, discharged or rescinded within ten (10)
days, or if Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its
business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's assets, or
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if a notice of lien, levy, or assessment is filed of record with respect
to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten
(10) days after Borrower receives notice thereof, provided that none of
the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith
contest by Borrower (provided that no credit extensions will be required
to be made during such cure period); or,
(n) If Borrower makes any payment on account of Subordinated Debt,
except to the extent such payment is allowed under any subordination agreement
entered into with Bank.
SECTION 10: BANK'S RIGHTS AND REMEDIES
10.1 Rights and Remedies. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Indebtedness, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of
Default described in Section 9.1(j), all Indebtedness shall become
immediately due and payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Terminate this Agreement as to any future liability or
obligation of Bank, but without affecting Bank's rights and security
interests in the Collateral, and the Indebtedness of Borrower to Bank;
(d) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all Letters of Credit fees scheduled to
be paid or payable over the remaining term of the Letters of Credit;
(e) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(f) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes
Bank to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which
in Bank's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's premises. Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge,
in order to exercise any of Bank's rights or remedies provided herein,
at law, in equity, or otherwise;
(g) Without notice to Borrower set off and apply to the
Indebtedness any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral;
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(i) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises)
as Bank determines is commercially reasonable, and apply the proceeds
thereof to the Indebtedness in whatever manner or order Bank deems
appropriate;
(j) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law;
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower;
(l) Without limiting Bank's rights under any security interest,
Bank is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property
of a similar nature as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and
Borrower's rights under all licenses and all franchise agreement shall
inure to Bank's benefit, and Bank shall have the right and power to
enter into sublicense agreements with respect to all such rights with
third parties on terms acceptable to Bank;
(m) Borrower shall pay all Bank Expenses incurred in connection
with Bank's enforcement and exercise of any of its rights and remedies
as herein provided, whether or not suit is commenced by Bank.
10.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
Account Debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (e) settle and adjust disputes and
claims respecting the Accounts directly with Account Debtors, for amounts and
upon terms which Bank determines to be reasonable; (f) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (g) to transfer any intellectual property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code, provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Indebtedness has been fully repaid and performed and Bank's
obligation to provide Advances hereunder is terminated.
10.3 Accounts Collection. At any time from the date of this Agreement,
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and, if requested or required by Bank, immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.
10.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 7.8 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
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10.5 Bank's Liability for Collateral. So long as Bank complies with its
obligations under Section 9207 of the Code. Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral, (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
10.6 Waiver of Certain Laws. To the extent permitted by applicable law,
Borrower hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish, the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any sale made under
the judgment, order or decree of any court, on any claim for interest on the
Notes, or any security interest or mortgage contemplated by or granted under or
in connection with this Agreement or the Indebtedness.
10.7 Waiver of Defaults. No Default or Event of Default shall be waived
by Bank except in a written instrument specifying the scope and terms of such
waiver and signed by an authorized officer of Bank, and such waiver and shall be
effective only for the specific time(s) and purpose(s) given. No single or
partial exercise of any right, power or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of Bank's rights.
No waiver of any Default or Event of Default shall extend to any other or
further Default or Event of Default. No forbearance on the part of Bank in
enforcing any of Bank's rights or remedies hereunder or any of the other Loan
Documents shall constitute a waiver of any of its rights or remedies. Borrower
expressly agrees that this Section may not be waived or modified by Bank by
course of performance, estoppel or otherwise.
10.8 Receiver. Bank, in any action or suit to foreclose upon any of the
Collateral, shall be entitled, without notice or consent, and completely without
regard to the adequacy of any security for the Indebtedness, to the appointment
of a receiver of the business and premises in question, and of the rents and
profits derived therefrom. This appointment shall be in addition to any other
rights, relief or remedies afforded Bank. Such receiver, in addition to any
other rights to which he shall be entitled, shall be authorized to sell,
foreclose or complete foreclosure on Collateral contemplated by this Agreement
for the benefit of Bank, pursuant to provisions of applicable law.
10.9 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the UCC, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
10.10 Demand: Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
SECTION II: MISCELLANEOUS
11.1 Loans to Borrower. Bank and Borrower agree that any loans which
Bank in its sole discretion has made or may now or hereafter make to Borrower
shall be subject to the terms and conditions of this Agreement unless otherwise
agreed in writing by Bank and Borrower.
11.2 Accounting Principles. Except to the extent expressly stated to the
contrary herein, where the character or amount of any asset or liability or item
of income or expense is required to be determined, or any consolidation or other
accounting computation is required to be made for purposes of this Agreement, it
shall be done in accordance with GAAP, and all accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP.
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11.3 Audits of Collateral: Fees. Bank shall have the right from time to
time to audit Borrower's Accounts, Inventory, or other Collateral, provided that
such audits will be conducted upon reasonable notice. Borrower agrees to
reimburse Bank, on demand, for customary and reasonable fees and costs incurred
by Bank for such audits, and for each appraisal of Collateral and financial
analysis and examination of Borrower performed from time to time by its agents.
11.4 Taxes and Fees. Should any tax (other than a tax based upon the net
income of Bank) or recording or filing fee become payable in respect of this
Agreement or any of the Loan Documents, any of the Collateral, or any amendment,
modification or supplement hereof or thereof, Borrower agrees to pay such taxes
(or reimburse Bank therefor), together with any interest or penalties thereon,
and agree to hold Bank harmless with respect thereto.
11.5 Governing Law. This Agreement, each of the Notes, and each of the
other Loan and Collateral Documents, shall be deemed to have been delivered in
the State of California, and shall be governed by and construed and enforced in
accordance with the laws of the State of California, except to the extent that
the Uniform Commercial Code, other personal property law or real property law of
another jurisdiction where Collateral is located is applicable, and except to
the extent expressed to the contrary in any of the Loan Documents. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.6 Costs and Expenses. Borrower shall pay Bank, on demand, all costs
and expenses, including, without limitation, reasonable attorneys' fees and
legal expenses, incurred by Bank in perfecting, revising, protecting or
enforcing any of its rights or remedies against Borrower or any Collateral, or
otherwise incurred by Bank in connection with any Default or Event of Default or
the enforcement of this Agreement, the Loan Documents, or the Indebtedness.
Following Bank's demand upon Borrower for the payment of any such costs and
expenses, and until the same are paid in full, the unpaid amount of such costs
and expenses shall constitute Indebtedness and shall bear interest at the Base
Rate.
11.7 Notices. All notices and other communications provided for herein
or in any document contemplated hereby, given hereunder or required by law to be
given, shall be in writing (unless expressly provided to the contrary). If
personally delivered, such notices shall be effective when delivered, and in the
case of mailing, such notices shall be effective two (2) Business Days after
sending by first class mail, postage prepaid, in each case addressed to the
parties as set forth on the signature page of this Agreement, or to such other
address as a party shall have designated to the other in writing in accordance
with this Section. The giving of at least five (5) days' notice before Bank
shall take any action described in any notice shall conclusively be deemed
reasonable for all purposes; provided, that this shall not be deemed to require
Bank to give such five (5) days' notice, or any notice, if not specifically
required to do so in this Agreement.
11.8 Further Action. Borrower, from time to time, upon written request
of Bank, will promptly make, execute, acknowledge and deliver, or cause to be
made, executed, acknowledged and delivered, all such further and additional
instruments, and promptly take all such further action as may be required to
carry out the intent and purpose of this Agreement, and to provide for the Loans
under and payment of the Notes, according to the intent and purpose herein and
therein expressed.
11.9 Successors and Assigns: Participation. This Agreement shall be
binding upon and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns. The foregoing shall not authorize any
assignment or transfer by Borrower, of any of its respective rights, duties or
obligations hereunder, such assignments or transfers being expressly prohibited.
Bank, however, may freely assign, whether by assignment, participation or
otherwise, its rights and obligations hereunder, and is hereby authorized to
disclose to any such assignee or participant any financial or other information
in its knowledge or possession regarding Borrower, its Subsidiaries and
Affiliates, or the Indebtedness.
11.10 Indulgence. No delay or failure of Bank in exercising any right,
power or privilege hereunder or under any of the Loan Documents shall affect
such right, power or privilege, nor shall any single or partial exercise thereof
preclude any further exercise thereof, nor the exercise of any other right,
power or privilege available to
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Bank. The rights and remedies of Bank hereunder are cumulative and are not
exclusive of any rights or remedies of Bank.
11.11 Amendment and Waiver. No amendment or waiver of any provision of
this Agreement or any Loan Document, nor consent to any departure by Borrower,
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Bank, and then such waiver or consent shall be effective only in
the specific instance(s) and for the specific time(s) and purpose(s) for which
given.
11.12 Severability. In case any one or more of the obligations of
Borrower under this Agreement, any Note, or any of the other Loan Documents
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of Borrower shall not
in any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Borrower under this Agreement, the Notes or
any of the other Loan Documents in any other jurisdiction.
11.13 Headings and Construction of Terms. The headings of the various
sub-Sections hereof are for convenience of reference only and shall in no way
modify or affect any of the terms or provisions hereof. Where the context herein
requires, the singular number shall include the plural, and any gender shall
include any other gender.
11.14 Independence of Covenants. Each covenant hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of any Default or Event of Default.
11.15 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of Borrower made herein or
in any of the Loan Documents, or in any certificate, report, financial statement
or other document furnished by or on behalf of Borrower in connection with this
Agreement or any of the Loan Documents, shall be deemed to have been relied upon
by Bank, notwithstanding any investigation heretofore or hereafter made by Bank
or on Bank's behalf, and those covenants and agreements of Borrower set forth in
this Agreement (together with any other indemnities of Borrower contained
elsewhere in this Agreement or in any of the Loan Documents) shall survive the
termination of this Agreement and the repayment in full of the Indebtedness.
11.16 Effective Upon Execution. This Agreement shall become effective
upon the execution hereof by Bank and Borrower, and shall remain effective until
the Indebtedness under this Agreement and each of the Notes shall have been
repaid and discharged in full and no commitment to extend any credit hereunder
(whether optional or obligatory) remains outstanding.
11.17 Complete Agreement: Conflicts. This Agreement, the Notes, the
other Loan Documents, any agreements, certificates, or other documents given in
connection with the Indebtedness under this Agreement, and any commitment letter
previously issued by Bank with respect thereto (provided that in the event of
any inconsistency or conflict between this Agreement and the other Loan
Documents, on one hand, and such commitment letter, on the other hand, this
Agreement and the Loan Documents shall control), contain the entire agreement of
the parties thereto and supersedes all prior agreements and understandings
related to the subject matter hereof, and none of the parties shall be bound by
anything not expressed in writing. In the event that and to the extent that any
of the terms, conditions or provisions of any of the other Loan Documents are
inconsistent with or in conflict with any of the terms, conditions or provisions
of this Agreement, the applicable terms, conditions and provisions of this
Agreement shall govern and control.
11.18 Confidentiality. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement,
except that disclosure of such information may be made (a) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower; (b) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower; (c) as required by law, regulations, rule or order, subpoena, judicial
order or similar
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order; (d) as may be required in connection with the examination, audit or
similar investigation of Bank, and, (e) as Bank may deem appropriate in
connection with the exercise of any remedies hereunder. Confidential information
hereunder shall not include information that either: (i) is in the public domain
or in the knowledge or possession of Bank when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank through no fault of Bank; or,
(ii) is disclosed to Bank by a third party, provided Bank does not have actual
knowledge that such third party is prohibited from disclosing such information.
11.19 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL
OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY
OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK
OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
11.20 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
WITNESS the due execution hereof as of the day and year first above
written.
BANK: BORROWER
COMERICA BANK-CALIFORNIA
By: /s/ ELIZABETH WILKERSON By: /s/ WALTER ALESSANDRINI
-------------------------------- ---------------------------------
Its: CORP. BANKING OFFICER Its: CEO
Address: 55 Almaden Boulevard Address: 42501 Albrae
San Jose, CA 95113 Street Fremont, CA 94538
Attn.: Elizabeth Wilkerson /s/ JESSY CHAO
Telefax No.: 408-556-5889 ------------------------------------
DIRECTOR OF FINANCE
Attn.: Jessy Chao
Telefax No.: 510-360-0689
26
<PAGE> 28
EXHIBIT A
The Collateral shall consist of all right, title and interest of a
Debtor in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including
without limitation, all machinery, fixtures, vehicles, and any interest in any
of the foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily our of a Debtor's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to a Debtor,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by a Debtor and Debtor's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Debtor's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protections of semiconductor ships, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interest in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
(h) Notwithstanding the foregoing, the term "Collateral" shall not
include any property, rights or licenses to the extent the granting of a
security interest therein (i) would be contrary to applicable law or (ii) is
prohibited by or would constitute a default under any agreement or document
governing such property, rights or licenses (but only to the extent such
prohibition is enforceable under applicable law, including without limitation
Section 9318 of the Code); provided that immediately and automatically upon the
ineffectiveness, lapse or termination of any such prohibition or restriction,
the Collateral shall include such property, rights and licenses, and Borrower
shall be deemed to have granted a security interest in all such rights and
interests as if such prohibition or restriction had never been in effect.
27
<PAGE> 29
SCHEDULE 1
Permitted Liens and Capital Leases
- ----------------------------------
CALIFORNIA
Debtor: Avanex Corporation - Fremont, CA
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
- ----------------- ----------- -------------
<S> <C> <C>
9817360855 06/19/1998 Hewlett-Packard Company Finance & Remarketing Division
9835560266 12/16/1998 Phoenix Warehouse II, Inc.
9835560292 12/16/1998 Phoenix Warehouse II, Inc. [amendment 5/6/99]
9907160504 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
9907160502 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
9907860782 03/11/1999 Phoenix Warehouse II, Inc.
9908160297 03/11/1999 Phoenix Warehouse II, Inc.
9916960704 06/14/1999 Phoenix Warehouse II, Inc.
</TABLE>
Debtor: Avanex Corporation - Richardson, TX
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
- ----------------- ----------- -------------
<S> <C> <C>
9907860782 03/11/1999 Phoenix Warehouse II, Inc.
9908160297 03/11/1999 Phoenix Warehouse II, Inc.
9916960704 06/14/1999 Phoenix Warehouse II, Inc.
</TABLE>
Texas
Debtor: Avanex Corporation - Richardson, TX
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
- ----------------- ----------- -------------
<S> <C> <C>
9900043848 03/04/1999 Hewlett Packard Company Finance & Remarketing Division
9900043849 03/04/1999 Hewlett Packard Company Finance & Remarketing Division
</TABLE>
28
<PAGE> 30
SCHEDULE 2
SUBSIDIARY COMPANIES
There are no subsidiary companies.
<PAGE> 1
EXHIBIT 10.15
SENIOR LOAN AND SECURITY AGREEMENT NO. 053-6193
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 053-6193 (this "Security Agreement")
is dated as of November 5, 1998 between AVANEX CORPORATION, a California
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $1,300,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable ("Soft Costs") whether now owned by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
(collectively, the "Collateral") which is described on the Note attached hereto
or any subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s). The
terms of each Note hereto are subject to all conditions and provisions of this
Security Agreement as it may at any time be amended. Each Note shall constitute
a separate and independent Loan and contractual obligation of Borrower and shall
incorporate the terms and conditions of this Security Agreement and any
additional provisions contained in such Note. In the event of a conflict between
the terms and conditions of this Security Agreement and any provisions of such
Note, the provisions of such Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees that
its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such rent and other sums, are absolute and unconditional and are not subject
to any abatement, reduction, setoff, defense, counterclaim or recoupment due or
alleged to be due to, or by reason of, any past, present or future claims which
Borrower may have against Lender, any assignee, the manufacturer or seller of
the Collateral, or against any person for any reason whatsoever.
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
conditions of
<PAGE> 2
this Security Agreement and so long as no Event of Default or event which with
the giving of notice or passage of time, or both, would become an Event of
Default has occurred and is continuing, Lender hereby agrees to make one or more
senior secured Loans to Borrower, subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal amount of the Loans
shall not exceed $1,300,000 in the aggregate (the "Commitment"); (iii) at the
time of each Loan, no Event of Default or event which with the giving of notice
or passage of time, or both, would become an Event of Default shall have
occurred and be continuing, as reasonably determined by Lender, and certified by
Borrower; (iv) the amount of each Loan shall be at least $25,000 except for a
final Loan which may be less than $25,000; (v) Lender shall not be obligated to
make any Loan after June 30, 1999 provided that the funding period may be
extended to August 31, 1999 if Lender has received and approved in its sole
discretion Borrower's monthly 2000 business plan; (vi) for each Loan, Borrower
shall present to Lender a list of proposed Collateral for approval by Lender in
its sole discretion; (vii) for each Loan, Borrower shall have provided Lender
with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable to Lender);
(viii) Borrower is performing according to and is not materially deviating from
its business plan referred to as "Proforma Income Statement and Proforma Balance
Sheet," 2 pages, dated September 16, 1998 (the "Business Plan"), as may be
amended from time to time in form and substance acceptable to Lender; (ix) there
shall be no material adverse change in Borrower's condition, financial or
otherwise, that would materially impair the ability of Borrower to meet its
payment and other obligations under this Loan (a "Material Adverse Effect") as
reasonably determined by Lender, and Borrower so certifies, from (yy) the date
of the most recent financial statements delivered by Borrower to Lender to (zz)
the date of the proposed Loan; (x) Borrower shall use the proceeds of all Loans
hereunder to purchase or reimburse the purchase of Collateral; (xi) at the time
of each Loan, Borrower has reimbursed Lender for all UCC filing and search
costs, inspection and labeling costs, and appraisal fees, if any; (xii) all
Collateral has been marked and labeled by Lender or Lender's agent; and (xiii)
Lender has received in form and substance acceptable to Lender: (a) Borrower's
interim financial statements signed by a financial officer of Borrower, (b)
prior to the first funding, evidence of Borrower's $2.600.000 cash position as
of July 31, 1998; and (c) complete copies of the Borrower's audit reports for
its most recent fiscal year, which shall include at least Borrower's balance
sheet as of the close of such year, and Borrower's statement of income and
retained earnings and of changes in financial position for such year, prepared
on a consolidated basis and certified by independent public accountants. Such
certificate shall not be qualified or limited because of restricted or limited
examination by such accountant of any material portion of the company's records.
Such reports shall be prepared in accordance with generally accepted accounting
principles and practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
all, but not fewer than all, outstanding Notes in whole but not in part only in
the event that Lender declines to consent to Borrower's merger into,
consolidation with or conveyance or transfer of its properties substantially as
an entirety to any other person or entity. The prepayment amount shall be the
sum of (i) and (ii) below, discounting the amounts in (ii) at a rate of 6% per
annum compounded monthly on the basis of a 360 day year: (i) all amounts which
may be then due or accrued to the payment date for all outstanding Notes; (ii)
as of such payment date, an amount equal to: (A) all remaining monthly payments
due under all outstanding Notes, and (B) 20% of the value of the Collateral
under all outstanding Notes calculated in accordance with Election No. 1 in
Section 28. The prepayment conditions are as follows: (a) Borrower must provide
Lender with at least five (5) days' advance written notice of its intention to
prepay; and (b) the prepayment date must fall on a regular monthly payment date.
2
<PAGE> 3
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified could not reasonable be expected to have a Material Adverse
Effect; (b) it has full authority to execute and deliver this Security Agreement
and the Notes and perform the terms hereof and thereof, and this Security
Agreement and the Notes have been duly authorized, executed and delivered and
constitute valid and binding obligations of Borrower enforceable in accordance
with their terms; (c) the execution and delivery of this Security Agreement and
the Notes will not contravene any law, regulation or judgment affecting Borrower
or result in any breach of any material agreement or other instrument binding on
Borrower; (d) no consent of Borrower's shareholders or holder of any
indebtedness, or filing with, or approval of, any governmental agency or
commission, which has not already been obtained or performed, as appropriate, is
a condition to the performance of the terms of this Security Agreement or the
Notes; (e) there is no action or proceeding pending or threatened against
Borrower before any court or administrative agency which might have a Material
Adverse Effect on the business, financial condition or operations of Borrower;
(f) at the time any Loan is made hereunder, Borrower owns and will keep all of
the Collateral free and clear of all liens, claims and encumbrances other than
Permitted Liens, and, except for this Security Agreement, there is no deed of
trust, mortgage, security agreement or other third party interest against any of
the Collateral other than Permitted Liens; (g) at the time any Loan is made
hereunder, Borrower has good and marketable title to the Collateral; (h) at the
time any Loan is made hereunder, all Collateral has been received, installed and
is ready for use and is satisfactory in all respects for the purposes of this
Security Agreement; (i) the Collateral is, and will remain at all times under
applicable law, removable personal property, which is free and clear of any lien
or encumbrance except in favor of Lender and except for Permitted Liens,
notwithstanding the manner in which the Collateral may be attached to any real
property; (j) all credit and financial information submitted to Lender herewith
or at any other time is and will at the time given be true and correct in all
material respects; and (k) the security interest granted to Lender hereunder is
a first priority security interest, and (l) on or before January 1, 2000,
Borrower's computer system shall be Year 2000 performance compliant and will
thus be able to accurately process date data from, into and between the
twentieth and twenty-first centuries including leap year calculations.
"Permitted Liens" shall mean and include: (i) liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith; and (ii) liens of carriers,
warehousemen, mechanics, materialmen, vendors, landlords and other liens arising
by operation of law for obligations incurred in the ordinary course of business
not at the time delinquent or thereafter payable without penalty or being
contested in good faith.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. Except for "mobile goods" (as such term
is defined in the California Uniform Commercial Code), including, without
limitation, laptop computers and other mobile equipment, and other equipment
used at trade shows, all of the Collateral shall be located at the address (the
"Collateral Location") shown on Exhibit A to each Note and shall not be moved
without Lender's prior written consent which location shall in all events be
within the United States. All of the
3
<PAGE> 4
records regarding the Collateral shall be located at 42501 Albrae Street,
Fremont, CA 94538, or such other location of which Borrower has given notice to
Lender in accordance with this Security Agreement. Lender shall have the right
to inspect Collateral, including records relating thereto, and Borrower's books
and records at any time (upon reasonable notification) during regular business
hours, such books and records to be maintained in accordance with generally
accepted accounting principles. Borrower shall be responsible for all labor,
material and freight charges incurred in connection with any removal or
relocation of Collateral which is requested by Borrower and consented to by
Lender, as well as for any charges due to the installation or moving of the
Collateral. Payments under the Notes and under this Security Agreement shall
continue during any period in which the Collateral is in transit during a
relocation. During Borrower's regular business hours and upon at least two days'
notice to Borrower, Lender or its agent shall mark and label Collateral, which
labels (to be provided by Lender) shall state that such Collateral is subject to
a security interest of Lender, and Borrower shall keep such labels on the
Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice, Borrower
will reasonably permit Lender to inspect each item of Collateral and its
maintenance records during Borrower's regular business hours. Borrower will at
its sole expense comply with all applicable laws, rules, regulations,
requirements and orders with respect to the use, maintenance, repair, condition,
storage and operation of each item of Collateral. Any addition or improvement
that is so required or cannot be so removed will immediately become Collateral
of Lender. (b) Service and Repair. Borrower will at its sole expense maintain
and service and repair any damage to each item of Collateral in a manner
consistent with prudent industry practice and Borrower's own practice so that
such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than sixty (60) days after such Casualty
Occurrence, Borrower shall, at its election, either: (a) repair the Collateral
returning it to good operating condition, or (b) replace the Collateral with
Collateral acceptable to Lender in its reasonable discretion, in good condition
and repair taking all steps required by Lender to perfect Lender's first
priority security interest therein, which replacement Collateral shall be
subject to the terms of this Security Agreement, or (c) pay to Lender an amount
equal to the Balance Due (as defined below) for each lost or damaged item of
Collateral. The Balance Due for each such item is the sum of: (i) all amounts
for each item which may be then due or accrued to the payment date, plus (ii) as
of such payment date, an amount discounted to present value at 6% equal to the
product of the fraction specified below times the sum of all remaining payments
under the respective Note, including the amount of any mandatory or optional
payment required or permitted to be paid by Borrower to Lender at the maturity
of the Note. The numerator of the fraction shall be the collateral value (as set
forth on the applicable Note) of the item and the denominator shall be the
aggregate collateral value of all items under the Note. Upon the making of such
payments, Lender shall release such item of Collateral from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral (including, in the case of Collateral which is vehicles,
comprehensive and collision coverage) and in no event for less than the amount
payable following a Casualty Occurrence (as provided in Section 9). Such
insurance shall provide for a loss payable endorsement to Lender and/or any
assignee of Lender. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage
4
<PAGE> 5
for personal injury, death or property damage in an amount not less than
$2,000,000 in the aggregate, (and in the case of Collateral which is vehicles,
in an amount not less than $1,000,000 covering bodily injury and property damage
in a combined single limit) naming Lender and/or Lender's assignee as additional
insured. Such insurance shall contain insurer's agreement to give thirty (30)
days' advance written notice to Lender before cancellation or material change of
any policy of insurance. Borrower will provide Lender and any assignee of Lender
with a certificate of insurance from the insurer evidencing Lender's or such
assignee's interest in the policy of insurance. Such insurance shall cover any
Casualty Occurrence to any unit of Collateral. Notwithstanding anything in
Section 9 or this Section 10 to the contrary, this Security Agreement and
Borrower's obligations hereunder shall remain in full force and effect with
respect to any unit of Collateral which is not subject to a Casualty Occurrence.
If Borrower fails to provide or maintain insurance as required herein, Lender
shall have the right, but shall not be obligated, to obtain such insurance. In
that event, Borrower shall pay to Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply could reasonably be expected to have a Material Adverse Effect; (c) take
no action to adversely affect Lender's security interest in the Collateral as a
first and prior perfected security interest; (d) furnish Lender with its annual
audited financial statements within one hundred twenty (120) days following the
end of Borrower's fiscal year, unaudited quarterly financial statements within
forty-five (45) days after the end of each fiscal quarter, and within thirty
(30) days of the end of each month a financial statement for that month prepared
by Borrower, and including an income statement and balance sheet, all of which
shall be certified by an officer of Borrower as true and correct and shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and such other information as Lender may reasonably
request; and (e) promptly (but in no event more than five (5) days after the
occurrence of such event) notify Lender of any change in Borrower's condition
during the commitment period which constitutes a Material Adverse Effect, and of
the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
and approved by Lender. Borrower's obligations under this Section 12 shall
survive the payment in full of all the Indebtedness and the performance of all
Obligations with respect to acts or events occurring or alleged to have occurred
prior to the payment in full of all the Indebtedness and the performance of all
Obligations.
5
<PAGE> 6
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing and Borrower shall execute such additional documentation as
Lender's assignee and/or secured party shall reasonably require at Lender's
expense. Each such assignee and/or secured party shall have all of the rights,
but (except as provided in this Section 15) none of the obligations, of Lender
under this Security Agreement, unless such assignee or secured party expressly
agrees to assume such obligations in writing, provided that notwithstanding
anything contained herein, any assignee of any portion of Lender's commitment
and obligation to extend Loans as set forth in Section 3(a)(ii) of this Security
Agreement, shall be obligated to extend such Loans. Borrower shall not assert
against any assignee and/or secured party any defense, counterclaim or offset
that Borrower may have against Lender. Notwithstanding any such assignment, and
providing no Event of Default has occurred and is continuing, Lender, or its
assignees, secured parties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the terms and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignees of the parties hereto. Borrower acknowledges that any
such assignment by Lender will not change Borrower's duties or obligations under
this Security Agreement and the Notes or increase any burden or risk on
Borrower.
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<PAGE> 7
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any other agreement between Borrower and Lender or under any
lease or mortgage of real property covering the location of the Collateral if
such failure to comply or perform is not cured by Borrower within thirty (30)
days after Borrower knows of the noncompliance or nonperformance or notice from
Lender or such longer period that Borrower is diligently attempting to effect
such cure; (v) seizure of any of the Collateral under legal process; (vi) the
filing by or against Borrower or any guarantor under any guaranty executed in
connection with this Security Agreement ("Guarantor") of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors provided
that in the case of all such involuntary proceedings, same are not dismissed
within sixty (60) days after commencement; (vii) the voluntary or involuntary
making of an assignment of a substantial portion of its assets by Borrower or by
any Guarantor for the benefit of its creditors, the appointment of a receiver or
trustee for Borrower or any Guarantor or for any of Borrower's or Guarantor's
assets, the institution by or against Borrower or any Guarantor of any formal or
informal proceeding for dissolution, liquidation, settlement of claims against
or winding up of the affairs of Borrower or any Guarantor provided that in the
case of all such involuntary proceedings, same are not dismissed within sixty
(60) days after commencement; (viii) the making by Borrower or by any Guarantor
of a transfer of all or a material portion of Borrower's or Guarantor's assets
or inventory not in the ordinary course of business; or (ix) any default or
breach by any Guarantor of any of the terms of its guaranty to Lender in
connection with this Security Agreement.
(b) Remedies. If any Event of Default has occurred and is continuing,
Lender may in its sole discretion exercise one or more of the following remedies
with respect to any or all of the Collateral: (i) declare due any or all of the
aggregate sum of all remaining payments under the Notes, including the amount of
any mandatory or optional payment required or permitted to be paid by Borrower
to Lender at the maturity of the Notes ("Remaining Payments"); (ii) proceed by
appropriate court action or actions either at law or in equity to enforce
Borrower's performance of the applicable covenants of the Notes and this
Security Agreement or to recover all damages and expenses incurred by Lender by
reason of an Event of Default; (iii) except as provided by law, without court
order or prior demand, enter upon the premises where the Collateral is located
and take immediate possession of and remove it without liability of Lender to
Borrower or any other person or entity; (iv) terminate this Security Agreement
and sell the Collateral at public or private sale, or otherwise dispose of,
hold, use or lease any or all of the Collateral in a commercially reasonable
manner; or (v) exercise any other right or remedy available to it under
applicable law. If Lender has declared due any or all of the Remaining Payments,
Borrower will pay immediately to Lender, without duplication, (A) the Remaining
Payments discounted at 6% per annum compounded monthly on the basis of a 360 day
year, (B) all amounts which may be then due or accrued, and (C) all other
amounts due under this Security Agreement and under the Notes (Lender's Return,
as referred to below, means the amounts described in clauses (A), (B) and (C)
above). The net proceeds of any sale or lease of such Collateral will be
credited against Lender's Return. The net proceeds of a sale of the Collateral
pursuant to this Section 16(b) is defined as the sales price of the Collateral
less selling expenses, including, without limitation, costs of remarketing the
Collateral and all refurbishing costs and commissions paid with respect to such
remarketing.
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<PAGE> 8
Borrower agrees to pay all reasonable out-of-pocket costs of Lender incurred in
enforcement of this Security Agreement, the Notes or any instrument or agreement
required under this Security Agreement, including, but not limited to reasonable
attorneys' fees and litigation expenses and fees of collection agencies ("Remedy
Expenses"). At Lender's request, Borrower shall assemble the Collateral and make
it available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
Second, to the payment of all other amounts not described in item
Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the
extent not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.
(d) Effect of Delay: Waiver: Foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any
payment owed Lender by Borrower which is not paid when due (taking into account
applicable grace periods), for each month such payment is not paid when due, but
in no event an amount greater than the highest rate permitted by applicable law.
If such amounts have not been received by Lender at Lender's place of business
or by
8
<PAGE> 9
Lender's designated agent by the date such amounts are due under this Security
Agreement or the Notes, Lender shall bill Borrower for such charges. Borrower
acknowledges that invoices for amounts due hereunder or under the Notes are sent
by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice
will not relieve Borrower of its obligation to make payments hereunder or under
the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of
Lender's officers, employees or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect and/or give notice of Lender's security interest in any of the
Collateral. Notwithstanding the above, Borrower will, upon Lender's request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by Lender to perfect Lender's security
interests hereunder. Borrower authorizes Lender to file financing statements
signed only by Lender (where such authorization is permitted by law) at all
places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs and
expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
is filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. Other than in conformity with the
manufacturer's warranty and/or other functional improvements, no alterations or
attachments shall be made to the Collateral without Lender's prior written
consent, which shall not be given for changes that will affect the reliability
and utility of the Collateral or which cannot be removed without damage to the
Collateral, or which in any way affect the value of the Collateral for purposes
of resale or lease. All attachments and improvements to the Collateral shall be
deemed to be "Collateral" for purposes of the Security Agreement, and a first
priority security interest therein shall immediately vest in Lessor.
SECTION 24. COMMITMENT FEE. Borrower has paid to Lender a commitment fee ("Fee")
of $13,000. The Fee shall be applied by Lender to reimburse Lender for all
out-of-pocket UCC and other search costs, inspections and labeling costs and
appraisal fees, if any, incurred by Lender. The balance shall then be
9
<PAGE> 10
applied proportionally to the first monthly payment for each Note hereunder in
the proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such monthly
payments shall be non-refundable except if Lender defaults in its obligation to
fund Loans pursuant to Section 3.
SECTION 25. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 2401 Kerner Boulevard,
San Rafael, California 94901, Attention: Asset Management and to Borrower at
42501 Albrae Street, Fremont, CA 94538, Attention: Jessy Chao.
SECTION 26. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) Borrower acknowledges that Borrower has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of Lender to require
strict performance by Borrower or any waiver by Lender of any provision herein
or in a Note shall not be construed as a consent or waiver of any other breach
of the same or any other provision. (g) If any provision of this Security
Agreement or any Note is held invalid, such invalidity shall not affect any
other provisions hereof or thereof. (h) The obligations of Borrower to pay the
Indebtedness and perform the Obligations shall survive the expiration or earlier
termination of this Security Agreement and each Note until all Obligations of
Borrower to Lender have been met and all liabilities of Borrower to Lender and
any assignee have been paid in full. (i) Borrower will notify Lender at least 30
days before changing its name, principal place of business or chief executive
office. (j) Borrower will, at its expense, promptly execute and deliver to
Lender such documents and assurances (including financing statements) and take
such further action as Lender may reasonably request in order to carry out the
intent of this Security Agreement and Lender's rights and remedies.
SECTION 27. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 28. ADDITIONAL INTEREST COMPENSATION: (a) General. Borrower shall be
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 90 days prior
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<PAGE> 11
to the end of the term of the first Note. That choice shall be an election of
Borrower's additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
Fair market value shall be determined for the Collateral under all Notes prior
to the first Note's expiration.
In the event Borrower does not provide 90 days' prior written notice of its
election, the Loan shall continue on at the original Loan rate until such 90
days' notice is given and then for an additional 90 days following such notice.
At the end of such notice period, payments under Borrower's election shall be
due.
(b) End of Loan Position Elections. As Additional Interest Compensation,
Borrower shall be required to:
Election No. 1: Make a final payment equal to the Collateral's fair market
value, in no event less than 10% nor more than 20% of the Note's original
principal amount. Fair market value shall be determined by Lender.
Election No. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1.85% of the Note's original principal amount.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED AVANEX CORPORATION
By: /s/ SHARON LITWIN By: /s/ JESSY CHAO
-------------------------- -------------------------------------
Name: SHARON LITWIN Name (Print): Jessy Chao
------------------------
Title: VP Title: Director of Finance and Business
----------------------- Operation, CFO
HEADQUARTERS LOCATION:
----------------------
42501 Albrae Street
Fremont, CA 94538
County of Alameda
EXHIBITS AND SCHEDULES:
-----------------------
Exhibit A -- Closing Memorandum
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<PAGE> 12
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT NO.
053-6193
DATED NOVEMBER 5, 1998
CLOSING MEMORANDUM
1* Duly executed Senior Loan and Security Agreement.
2. Duly executed Senior Security Promissory Note with Exhibit A Collateral
description attached.
3. Insurance certificates reflecting coverage required under Section 10 of
the Senior Loan and Security Agreement.
4.* Resolutions of Borrower's board of directors.
5. Real Property Waiver.**
6. UCC-1 Financing Statements with respect to the Collateral.
7. UCC search (Lender will obtain).
8. Certificate of Chief Financial Officer stating that (i) there are no
liens, charges, security interests or other encumbrances that may affect
Lender's right, title and interest in the Collateral and there are no
UCC-1 financing statements filed or in the process of being filed against
any of the Collateral, (ii) Borrower is performing according to, and is
not materially deviating from, Borrower's business plan, (iii) no change
which is a Material Adverse Effect has occurred in the financial condition
of Borrower, (iv) no default has occurred, and (v) the representations and
warranties in Section 5 of the Senior Loan and Security Agreement are true
and correct as if made on the date of the Loan.
9.* Certificate from the Secretary of State of Borrower's state of
incorporation, and from the state in which Borrower's chief executive
office is located, if different, stating the Borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Loan (Lender will obtain).
10.* Borrower's Business Plan.
11. Borrower's most recent financial statements.
12. List of proposed Collateral.
13. Purchase documentation verifying Borrower's ownership of equipment.
14. See Section 3 of the Senior Loan and Security Agreement for additional
conditions to closing.
15. Intercreditor Agreement, if applicable.
* First Loan only.
** Required if any Equipment is a fixture, i.e., attached to real property,
or located in certain states.
<PAGE> 1
EXHIBIT 10.16
[FINOVA LOGO]
FINANCIAL INNOVATORS
FINOVA Capital Corporation
10 Waterside Drive
Farmington, Connecticut 06032-3065
(860) 676-1818
MASTER LEASE No. S7280, dated June 2, 1999
FINOVA Capital Corporation ("we", "us" or "FINOVA") agrees to lease to Avanex
Corporation ("you" or "Lessee") and you agree to lease from us, the Equipment
described in any schedule to this Lease (a "Schedule"). The Equipment also
includes any replacement parts, repairs, additions and accessories that you may
add to the Equipment. We may treat any Schedule as a separate lease containing
all of the provisions of this Lease.
1. PURCHASING AND INSTALLING THE EQUIPMENT
We will purchase the Equipment from the Supplier you chose. The Supplier
will deliver the Equipment to you at your expense. You will properly
install the Equipment at your expense at the location(s) indicated in the
Schedule.
2. TERM
- The Term of each Schedule begins when any of the Equipment on that
Schedule is delivered to you, or a later date that we agree to in
writing.
- The Term continues until you fully perform in all material respects
all of your obligations under this Lease and the Schedule.
- If the Equipment is not delivered, installed and accepted by you by
the date indicated in the Schedule, we may terminate this Lease and
the Schedule as to the Equipment that was not delivered, installed
and accepted by giving you 10 days written notice of termination.
- Before we make any progress payment or final payment for the
Equipment on any Schedule, we require the following:
- That no payment is past due to us under any lease, loan or other
financial arrangement that you or any guarantor have with us.
- That you are complying in all material respects with all the terms
of this Lease.
- That we have received all the documents we requested, including the
signed Schedule and Delivery and Acceptance Certificate.
- That there has been no material adverse change in your financial
condition, business, operations or prospects, or that of any
guarantor, from the condition that you disclosed to us in your
application for credit.
3. RENT
- The rent is indicated on the Schedule. The rent is payable
periodically in advance from time to time (for example, monthly).
You agree that you owe us the total of all of these rent payments
over the Term of the Schedule.
- The first rent payment is due at the beginning of the Term or at a
later date that we agree to in writing. Subsequent rent payments are
due on the same day of each successive period until you pay us in
full all of the rent and any other charges or expenses you owe us.
- If the first rent payment is due later than the beginning of the
Term, you will also pay us interim rent on the first rent payment
date. The interim rent will be for the period from the beginning of
the Term until the date that the first rent payment is due. Interim
rent will be calculated at the same rate as the regular rent
payment, but on a daily basis for the number of days for which
interim rent is due.
- YOUR OBLIGATION TO PAY US ALL RENT IS ABSOLUTE AND UNCONDITIONAL.
YOU ARE NOT EXCUSED FROM PAYING THE RENT, IN
<PAGE> 2
FULL, FOR ANY REASON. YOU AGREE THAT YOU HAVE NO DEFENSE FOR FAILURE
TO PAY THE RENT AND YOU WILL NOT MAKE ANY COUNTERCLAIMS OR SETOFFS
TO AVOID PAYING THE RENT.
4. NON-CANCELABLE LEASE. YOU AGREE THAT YOU MAY NOT CANCEL OR TERMINATE
THIS LEASE OR ANY SCHEDULE.
5. PROTECTION OF OUR INTEREST IN THE EQUIPMENT; FEES.
- The Equipment is our property. It will remain our property. You will
not own the Equipment unless the Schedule gives you an option to
purchase the Equipment and you have exercised that option and paid
us in full for the Equipment and any other amounts you may owe us.
If we request, you will put labels supplied by us stating "PROPERTY
OF FINOVA" on the Equipment where they are clearly visible.
- You give us permission to add to this Lease or any Schedule the
serial numbers and other information about the Equipment.
- While this Lease is intended to be a lease (and not a loan), you
grant us a security interest in the Equipment to protect our
interest in the Equipment if this Lease is later determined to be a
security agreement. You give us permission to file this Lease or a
Uniform Commercial Code financing statement, at your expense, in
order to perfect this security interest. You also give us permission
to sign your name on the Uniform Commercial Code financing
statements where this is permitted by law.
- You will pay our cost to do searches for other filings or judgments
against you or your affiliates. You will also pay any filing,
recording or stamp fees or taxes resulting from filing this Lease or
a Uniform Commercial Code financing statement. You will also pay our
fees in effect from time to time for documentation, administration
and Termination of this Lease.
- At your expense, you will defend our ownership rights in the
Equipment against, and keep the Equipment free of, any legal
process, liens, security interests, attachments, levies and
executions. You will give us immediate written notice of any legal
process, liens, attachments, levies or executions, and you will
indemnify us against any loss that results to us from these causes.
- You will notify us at least 15 days before you change the address of
your principal executive office.
- You will promptly sign and return additional documents that we may
request in order to protect our interest in the Equipment.
- The Equipment is personal property and will remain personal
property. You will not incorporate it into real estate and will not
do anything that will cause the Equipment to become part of real
estate or a fixture.
6. CARE, USE, LOCATION AND ALTERATION OF THE EQUIPMENT
- You will make sure that the Equipment is maintained in good
operating condition, and that it is serviced, repaired and
overhauled when this is necessary to keep the Equipment in good
operating condition. All maintenance must be done according to the
Supplier's or Manufacturer's requirements or recommendations. All
maintenance must also comply with any legal or regulatory
requirements.
- You will maintain service logs for the Equipment, if applicable, and
permit us to inspect the Equipment, the service logs and service
reports. You give us permission to make copies of the service logs
and service reports.
- We will give you prior notice if we, or our agent, want to inspect
the Equipment or the service logs or service reports. We may inspect
it during regular business hours. If we find during an inspection
that you are not complying with this Lease, you will pay our travel,
meals and lodging costs, our salary costs, and the costs and fees of
our agents for reinspection. You will promptly cure any problems
with the Equipment that are discovered during our inspection.
- You will use the Equipment only for business purposes. You will obey
all legal and regulatory requirements in your use of the Equipment.
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<PAGE> 3
- You will make all additions, modifications and improvements to the
Equipment that are required by law or government regulation.
Otherwise, you will not alter the Equipment without our written
permission. You will replace all worn, lost, stolen or destroyed
parts of the Equipment with replacement parts that are as good or
better than the original parts. The new parts will become our
property upon replacement.
- You will not remove the Equipment from the location indicated in the
Schedule without our written permission.
7. RETURN OF EQUIPMENT. Unless otherwise stated in the Schedule:
- You must give us written notice at least 60 days before the end of
the Term if you want to purchase the equipment from us (assuming the
Schedule provides you with an option to purchase the Equipment).
- You must give us written notice at least 60 days before the end of
the Term if you want to return the Equipment to us.
- If you do not give us written notice at least 60 days before the end
of the Term either that you want to purchase or that you want to
return the Equipment, you will continue to rent the Equipment and
this Lease and the Schedule will be automatically extended until 120
days after we receive your notice. The rent will be the fair market
rental value of the Equipment, as determined by us. Unless we notify
you otherwise, the fair market rental value will not exceed the rent
then being charged under this Lease and the Schedule.
- If you do give us 60 days written notice that you want to purchase
the Equipment but you do not pay us the purchase price, you will
continue to rent the Equipment. The rent will be the fair market
rental value of the Equipment, as determined by us. You will
continue to pay us this rent until you have paid the purchase price
for the Equipment. The rent payments will not be credited to the
purchase price.
- If you do give us 60 days written notice that you want to return the
Equipment to us, but you do not return the Equipment in compliance
with the return conditions contained in the next paragraph, you will
continue to rent the Equipment. The rent will be the fair market
rental value of the Equipment, as determined by us. You will
continue to pay us this rent until you have returned the Equipment
to us in compliance with these return conditions.
- Return conditions: - You will return the Equipment, freight and
insurance prepaid by you, to us at a location we request in the
United States of America. It will be returned in good operating
condition, as required by section 6 above. The Equipment will not be
subject to any liens when it is returned.
- You will pack or crate the Equipment for shipping in the
original containers, or comparable ones. You will do this
carefully and follow all recommendations of the Supplier and
the Manufacturer as to packing or crating.
- You will also return to us the plans, specifications,
operating manuals, software documentation, discs, warranties
and other documents furnished by the Manufacturer or Supplier.
You will also return to us all service logs and service
reports, as well as all written materials that you may have
concerning the maintenance and operation of the Equipment.
- At our request, you will provide us with up to 60 days free
storage of the Equipment at your location, and upon prior
notice and during normal business hours (except in a case of
an Event of Default in which case no notice is due) you will
let us (or our agent) have access to the Equipment in order to
inspect it and sell it.
- You will pay us what it costs us to repair the Equipment if
you do not return it in the required condition.
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<PAGE> 4
8. RISK OF LOSS
- You have the complete risk of loss or damage to the Equipment. Loss
or damage to the Equipment will not relieve you of your obligation
to pay rent.
- If any Equipment is lost or damaged, you have two choices (although
if you are in default under this Lease, we and not you will have the
two options). The choices are:
(1) Repair or replace the damaged or lost Equipment so that, once again,
we own Equipment in good operating condition and have clear title to
it.
(2) Pay us the present value (as of the date of payment) of the
remaining rent payments and our residual interest in the Equipment.
We will calculate the present value using a discount rate of five
(5%) percent per year. Once you have paid us this amount and any
other amount that you may owe us, you (or your insurer) may keep the
Equipment for salvage purposes, on an "AS IS, WHERE IS" basis.
9. INSURANCE
- Until you have properly returned the Equipment to us, you will keep
it insured. The amount of the insurance, the coverage, and the
insurance company must be acceptable to us.
- If you do not provide us with written evidence of insurance that is
acceptable to us, we may buy the insurance ourselves, at your
expense. You will promptly pay us the cost of this insurance. We
have no obligation to purchase any insurance. Any insurance that we
purchase will be our insurance, and not yours, and may insure the
Equipment beyond the end of the Term.
- Insurance proceeds may be used to repair or replace damaged or lost
Equipment or to pay us the present value of the rent and our
residual interest in the Equipment. (See section 8, "Risk of Loss",
above.)
- You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance
policies, and to endorse your name on all documents, checks or
drafts relating to insurance claims for Equipment.
10. TAXES
- You will pay all sales, use, excise, stamp, documentary and ad
valorem taxes, license and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession,
use or lease of the Equipment.
- You will pay all taxes (other than our federal or state net income
taxes) imposed on you or on us or the rent payments.
- You will reimburse us for any of these taxes that we pay or advance.
- Unless we notify you otherwise, we will file and pay for any
personal property taxes on the Equipment. You will reimburse us for
the full amount of these taxes, without regard to early payment
discount. We may estimate the amount of these taxes in advance and
bill you periodically in advance for these taxes.
11. INDEMNITY
- You will indemnify us, defend us and hold us harmless. This applies
to any and all claims, expenses and attorney's fees concerning or
arising from the Equipment, this Lease, or any Schedule. It includes
any claims concerning the manufacture, selection, delivery,
possession, use, operation or return of the Equipment, excluding
claims arising out of our gross negligence or willful misconduct.
- This obligation of yours to indemnify us continues even after the
Term is over.
12. DEFAULT
You are in default if any of the following happens:
- You do not pay us, within five (5) days of when it is due, any rent
payment or other payment that you owe us under this Lease, any
Schedule, or any other lease, loan or other financial arrangement
that you have with us.
- Any of the financial information that you give us is not true and
complete, or you fail to tell us
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<PAGE> 5
anything that would make the financial information misleading in any
material respect.
- You do something you are not permitted to do, or you fail to do
anything that is required of you, under this Lease, any Schedule or
any other lease, loan or other financial arrangement that you have
with us, which continues uncured for thirty (30) days after written
notice by us to you.
- An event of default occurs for any other lease, loan or obligation
of yours (or any guarantor) that exceeds $50,000.
- You or any guarantor file bankruptcy, or involuntary bankruptcy is
filed against you or any guarantor and is not dismissed within 60
days.
- You or any guarantor are subject to any other insolvency proceeding
other than bankruptcy (for example, a receivership action or an
assignment for benefit of creditors) and such proceeding that is
involuntary is not dismissed within 60 days.
- Without our permission, which shall not be unreasonably withheld or
delayed you sell all or a substantial part of its assets, merge or
consolidate, or a majority of your voting stock or interests (or any
guarantor's voting stock or interests) is transferred.
- There is a material adverse change in your financial condition,
business, operations or prospects, or that of any guarantor, from
the condition that you disclosed to us in your application for
credit.
13. REMEDIES, DEFAULT INTEREST, LATE FEES
If you are in default we may exercise one or more of our "remedies." Each
of our remedies is independent. We may exercise any of our remedies, all
of our remedies or none of our remedies. We may exercise them in any order
we choose. Our exercise of any remedy will not prevent us from exercising
any other remedy or be an "election of remedies." If we do not exercise a
remedy, or if we delay in exercising a remedy, this does not mean that we
are forgiving your default or that we are giving up our right to exercise
the remedy. Our remedies allow us to do one or more of the following:
- Require you to immediately pay us all rent for the entire Term for
any or all Schedules.
- Require you to immediately pay us all amounts that you are required
to pay us for the entire Term of any other leases, loans or other
financial arrangements that you have with us.
- Sue you for all rent and other amounts you owe us plus the greater
of (1) the actual residual value of the Equipment or (2) the
residual value we assumed when we leased it to you. Future rent and
residual value will be discounted to present value using a discount
rate of five (5%) percent per year.
- Require you at your expense to assemble the Equipment at a location
we request in the United States of America.
- Remove and repossess the Equipment from where it is located, without
demand or notice, or make the Equipment inoperable. We have your
permission to remove any physical obstructions to removal of the
Equipment. We may also disconnect and separate all Equipment from
other property. No court order, court hearing or "legal process"
will be required for us to repossess the Equipment. You will not be
entitled to any damages resulting from removal or repossession of
the Equipment. We may use, ship, store, repair or lease any
Equipment that we repossess. We may sell any repossessed Equipment
at private or public sale. You give us permission to show the
Equipment to buyers at your location free of charge during normal
business hours. If we do this, we do not have to remove the
Equipment from your location. If we repossess the Equipment and sell
it, we will give you credit for the net sale price, after
subtracting our costs of repossessing and selling the Equipment. If
we rent the Equipment to somebody else, we will give you credit for
the net rent received, after subtracting our costs of repossessing
and renting the Equipment, but the credit will be discounted to
present value using the discount rate that we used in calculating
your rental payment under the Schedule for the Equipment. The credit
will be applied against what you owe us under this Lease, the
Schedules and any other leases, loans or other financial
arrangements that you have with us. If the credit exceeds the amount
you owe under this Lease,
5
<PAGE> 6
the Schedules and any other leases, loans or other financial
arrangements that you have with us, we will refund the amount of the
excess to you.
- You will also pay us the following:
- All our expenses of enforcing our remedies. This includes all our
expenses to repossess, store, ship, repair and sell the Equipment.
- Our reasonable attorney's fees and expenses.
- Default interest on everything you owe us from the date of your
default to the date on which we are paid in full. The "default
interest rate" will be one and one-half (1.5%) percent per month. If
this interest rate exceeds the highest legal interest rate, you will
only be required to pay us default interest at the highest legal
interest rate.
You realize that the damages we could suffer as a result of your default
are very uncertain. You also realize that the value of an unexpired lease
Term is difficult or impossible to calculate. This is why we have agreed
with you in advance on the discount rates and default interest rate to be
used in calculating the payments you will owe us if you default. You agree
that, for these reasons, the payments you will owe us if you default are
"agreed" or "liquidated" damages. You understand that these payments are
not "penalties" or "forfeitures."
You will pay us a late fee whenever you pay any amount that you owe us
more than ten (10) days after it is due. You will pay the late fee within
one month after the late payment was originally due. The late fee will be
five (5%) percent of the late payment. If this exceeds the highest legal
amount we can charge you; you will only be required to pay the highest
legal amount. The late fee is intended to reimburse us for our collection
costs that are caused by late payment. It is charged in addition to all
other amounts you are required to pay us, including default interest.
14. PERFORMING YOUR OBLIGATIONS IF YOU DO NOT
If you do not perform one or more of your obligations under this Lease or
a Schedule, we may perform it for you. We will notify you in writing at
least ten (10) days before we do this. We do not have to perform any of
your obligations for you. If we do choose to perform them, you will pay us
all of our expenses to perform the obligations. You will also reimburse us
for any money that we advance to perform your obligations, together with
interest at the default interest rate on that amount. This will be
additional "rent" that you will owe us and you will pay it at the same
time that your next rent payment is due.
15. ASSIGNMENT
WE MAY ASSIGN THIS LEASE OR ANY SCHEDULE OR ANY RENT PAYMENTS WITHOUT YOUR
PERMISSION.
WE MAY GRANT A SECURITY INTEREST IN THE EQUIPMENT WITHOUT YOUR PERMISSION.
THE PERSON TO WHOM WE ASSIGN IS CALLED THE "ASSIGNEE." THE ASSIGNEE WILL
NOT HAVE ANY OF OUR OBLIGATIONS UNDER THIS LEASE. YOU WILL NOT BE ABLE TO
RAISE ANY DEFENSE, COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE.
AFTER ASSIGNMENT YOU MAY "QUIETLY ENJOY" THE USE OF THE EQUIPMENT SO LONG
AS YOU ARE NOT IN DEFAULT.
UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER
YOUR RIGHTS UNDER THIS LEASE OR ANY SCHEDULE. YOU ALSO ARE NOT ALLOWED TO
SUBLET THE EQUIPMENT OR LET ANYBODY ELSE USE IT UNLESS WE GIVE YOU OUR
WRITTEN PERMISSION.
16. UNIFORM COMMERCIAL CODE DISCLAIMERS OF WARRANTIES AND WAIVERS
WE DID NOT MANUFACTURE OR SUPPLY THE EQUIPMENT. WE ARE NOT A DEALER IN THE
EQUIPMENT. INSTEAD, YOU CHOSE THE EQUIPMENT.
WE DO NOT MAKE ANY WARRANTY AS TO THE EQUIPMENT. WE DO NOT MAKE ANY
WARRANTY AS TO "MERCHANTABILITY" OR "SUITABILITY" OR "FITNESS FOR A
PARTICULAR PURPOSE" OR
6
<PAGE> 7
"NONINFRINGEMENT" OF ANY PATENT, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY
RIGHT.
WE WILL NOT BE RESPONSIBLE FOR ANY LOSS, DAMAGE, OR INJURY TO YOU OR
ANYBODY ELSE AS A RESULT OF ANY DEFECTS, HIDDEN OR OTHERWISE, IN THE
EQUIPMENT UNDER "STRICT LIABILITY" LAWS OR ANY OTHER LAWS.
WE WILL NOT BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, LOSS OF PROFITS OR GOODWILL.
WE MAKE NO WARRANTY AS TO THE TREATMENT OF THIS LEASE FOR TAX OR
ACCOUNTING PURPOSES.
If the Equipment is unsatisfactory, you will continue to pay us all rent
and other amounts you are required to pay us. You must seek repair or
replacement of the Equipment solely from the Manufacturer or Supplier and
not from us. You may use our rights under any Manufacturer or Supplier
warranties on the Equipment to get it repaired or replaced. Neither the
Manufacturer nor the Supplier is our "agent," so they cannot speak for us
and they are not allowed to make any changes in this Lease or any
Schedule, or give up any of our rights.
17. UNIFORM COMMERCIAL CODE ARTICLE 2A PROVISIONS.
This Lease is a "Finance Lease" under Article 2A of the Uniform Commercial
Code. You agree that (a) we have advised you of the identity of the
Supplier, (b) you may have rights under the "supply contract" under which
we are purchasing the Equipment from the Supplier and (c) you may contact
the Supplier for a description of these rights.
YOU WAIVE ANY AND ALL OF YOUR RIGHTS AND REMEDIES UNDER ARTICLE 2A OF THE
UNIFORM COMMERCIAL CODE, INCLUDING SECTIONS 2A-508 THROUGH 2A-522 OF THE
UNIFORM COMMERCIAL CODE.
18. ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE OF
PROCESS, WAIVER OF JURY TRIAL.
THIS LEASE WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN WRITING.
THIS LEASE IS GOVERNED BY THE LAWS OF THE STATE OF ARIZONA, THE STATE IN
WHICH OUR OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS AND
CONDITIONS OF THIS LEASE OCCURRED AND FROM WHICH PAYMENT FOR THE EQUIPMENT
WILL BE ORDERED HOWEVER, IF THIS LEASE IS UNENFORCEABLE UNDER ARIZONA LAW,
IT WILL INSTEAD BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE
EQUIPMENT IS LOCATED.
YOU MAY ONLY SUE US IN A FEDERAL OR STATE COURT THAT IS LOCATED IN
MARICOPA COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL
THEORIES, INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO
THE PERSONAL JURISDICTION OF THESE ARIZONA COURTS. YOU WILL NOT CLAIM THAT
MARICOPA COUNTY, ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A
PROPER "VENUE."
WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH
PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO YOUR
ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.
YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.
19. INFORMATION SUPPLIED BY YOU AND ANY GUARANTOR
- All financial information and other information that you or any
guarantor have given us is true and complete. You or any guarantor
have not failed to tell us anything that would make the financial
information misleading. There has been no material adverse change in
your financial condition, business, operations or prospects, or the
financial condition of any guarantor, from the financial condition
that you disclosed to us in your application for credit.
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<PAGE> 8
- You have supplied us with information about the Equipment. You
promise to us that the amount we are paying for the Equipment is no
more than the fair and usual price for this kind of Equipment,
taking into account any discounts, rebates and allowances that you
or any affiliate of yours may have been given for the Equipment.
- During the Term you will promptly give copies of any filings you
make with the Securities and Exchange Commission (SEC). You and any
guarantor will also provide us with the following financial
statements:
- Quarterly balance sheet and statements of earnings and cash flow -
within 45 days after the end of your first three fiscal quarters in
each fiscal year. These will be certified by your chief financial
officer and accompanied by a certificate of your chief financial
officer stating that no default exists, or, if he or she cannot
certify this because a default does exist, he or she must specify in
reasonable detail the nature of the default.
- Annual balance sheet and statements of earnings and cash flow -
within 120 days after the end of each fiscal year. These will be
audited by independent auditors acceptable to us and will be
accompanied by a certificate executed by your Chief Financial
Officer stating that you have complied with all covenants contained
in the Lease and that there are no events of default thereunder
("the Compliance Certificate"). Their audit report must be
unqualified or otherwise acceptable to FINOVA.
These financial statements will be prepared according to generally
accepted accounting principles, consistently applied.
All financial statements and SEC filings that you or any guarantor provide
us will be true and complete. They will not fail to tell us anything that
would make them misleading.
20. NOTICES
We may give you written notice in person, by mail, by overnight delivery
service, or by fax. Notice will be sent to your address below your
signature. Mail notice will be effective three (3) days after we mail it
with prepaid postage to the right address. Overnight delivery notice
requires a receipt and tracking number. Fax notice requires a receipt from
the sending machine showing that it has been sent to your fax number and
received.
You may give us notice the same way that we may give you notice.
21. GENERAL
This Lease benefits our successors and assigns. This Lease benefits only
those successors and assigns of yours that we have approved in writing.
This Lease binds your successors and assigns. This Lease binds only those
successors and assigns of ours that clearly assume our obligations in
writing.
TIME IS OF THE ESSENCE OF THIS LEASE.
This Lease and all of the Schedules is the entire agreement between you
and us concerning the Equipment.
Only an employee of FINOVA who is authorized by corporate resolution or
policy may modify or amend this Lease or any Schedule on our behalf, and
this must be in writing. Only he or she may give up any of our rights, and
this must be in writing. If more than one person is the Lessee under this
Lease, then each of you is jointly and severally liable for your
obligations under this Lease.
This Lease is only for your benefit and for our benefit, as well as our
successors and assigns. It is not intended to benefit any other person.
If any provision in this Lease is unenforceable, then that provision must
be deleted. Only unenforceable provisions are to be deleted. The rest of
the lease will remain as written.
22. YEAR 2000
You represent, warrant and agree to take all action necessary including
but not limited to due inquiry and due diligence to assure that there will
be no material adverse change to your business by reason of the advent of
the year 2000, including without limitation that all computer based
systems, embedded microchips and other processing capabilities effectively
recognize and process all dates before and after December 31, 1999 ("Y2K
Compliant"). At
8
<PAGE> 9
our request, you will provide to us assurance reasonably acceptable to us
that your computer-based systems, embedded microchips and other processing
capabilities are Y2K Compliant.
23. REPRESENTATIONS AND WARRANTIES
You represent and warrant to us as follows:
- You have complied with all "environmental laws" and will continue to
comply with all "environmental laws." No "hazardous substances" are
used, generated, treated, stored or disposed of by you or at your
properties except in compliance with all environmental laws.
"Environmental laws" mean all federal, state or local environmental
laws and regulations, including the following laws: CERCLA, RCRA,
Hazardous Materials Transport Act and The Federal Water Pollution
Control Act. "Hazardous substances" means all hazardous or toxic
wastes, materials or substances, as defined in the environmental
laws, as well as oil, flammable substances, asbestos that is or
could become friable, urea formaldehyde insulation, polychlorinated
biphenyls and radon gas.
24. PUBLICITY
We may make press releases and publish a tombstone announcing this
transaction and its total amount. You may not publicize this transaction
in any way without our prior written consent.
LESSOR: LESSEE:
FINOVA CAPITAL CORPORATION AVANEX CORPORATION
10 Waterside Drive 42501 Albrae Street
Farmington, Connecticut 06032-3065 Fremont, CA 94538
BY /s/ LINDA A. MOSCHITTO BY: /s/ JESSY CHAO
---------------------------------- ----------------------------
PRINTED NAME: LINDA A. MOSCHITTO PRINTED NAME: JESSY CHAO
------------------------ ------------------
TITLE Director-Contract Administration TITLE: DIRECTOR OF FINANCE
-------------------------------- -------------------------
FAX NUMBER: (860) 676-1814 Taxpayer ID# 94-3285348
-------------------
DATE ACCEPTED: July 20, 1999 FAX NUMBER: 510-360-0689
----------------------- --------------------
DATED: 7-13-99
-------------------------
STATE OF
------------
COUNTY OF
-----------
I acknowledge that ________________, who stated that he/she is
_________________ of the Lessee named above, signed this Master Lease Agreement
in my presence today: ________________. He/she acknowledged to me that his/her
signature on this Master Lease Agreement was authorized by a valid resolution or
other valid authorization from Lessee's board of directors or other governing
body.
See attachment
--------------------------------
Notary Public
[SEAL]
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<PAGE> 10
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT No 5907
State of CALIFORNIA
County of ALAMEDA
On 7-13-99 before me, SHEFALI B. SHETH, NOTARY PUBLIC
------- ----------------------------------------------------------
DATE NAME, TITLE OF OFFICER - E G. "JANE DOE, NOTARY PUBLIC"
personally appeared Jessy Chao
------------------------------------------------------------
NAME(S) OF SIGNER(S)
[ ] personally known to me - OR - [x] proved to me on the basis of satisfactory
evidence to be the person whose name is
subscribed to the within instrument and
acknowledged to me that he executed the
same in his authorized capacity, and that
by his signature on the instrument the
person or the entity upon behalf of which
the person acted, executed the instrument.
WITNESS my hand and official seal.
[STAMP OMITTED]
/s/ Shefali B. Sheth
------------------------------------------
SIGNATURE OF NOTARY
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[ ] INDIVIDUAL
[ ] CORPORATE OFFICER
-------------------------------------
---------------------------------- TITLE OR TYPE OF DOCUMENT
TITLE(S)
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL -------------------------------------
[ ] ATTORNEY-IN-FACT NUMBER OF PAGES
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER:
--------------------------- -------------------------------------
DATE OF DOCUMENT
---------------------------
---------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
------------------------------------
- -------------------------------------- SIGNER(S) OTHER THAN NAMED ABOVE
- -------------------------------------
(c) 1993 NATIONAL NOTARY ASSOCIATION - 8236 Remmet Ave. P O Box 7184 - Canoga
Park, CA 91309-7184
<PAGE> 11
SECRETARY'S CERTIFICATE
I am the properly elected Secretary of Avanex Corporation, which is a
California corporation (the "Corporation"). I certify to FINOVA CAPITAL
CORPORATION that:
1. A true and correct copy of the Certificate of Incorporation of
the Corporation is attached as Exhibit A to this Certificate. The Certificate of
Incorporation has not been amended, modified or supplemented. It is still in
effect as written.
2. A true and correct copy of the By-laws of the Corporation is
attached as Exhibit B to this Certificate. The By-laws have not been amended,
modified or supplemented. These are still in effect as written.
3. The following officers of the Corporation have been properly
elected. They are still officers. Their true signatures appear below:
<TABLE>
<CAPTION>
OFFICE NAME SIGNATURE
------ ---- ---------
<S> <C> <C>
President ------------------ -----------------------
Vice President ------------------ -----------------------
Secretary JUDITH O'BRIEN /s/ JUDITH O'BRIEN
----------------- -----------------------
Treasurer JESSY CHAO /s/ JESSY CHAO
----------------- -----------------------
</TABLE>
4. The Corporation is qualified to do business everywhere this is
required. It is in good standing in each of these jurisdictions.
5. Resolutions properly adopted by the Board of Directors of the
Corporation appear below. These resolutions have not been revoked, amended,
modified or supplemented. They are still in effect as written.
"WHEREAS, the Board of Directors of the Corporation believes
it is in the best interests of the Corporation to enter into a
Master Lease Agreement with FINOVA Capital Corporation
("FINOVA");
NOW, THEREFORE, be it:
RESOLVED, that the Corporation is authorized to lease
Equipment from FINOVA, pursuant to the terms of a Master Lease
Agreement and all of its Exhibits, a copy of which has been
delivered to each of the directors (the "Lease") to be signed
and delivered by the Corporation, and be it further
RESOLVED, that the form of the Lease and all of its Exhibits
are approved; and be it further
RESOLVED, that the President or any Vice President of the
Corporation, acting alone or together with a Secretary or any
Assistant Secretary of the Corporation, are authorized and
directed
<PAGE> 12
to sign and deliver and perform the Lease in the name and on
behalf of the Corporation. Any of these officers are also
authorized to sign and deliver the Exhibits and all other
documents required by FINOVA. Any of these officers are also
authorized to make any changes or add additional terms as may
appear in the final Lease and Exhibits signed by any of these
officers; and be it further
RESOLVED, that each officer of the Corporation is authorized
and directed to sign and deliver all other documents and to
take all further lawful actions to implement the previous
resolutions".
/s/ JUDITH O'BRIEN
-----------------------------------------
Secretary
Name: JUDITH O'BRIEN
-----------------------------------
Date: 3-13-99
-----------------------------------
<PAGE> 1
EXHIBIT 10.17
Comerica
SECURITY AGREEMENT
As of September 16, 1999, for value received, the undersigned ("Debtor") grants
to Comerica Bank-California ("Bank"), a California banking corporation, a
continuing security interest in the collateral (as defined below) to secure
payment when due, whether by stated maturity, demand acceleration or otherwise,
of all existing and future indebtedness ("Indebtedness") ?? the Bank of Avanex
Corporation ("Borrower") and/or Debtor. Indebtedness includes without limit any
and all obligations or liabilities of the Borrower and/or Debtor to the Bank,
whether absolute or contingent, direct or indirect, voluntary or involuntary,
liquidated or unliquidated, joint or several, known or unknown; any and all
obligations or liabilites for which the Borrower and/or Debtor would otherwise
be liable to the Bank were it not for the invalidity or unenforceability of them
by reason of any bankruptcy, insolvency or other law, or for any other reason;
any and all amendments, modifications, renewals and/or extensions of any of the
above; all costs incurred by Bank in establishing, determining, continuing, or
defending the validity or priority of its security interest, or in pursuing its
rights and remedies under this Agreement or under any other agreement between
Bank and Borrower and/or Debtor or in connection with any proceeding involving
Bank as a result of any financial accommodation to Borrower and/or Debtor; and
all other costs of collecting indebtedness, including without limit attorney
fees. Debtor agrees to pay Bank all such costs incurred by the Bank, immediately
upon demand, and until paid all costs shall bear interest at the highest per
annum rate applicable to any of the indebtedness, but not in excess of the
maximum rate permitted by law. Any reference in this Agreement to attorney fees
shall be deemed a reference to reasonable fees, costs, and expenses of both
in-house and outside counsel and paralegals, whether or not a suit or action is
instituted and to court costs if a suit or action is instituted, and whether
attorney fees or court costs are incurred at the trial court level, on appeal,
in a bankruptcy, administrative or probate proceeding or otherwise.
1. Collateral shall mean all of the following property Debtor now or later
owns or has an interest in, wherever located:
* specific items listed below and/or on attached Schedule A, if
any, is/are also included in Collateral: A Certificate of
Deposit (#850750000070251) dated, in the name of Avanex
Corporation, in the amount of $800,000.00 and any and all
subsequent renewals thereof.
* all goods, instruments, documents, policies and certificates of
insurance, deposits, money or other property (except real
property which is not a fixture) which are now or later in
possession of Bank, or as to which Bank now or later controls
possession by documents or otherwise, and
* all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions,
rights of any kind (including but not limited to stock splits,
stock rights, voting and preferential rights), products, and
proceeds of or pertaining to the above including, without limit,
cash or other property which were proceeds and are recovered by
a bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
2. Warranties, Covenants and Agreements. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, mark its
records and the Collateral to clearly indicate the security
interest of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be
deemed to have warranted that (a) Debtor is the lawful owner of
the Collateral and has the right and authority to subject it to
a security interest granted to Bank; (b) none of the Collateral
is subject to any security interest other than that in favor of
Bank and there are no financing statements on file, other than
in favor of Bank; and (c) Debtor acquired its rights in the
Collateral in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to
be sold, transferred or leased, any or all of the Collateral,
except (where inventory is pledged as Collateral) for inventory
in the ordinary course of its business and will not return any
Inventory to its supplier. Bank or its representatives may at
all reasonable times inspect the Collateral and may enter upon
all premises where the Collateral is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be executed
all writings requested by Bank to establish, maintain and
continue a perfected and first security interest of Bank in the
Collateral. Debtor agrees that Bank has no obligation to acquire
or perfect any lien on or security interest in any asset(s),
whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the
Bank may have a lien or security interest for payment of the
Indebtedness.
2.5 Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent contested
in good faith and bonded in a manner satisfactory to Bank. If
Debtor fails to pay any of these taxes, assessments, or other
charges in the time provided above, Bank has the option (but not
the obligation) to do so and Debtor agrees to repay all amounts
so expanded by Bank immediately upon demand, together with
interest at the highest lawful default rate which could be
charged by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to
the Collateral, insurance under an "all risk" policy against
fire and other risks customarily insured against; and (b) public
liability insurance and other insurance as may be required by
law or reasonably required by Bank, all of which insurance shall
be in amount, form and content, and written by companies as may
be satisfactory to Bank, containing a Lender's loss payable
endorsement acceptable to Bank. Debtor will deliver to Bank
immediately upon demand evidence satisfactory to Bank that the
required insurance has been procured. If Debtor fails to
maintain satisfactory insurance, Bank has the option (but not
the obligation) to do so and Debtor agrees to repay all amounts
so expended by Bank immediately upon demand, together with
interest at the highest lawful default rate which could be
charged by Bank on any indebtedness.
2.7 If Accounts Receivable are pledged as Collateral under this
Agreement, then on each occasion on which Debtor evidences to
Bank the account balances on and the nature and extent of the
Accounts Receivable, Debtor shall be deemed to have warranted
that except as otherwise indicated (a) each of those Accounts
Receivable is valid and enforceable without performance by
Debtor of any act; (b) each of those account balances are in
fact owing, (c) there are no setoffs, recoupments, credits,
contra accounts, counterclaims or defenses against any of those
Accounts Receivable, (d) as to any Accounts Receivable
represented by a note, trade acceptance, draft or other
instrument or by any chattel paper or document, the same have
been endorsed and/or delivered by Debtor to Bank, (e) Debtor has
not received with respect to any Account Receivable, any notice
of the death of the related account debtor, nor of the
dissolution, liquidation, termination of existence, insolvency,
business failure, appointment of a receiver for, assignment for
the benefit of creditors by, or filing of a petition in
bankruptcy by or against, the account debtor, and (f) as to each
Account Receivable, the account debtor is not an affiliate of
Debtor, the United States of America or any department, agency
or instrumentality of it, or a citizen or resident of any
jurisdiction outside of the United States. Debtor will do all
acts and will execute all writings requested by Bank to perform,
enforce performance of, and collect all Accounts Receivable.
Debtor shall neither make nor permit any modification,
compromise or substitution for any Account Receivable without
the prior written consent of Bank. Debtor shall, at Bank's
request, arrange for verification of Accounts Receivable
directly with account debtors or by other methods acceptable to
Bank.
2.8 Debtor at all times shall be in strict compliance with all
applicable laws, including without limit any laws,
<PAGE> 2
ordinances, directives, orders, statutes, or regulations an
object of which is to regulate or improve health, safety, or the
environment ("Environmental Laws").
2.9 If marketable securities are pledged as Collateral under this
Agreement and if at any time the outstanding principal balance
of the Indebtedness exceeds N/A of the value of the Collateral,
as such value is determined from time to time by Bank (herein
called the "Margin Requirement"), Debtor shall immediately pay
or cause to be paid to Bank an amount sufficient to reduce the
Indebtedness such that the remaining principal outstanding
thereunder is equal to or less than the Margin Requirement. Bank
shall apply payments made under this paragraph in payment of the
Indebtedness in such order and manner of application as Bank in
its sole discretion elects. In the alternative, Debtor may
provide or cause to be provided to Bank additional collateral in
the form of cash or other property acceptable to Bank and with a
value, as determined by Bank, that when added to the Collateral
will constitute compliance with the Margin Requirement.
2.10 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of (a) the ultimate
sale or exchange thereof; or (b) presentation, collection,
renewal, or registration of transfer thereof; or (c) loading,
unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of
Bank and shall not constitute a release of Bank's security
interest in it or in the proceeds or products of it unless Bank
specifically so agrees in writing. If Debtor requests any such
redelivery, Debtor will deliver with such request a duly
executed financing statement in form and substance satisfactory
to Bank. Any proceeds of Collateral coming into Debtor's
possession as a result of any such redelivery shall be held in
trust for Bank and immediately delivered to Bank for application
on the Indebtedness. Bank may (in its sole discretion) deliver
any or all of the Collateral to Debtor, and such delivery by
Bank shall discharge Bank from all liability or responsibility
for such Collateral. Bank, at its option, may require delivery
of any Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.11 At any time and without notice, Bank may, as to Collateral other
than Equipment, Fixtures or Inventory, (a) cause any or all of
such Collateral to be transferred to its name or to the name of
its nominees; (b) receive or collect by legal proceedings or
otherwise all dividends, interest, principal payments and other
sums and all other distributions at any time payable or
receivable on account of such Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner
and distribution of the application to be in the sole discretion
of Bank; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or
any other agreement relating to or affecting such Collateral,
and deposit or surrender control of such Collateral, and accept
other property in exchange for such Collateral and hold or apply
the property or money so received pursuant to this Agreement.
2.12 Bank may assign any of the Indebtedness and deliver any or all
of the Collateral to its assignee, who then shall have with
respect to Collateral so delivered all the rights and powers of
Bank under this Agreement, and after that Bank shall be fully
discharged from all liability and responsibility with respect to
Collateral so delivered.
2.13 Debtor delivers this Agreement based solely on Debtor's
independent investigation of (or decision not to investigate)
the financial condition of Borrower and is not relying on any
information furnished by Bank. Debtor assumes full
responsibility for obtaining any further information concerning
the Borrower's financial condition, the status of the
Indebtedness or any other matter which the undersigned may deem
necessary or appropriate now or Later. Debtor waives any duty on
the part of Bank, and agrees that Debtor is not relying upon nor
expecting Bank to disclose to Debtor any fact now or later known
by Bank, whether relating to the operations or condition of
Borrower, the existence, Liabilities or financial condition of
any guarantor of the Indebtedness, the occurrence of any default
with respect to the Indebtedness, or otherwise, notwithstanding
any effect such fact may have upon Debtor's risk or Debtor's
rights against Borrower. Debtor knowingly accepts the full range
of risk encompassed in this Agreement, which risk includes
without Limit the possibility that Borrower may incur
Indebtedness to Bank after the financial condition of Borrower,
or Borrower's ability to pay debts as they mature, has
deteriorated.
2.16 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including without limit consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law,
including, without limit, Environmental Laws, or of any
remediation relating to any property required by any law,
including without limit Environmental Laws.
3. Collection of Proceeds.
3.1 Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately upon
notice to Debtor by Bank and at all times after that, Debtor
agrees to fully and promptly cooperate and assist Bank in the
collection and enforcement of all Collateral and to hold in
trust for Bank all payments received in connection with
Collateral and from the sale, lease or other disposition of any
Collateral, all rights by way of suretyship or guaranty and all
rights in the nature of a lien or security interest which Debtor
now or later has regarding Collateral. Immediately upon and
after such notice, Debtor agrees to (a) endorse to Bank and
immediately deliver to Bank all payments received on Collateral
or from the sale, lease or other disposition of any Collateral
or arising from any other rights or interests of Debtor in the
Collateral, in the form received by Debtor without commingling
with any other funds, and (b) immediately deliver to Bank all
property in Debtor's possession or later coming into Debtor's
possession through enforcement of Debtor's rights or interests
in the Collateral. Debtor irrevocably authorizes Bank or any
Bank employee or agent to endorse the name of Debtor upon any
checks or other items which are received in payment for any
Collateral, and to do any and all things necessary in order to
reduce these items to money. Bank shall have no duty as to the
collection or protection of Collateral or the proceeds of it,
nor as to the preservation of any related rights, beyond the use
of reasonable care in the custody and preservation of Collateral
in the possession of Bank. Debtor agrees to take all steps
necessary to preserve rights against prior parties with respect
to the Collateral. Nothing in this Section 3.1 shall be deemed a
consent by Bank to any sale, lease or other disposition of any
Collateral.
3.2 If Accounts Receivable are pledged as Collateral, this Section
3.2 shall be applicable and Debtor agrees that immediately upon
Bank's request (whether or not any Event of Default exists) the
indebtedness shall be on a "remittance basis" as follows: Debtor
shall at its sole expense establish and maintain (and Bank, at
Bank's option, may establish and maintain at Debtor's expense):
(a) an United States Post Office Lock box (the "Lock Box"), to
which Bank shall have exclusive access and control. Debtor
expressly authorizes Bank, from time to time, to remove contents
from the Lock Box, for disposition in accordance with this
Agreement. Debtor agrees to notify all account debtors and other
parties obligated to Debtor that all payments made to Debtor
agrees to payments by electronic funds transfer) shall be
remitted, for the credit of Debtor, to the Lock Box, and Debtor
shall include a like statement on all invoices; and (b) a
non-interest bearing deposit account with Bank which shall be
titled as designated by Bank (the "Cash Collateral Account") to
which Bank shall have exclusive access and control. Debtor
agrees to notify all account debtors and other parties obligated
to Debtor that all payments made to Debtor by electronic funds
transfer shall be remitted to the Cash Collateral Account, and
Debtor, at Bank's request, shall include a like statement on all
invoices. Debtor shall execute all documents and authorization
as required by Bank to establish and maintain the Lock Box and
the Cash Collateral Account.
3.3 If Accounts Receivable are pledged as Collateral, this Section
3.3 shall be applicable, and all items or amounts which are
remitted to the Lock Box, to the Cash Collateral Account, or
otherwise delivered by or for the benefit of Debtor to Bank on
account of partial or full payment of, or with respect to, any
Collateral shall, at Bank's option, (i) be applied to the
payment of the Indebtedness, whether then due or not, in such
order or at such time of application as Bank may determine in
its sole discretion, or, (ii) be deposited to the Cash
Collateral Account. Debtor agrees that Bank shall not be liable
for any loss or damage which Debtor may suffer as a result of
Bank's processing of items or its exercise of any other rights
or remedies under this Agreement, including without Limitation
indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items or
the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all
<PAGE> 3
such third party claims, demands or actions, and all related
expenses or liabilities, including, without limitation, attorney
fees.
4. Defaults, Enforcement and Application of Proceeds
4.1 Upon the occurrence of any of the following events (each an
"Event of Default"), Debtor shall be in default under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may be
due, by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of or
default under, any term of this Agreement, or any other
agreement or commitment between Borrower, Debtor, or any
guarantor of any of the Indebtedness ("Guarantor") and
Bank; or
(c) Any warranty, representation, financial statement, or
other information made, given or furnished to Bank by or
on behalf of Borrower, Debtor, or any Guarantor shall
be, or shall prove to have been, false or materially
misleading when made, given, or furnished; or
(d) Any loss, theft, substantial damage or destruction to or
of any Collateral, or the issuance or filing of any
attachment, levy, garnishment or the commencement of any
proceeding in connection with any Collateral or of any
other judicial process of, upon or in respect of
Borrower, Debtor, any Guarantor, or any Collateral; or
(e) Sale or other disposition by Borrower, Debtor, or any
Guarantor of any substantial portion of its assets or
property or voluntary suspension of the transaction of
business by Borrower, Debtor, or any Guarantor, or
death, dissolution, termination of existence, merger,
consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by
Borrower, Debtor, or any Guarantor; or commencement of
any proceedings under any state or federal bankruptcy or
insolvency laws or laws for the relief of debtors by or
against Borrower, Debtor, or any Guarantor; or the
appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the
property of Borrower, Debtor, or any Guarantor; or
(f) Bank deems the margin of Collateral insufficient or
itself insecure, in good faith believing that the
prospect of payment of the Indebtedness or performance
of this Agreement is impaired or shall fear
deterioration, removal, or waste of Collateral.
4.2 Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Debtor declare any or all
of the Indebtedness to be immediately due and payable, and shall
have and may exercise any one or more of the following rights
and remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties
under the provisions of the Uniform Commercial Code and
other applicable law;
(b) Institute legal proceedings to foreclose upon the lien
and security interest granted by this Agreement, to
recover judgment for all amounts then due and owing as
Indebtedness, and to collect the same out of any
Collateral or the proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the
Judgment or decree of any court of competent
jurisdiction, of any or all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may
then be located, and take possession of all or any of it
and/or render it unusable; and without being responsible
for loss or damage to such Collateral, hold, operate,
sell, lease, or dispose of all or any Collateral at one
or more public or private sales, leasings or other
dispositions, at places and times and on terms and
conditions as Bank may deem fit, without any previous
demand or advertisement; and except as provided in this
Agreement, all notice of sale, lease or other
disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to
inquire as to the power and authority of Bank to sell,
lease, or otherwise dispose of the Collateral or as to
the application by Bank of the proceeds of sale or
otherwise, which would otherwise be required by, or
available to Debtor under, applicable law are expressly
waived by Debtor to the fullest extent permitted.
At any sale pursuant to this Section 4.2, whether under
the power of sale, by virtue of judicial proceedings or
otherwise, it shall not be necessary for Bank or a
public officer under order of a court to have present
physical or constructive possession of Collateral to be
sold. The recitals contained in any conveyances and
receipts made and given by Bank or the public officer to
any purchaser at any sale made pursuant to this
Agreement shall, to the extent permitted by applicable
law, conclusively establish the truth and accuracy of
the matters stated (including, without limit, as to the
amounts of the principal of and interest on the
Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all
prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any
Collateral, the receipt of the officer making the sale
under judicial proceedings or of Bank shall be
sufficient discharge to the purchaser for the purchase
money, and the purchaser shall not be obligated to see
to the application of the money. Any sale of any
Collateral under this Agreement shall be a perpetual bar
against Debtor with respect to that Collateral.
4.3 Debtor shall at the request of Bank, notify the account debtors
or obligors of Bank's security interest in the Collateral and
direct payment of it to Bank. Bank may, itself, upon the
occurrence of any Event of Default so notify and direct any
account debtor or obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon
all expenses authorized by the Uniform Commercial Code and all
reasonable attorney fees and legal expenses incurred by Bank;
the balance of the proceeds of the sale or other disposition
shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to remaining Indebtedness and
the surplus, if any, shall be paid over to Debtor or to such
other person(s) as may be entitled to it under applicable law.
Debtor shall remain liable for any deficiency, which it shall
pay to Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be
construed, to preclude Bank from pursuing any other remedy
provided by law for the collection of the Indebtedness or for
the recovery of any other sum to which Bank may be entitled for
the breach of this Agreement by Debtor. Nothing in this
Agreement shall reduce or release in any way any rights or
security interests of Bank contained in any existing agreement
between Borrower, Debtor, or any Guarantor and Bank.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer
of Bank. No waiver of any default or forbearance on the part of
Bank in enforcing any of its rights under this Agreement shall
operate as a waiver of any other default or of the same default
on a future occasion or of any rights.
4.7 Debtor irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the
name, place and stead of, and at the expense of, Debtor:
(a) to demand, receive, sue for, and give receipts or
acquittances for any moneys due or to become due on any
Collateral and to endorse any item representing any
payment on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of
Debtor all financing statements or other filings deemed
necessary or desirable by Bank to evidence, perfect, or
continue the security interests granted in this
<PAGE> 4
Agreement; and
(c) to do and perform any act on behalf of Debtor permitted
or required under this Agreement.
4.8 Upon the occurrence of an Event of Default, Debtor also agrees,
upon request of Bank, to assemble the Collateral and make it
available to Bank at any place designated by Bank which is
reasonably convenient to Bank and Debtor.
5. Miscellaneous.
5.1 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or
by law shall be given to, or made upon, Debtor at the first
address indicated in Section 5.15 below.
5.2 Debtor will give Bank not less than 90 days prior written notice
of all contemplated changes in Debtor's name, chief executive
office location, and/or location of any Collateral, but the
giving of this notice shall not cure any Event of Default caused
by this change.
5.3 Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the
Indebtedness and any related obligations, including without
limit this Agreement. In connection with the above, but without
limiting its ability to make other disclosures to the full
extent allowable, Bank may disclose all documents and
information which Bank now or later has relating to Debtor, the
Indebtedness or this Agreement, however obtained. Debtor further
agrees that Bank may provide information relating to this
Agreement or relating to Debtor to the Bank's parent,
affiliates, subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time(s) either before or after maturity or
demand without notice to anyone.
5.6 Debtor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal
property security held from Borrower or any other person, or
otherwise comply with the provisions of Section 9-504 of the
Uniform Commercial Code; or (c) pursue any other remedy in the
Bank's power. Debtor waives notice of acceptance of this
Agreement and presentment, demand, protest, notice of protest,
dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any Indebtedness, any
and all other notices to which the undersigned might otherwise
be entitled, and diligence in collecting any Indebtedness, and
agree(s) that the Bank may, once or any number of times, modify
the terms of any Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all
Indebtedness, or permit Borrower to incur additional
Indebtedness, all without notice to Debtor and without affecting
in any manner the unconditional obligation of Debtor under this
Agreement. Debtor unconditionally and irrevocably waives each
and every defense and setoff of any nature which, under
principles of guaranty or otherwise, would operate to impair or
diminish in any way the obligation of Debtor under this
Agreement, and acknowledges that such waiver is by this
reference incorporated into each security agreement, collateral
assignment, pledge and/or other document from Debtor now or
later securing the Indebtedness, and acknowledges that as of the
date of this Agreement no such defense or setoff exists.
5.7 Debtor waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from Borrower
any amounts paid or the value of any Collateral given by Debtor
pursuant to this Agreement.
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor
at least five days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of the
time after which any private sale, lease, or other dispostion is
to be made, unless a shorter notice period is reasonable under
the circumstances. A notice shall be deemed to be given under
this Agreement when delivered to Debtor or when placed in an
envelope addressed to Debtor and deposited, with postage
prepaid, in a post office or official depository under the
exclusive care and custody of the United States Postal Service
or delivered to an overnight courier. The mailing shall be by
overnight courier, certified, or first class mail.
5.9 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue or
be reinstated in the event that any payment received or credit
given by Bank in respect of the Indebtedness is returned,
disagreed, or rescinded under any applicable law, including,
without limitation, bankruptcy or insolvency laws, in which case
this Agreement, shall be enforceable against Debtor as if the
returned, disgorged, or rescinded payment or credit had not been
received or given by Bank, and whether or not Bank relied upon
this payment or credit or changed its position as a consequence
of it. In the event of continuation or reinstatement of this
Agreement, Debtor agrees upon demand by Bank to execute and
deliver to Bank those documents which Bank determines are
appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the
failure of Debtor to do so shall not affect in any way the
reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors
and assigns and to any other holder who derives from Bank title
to or an interest in the Indebtedness or any portion of it, and
shall bind Debtor and the heirs, legal representatives,
successors, and assigns of Debtor. Nothing in this Section 5.10
is deemed a consent by Bank to any assignment by Debtor.
5.11 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
5.12 Except as otherwise provided in this Agreement, all terms in
this Agreement have the meanings assigned to them in Division 9
(or, absent definition in Division 9, in any other Division) of
the Uniform commercial Code, as of the date of this Agreement.
"Uniform Commercial Code" means the California Uniform
Commercial Code, as amended.
5.13 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or
further exercise of the rights and powers under this Agreement.
The unenforceability of any provision of this Agreement shall
not affect the enforceability of the remainder of this
Agreement. This Agreement constitutes the entire agreement of
Debtor and Bank with respect to the subject matter of this
Agreement. No amendment or modification of this Agreement shall
be effective unless the same shall be in writing and signed by
Debtor and an authorized officer of Bank. This Agreement shall
be governed by and construed in accordance with the internal
laws of the State of California, without regard to conflict of
laws principles.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or
not an Event of Default has occurred.
5.15 Debtor's chief executive office is located and shall be
maintained at 42501 Albrae Street
-------------------
STREET ADDRESS
Fremont Ca 94538
---------------------------------------------------------------
CITY STATE ZIP CODE COUNTY
If Collateral is located at other than the chief executive
office, such Collateral is located and shall be maintained at
----------------------------------------------------------------
STREET ADDRESS
---------------------------------------------------------------
CITY STATE ZIP CODE COUNTY
<PAGE> 5
Collateral shall be maintained only at the locations identified
in this Section 5.15.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.14 of this Agreement shall survive
termination.
6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
7. Special Provisions Applicable to this Agreement. ("None, if left blank)
DEBTOR: Avanex Corporation
----------------------------------
DEBTOR NAME TYPED/PRINTED
By: /s/ JESSY CHAO
---------------------------------------
SIGNATURE OF Jessy Chao
Its: Director Of Finance
---------------------------------------
TITLE (If applicable)
By: /s/ WALTER ALESSANDRINI
---------------------------------------
SIGNATURE OF Walter Alessandrini
Its: CEO
---------------------------------------
TITLE (If applicable)
By:
---------------------------------------
SIGNATURE OF
Its:
---------------------------------------
TITLE (If applicable)
By:
---------------------------------------
SIGNATURE OF
Its:
---------------------------------------
TITLE (If applicable)
Borrower(s):
Avanex Corporation
<PAGE> 1
EXHIBIT 10.19
December 1, 1999
Walter Alessandrini
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538
Dear Mr. Alessandrini:
This letter represents your approval of the following amendment to the
Secured Promissory Note dated May 20, 1999, by and between Walter Alessandrini
and Avanex Corporation (the "Note"). Section 1 of the Note is hereby amended and
restated in its entirety to read as follows:
"1. The principal amount of this Note and all accrued but unpaid
interest from the date hereof shall be due on the earliest of
(i) six months from that date on which the Borrower can sell
shares of the Company's common stock for an amount equal to the
principal and interest owed on this Note, so long as the sale
complies with all applicable federal and state laws, contractual
obligations with the Company's underwriters, Company's bylaws
and any applicable insider trading restrictions imposed on the
Company's employees, or (ii) the termination of Borrower's
employment with the Company. All payments made pursuant hereto,
regardless of when made, shall be applied first to reduce
accrued and unpaid interest on the outstanding principal hereof
and any remaining portion of such payments shall then be applied
to reduce the principal hereof. All payments shall be made in
lawful money of the United States of America. Borrower shall
have the right to prepay at any time, and from time to time,
without premium or penalty all or any portion of the principal
and accrued interest hereunder."
Please sign and date this letter to agree to the aforementioned
amendment of the Note.
Sincerely,
AVANEX CORPORATION
/s/ JESSY CHAO
------------------------------------
Jessy Chao
Vice President, Finance and Chief
Financial Officer
AGREED TO AND ACCEPTED this
1st day of December, 1999.
/s/ WALTER S. ALESSANDRINI
- ------------------------------------
Walter S. Alessandrini
<PAGE> 2
SECURED PROMISSORY NOTE
$300,000.00 Fremont, California
May 20, 1999
FOR VALUE RECEIVED, the undersigned, Walter Alessandrini ("Borrower"),
hereby promises to pay to the order of Avanex Corporation, a California
corporation (the "Company"), the principal sum of Three Hundred Thousand Dollars
($300,000.00), with simple interest thereon at the rate of 4.90% per annum, at
the principal offices of the Company, upon the following terms and conditions.
1. The principal amount of this Note and all accrued but unpaid interest
from the date hereof shall be due on the earliest of (i) the closing of the sale
by Borrower of Borrower's South Carolina home, (ii) a liquidity event of the
Company (including an initial public offering of our common stock or the sale of
substantially all of our stock or assets) or (iii) the termination of Borrower's
employment with the Company. All payments made pursuant hereto, regardless of
when made, shall be applied first to reduce accrued and unpaid interest on the
outstanding principal hereof and any remaining portion of such payments shall
then be applied to reduce the principal hereof. All payments shall be made in
lawful money of the United States of America. Borrower shall have the right to
prepay at any time, and from time to time, without premium or penalty all or any
portion of the principal and accrued interest hereunder.
2. Borrower represents that Borrower will use the principal amount
borrowed pursuant to this Note as a down-payment on a home in the Bay Area, and
hereby grants the holder a security interest in such Bay Area home. Borrower
covenants to promptly take such action as may be required to sell Borrower's
South Carolina home and to repay all amounts of principal and interest owed
pursuant to this Note as quickly as possible.
3. In the event that (a) Borrower defaults in the payment when due of
the principal hereof or interest hereon or the undersigned shall fail to pay
when due any other amount owing from time to time to the holder hereof, or (b)
any of the events described in Section 1 above occur, then, in any such event
and at the option of the holder of this Note, the entire principal amount then
outstanding hereunder and all accrued and unpaid interest hereon through the
date of such default or other event shall become immediately due and payable.
4. The holder of this Note shall have full recourse against the
undersigned.
5. Borrower hereby waives presentment, protest, demand for payment,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or endorsement of this Note. No
waiver by the holder hereof of any default shall be effective unless in writing
nor shall it operate as a waiver of any other default or of the same default on
a future occasion. This Note shall be binding upon the undersigned and its
successors and assigns. The undersigned agrees to pay all costs of collection of
this Note, including without limitation reasonable attorneys' fees and costs, in
the event it is not paid when due.
6. Borrower understands that nothing in this Note modifies Borrower's
at-will status with the Company. Either the Company or Borrower can terminate
the employment relationship at any time, with or without cause.
7. Time is of the essence of this Note. This Note may not be modified
orally, but only by a writing executed by Borrower and the holder hereof. This
Note has been made and delivered in the State of California and shall be
construed in accordance with, and all actions arising hereunder shall be
governed by, the laws of the State of California.
/s/ ANNA R. ALESSANDRINI
/s/ WALTER S. ALESSANDRINI
------------------------------------
Walter S. Alessandrini
<PAGE> 1
EXHIBIT 10.22
AVANEX CORPORATION
EMPLOYMENT AGREEMENT
This Agreement is made by and between Avanex Corporation (the "Company"),
and William Lanfri (the "Executive").
1. Duties and Scope of Employment.
(a) Position: Employment Commencement Date. The Company shall employ
the Executive as the Acting Chief Executive Officer of the Company reporting to
the Company's Board of Directors (the "Board"), until such time as a permanent
Chief Executive Officer is hired by the Company. Thereafter, for the duration of
Executive's employment by the Company, Executive shall, at the discretion of the
permanent Chief Executive Officer, serve as an advisor to the permanent Chief
Executive Officer or the Board. Executive's employment with the Company pursuant
to this agreement shall commence on June 10, 1998 and continue, if not earlier
terminated by either party hereto, until December 18, 1998.
(b) Obligations. Executive shall devote at least the equivalent of
three full-time days per week, on average, of his business efforts and time to
the Company through the term of this Agreement. As the Acting Chief Executive
Officer, Executive will lead the executive team of the Company. Executive agrees
not to commit to activities outside of his employment with the Company that
would require more than half of his business efforts and time. Executive will
inform the Board of any new business activities or time commitments that he
makes subsequent to the commencement of his employment with the Company.
Executive's performance objectives include the following:
o Delivery of the initial components business in Fiscal Year 1998,
including contract completing, staffing and appropriate product
shipments and related deliverables.
o Development of the marketing and technical framework and of the
primary business and staffing plan for the sub-systems business,
including setup of Dallas-area offices.
o Work on the cultural and organizational issues that are part of the
strategy of bringing together the component and the systems teams,
including creation of appropriate roles and job titles/structures.
o Help interview and sell potential permanent Chief Executive Officer
candidates.
2. Employee Benefits. During his employment hereunder, Executive shall
be eligible to participate in the employee benefit plans maintained by the
Company to the full extent provided for under those plans and except as
otherwise specifically provided for herein.
<PAGE> 2
3. At-Will Employment. Executive and the Company understand and
acknowledge that Executive's employment with the Company constitutes "at-will"
employment. Executive and the Company acknowledge that this employment
relationship may be terminated at any time, with or without good cause or for
any or no cause, at the option either of the Company or Executive.
4. Stock Option. The Company will grant to Executive an option for
shares of Common Stock equal to 0.75 percent of the Company's outstanding
shares of Common Stock on an as-converted and fully diluted basis assuming
issuance of all shares of Preferred Stock pursuant to the Series A, Series B
and Series C Preferred Stock Purchase Agreement dated as of February 10, 1998
and at an exercise price of the then fair market value of the Common Stock, as
determined by the Board pursuant to a Stock Option Agreement in substantially
the form attached hereto as Exhibit A.
5. Expenses. The Company will pay or reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder in
accordance with the Company's established policies. To defer business expenses
incurred in connection with Executive's commute, the Company shall reimburse
Executive in an amount not to exceed $50,000.00 in accordance with a formula
discussed by the Board.
6. No Additional Compensation. Executive shall not be entitled to any
annual salary or compensation not otherwise described in this Agreement.
Executive understands and agrees that neither his job performance nor
promotions, commendations, bonuses or the like from the Company give rise to or
in any way serve as the basis for modification, amendment, or extension, by
implication or otherwise, of this Agreement.
7. Enforcement. In the event of any action to enforce the terms of this
Agreement, the prevailing party in such action shall be entitled to such
party's reasonable costs and expenses of enforcement including, without
limitation, reasonable attorneys' fees.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" shall include any
person, firm, corporation or other business entity which at any time, whether
by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Executive following termination without cause. Any attempted assignment,
transfer, conveyance or other disposition (other than as aforesaid) of any
interest in the rights of Executive to receive any form of compensation
hereunder shall be null and void.
-2-
<PAGE> 3
9. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if delivered
personally or three (3) days after being mailed by registered or certified
mail, return receipt requested, prepaid and addressed to the parties or their
successors in interest at the following addresses, or at such other addresses
as the parties may designate by written notice in the manner aforesaid:
If to the Company: Avanex Corporation
42501 Albrae Avenue
Fremont, CA 94538
If to Executive: William Lanfri
at the last residential address known by the Company.
10. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
11. Proprietary Information Agreement. Executive will execute the
Company's Employment, Confidential Information, Invention Assignment and
Arbitration Agreement (the "Proprietary Information Agreement") in the form
attached hereto as Exhibit B.
12. Entire Agreement. This Agreement, the Company's 1998 Stock Plan, the
Stock Option Agreement, and the Proprietary Information Agreement represent the
entire agreement and understanding between the Company and Executive concerning
Executive's employment relationship with the Company, supersedes and replaces
any and all prior agreements and understandings concerning Executive's
employment relationship with the Company.
13. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in writing signed by Executive and the
Company.
14. Governing Law. This Agreement shall be governed by the laws of the
State of California.
15. Effective Date. This Agreement is effective immediately after it has
been signed.
16. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below.
AVANEX CORPORATION WILLIAM LANFRI
By: /s/ SIMON X. CAO /s/ WILLIAM LANFRI
------------------------------ --------------------------------
Signature Signature
Title: President
-----------------------------
Date: July 17, 1998 Date: July 15, 1998
------------------------------ ---------------------------
-4-
<PAGE> 1
EXHIBIT 10.23
[AVANEX CORPORATION LETTERHEAD]
Peter R. Maguire
2913 Shadywood Lane
Plano, TX 75023
June 18, 1999
OFFER LETTER
Dear Mr. Maguire,
I am pleased to offer you a position with Avanex Corporation (the
"Company") as a Vice President of Worldwide Sales commencing on June 28, 1999.
This position will be based in Richardson, Texas. You will receive an annual
salary of $165,000, which will be paid bi-weekly in accordance with the
Company's normal payroll procedures. You will also receive a sign on bonus of
$100,000. If you leave the Company voluntarily or the company terminates your
employment for cause, you will pay off the balance of the sign on bonus, which
is reduced by $8,333.33 per full month of your employment with the Company. You
will also receive a sales commission, under a separate commission agreement,
equal to 0.5% of sales amount made by June 30, 2000. The commission will be
paid upon the collection of the sales and in quarterly basis. The commission
agreement will be reviewed and renegotiated annually.
As a Company employee, you are also eligible to receive certain employee
benefits including Medical, Dental, and Vision insurance at no cost. Dependent
coverage for these benefits is available at a minimal rate immediately.
You will begin accruing time off / vacation at a rate of 1.25 day for each
full month of employment up to 15 days a year. You are also entitled to have 8
national holidays plus 2 floating holidays with pay.
We will recommend to the Board of Directors of the Company that, at the
next Board meeting, you be granted an [incentive] stock option entitling you to
purchase up to 550,000 shares of Common Stock of the Company at the then
current fair market value as determined by the Board at that meeting. Such
options shall be subject to the terms and conditions of the Company's Stock
Option Plan and Stock Option Agreement.
You should be aware that your employment with the Company is for no
specified period and constitutes at will employment. As a result, you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause.
For purposes of federal immigration law, you will be required to provide
to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
<PAGE> 2
[AVANEX CORPORATION LETTERHEAD]
I have enclosed our standard Proprietary Information Agreement as a
condition of your employment. If you accept this offer, please return to me a
signed copy of that agreement.
In the event of any dispute or claim relating to or arising out of our
employment relationship, you and the Company agree that all such disputes shall
be fully and finally resolved by binding arbitration conducted by the American
Arbitration Association in Alameda County, California. HOWEVER, we agree that
this arbitration provision shall not apply to any disputes or claims relating
to or arising out of the misuse or misappropriation of the Company's trade
secrets or proprietary information.
To indicate your acceptance of the Company's offer, please sign and date
this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by an officer of the Company and by you.
We look forward to working with you at Avanex Corporation.
Sincerely,
AVANEX CORPORATION
/s/ WALTER ALLESSANDRINI
------------------------------
Walter Allessandrini
President and CEO
ACCEPTED AND AGREED TO this
19th day of June, 1999.
/s/ PETER R. MAGUIRE
- ------------------------------
Peter R. Maguire
Enclosures: Duplicate Original Letter
Proprietary Information Agreement
<PAGE> 1
EXHIBIT 10.24
September 13, 1999
Mr. Walter Alessandrini
Chief Executive Officer
Avanex Corporation
42501 Albrae Street
Fremont, CA 94538
USA
Re: Patent License Agreement on VIPA between Fujitsu Limited and Avanex
Corporation
Dear Mr. Alessandrini:
Fujitsu Limited acknowledges that, as of September 13, 1999, the Conditions
Precedent in Section 2 of the above Patent License Agreement have been fulfilled
for dispersion compensator and the patent license for the same has been granted
to Avanex Corporation.
I appreciate your business.
Sincerely,
/s/ Yasuo Nagai
Yasuo Nagai
General Manager
Photonic Technology Development Division
Fujitsu Limited
4-1-1 Kamikodanaka, Nakahara-ku
Kawasaki, 211-8588
Japan
<PAGE> 2
PATENT LICENSE AGREEMENT
THIS AGREEMENT is made and entered into by and between FUJITSU LIMITED, a
corporation of Japan, having its registered office at 4-1-1 Kamikodanaka,
Nakahara-ku, Kawasaki, Kanagawa, 211-88, Japan (hereinafter referred to as
"FUJITSU"), and AVANEX Corporation, a corporation of the State of California,
having its principal office at 42501 Albrae Street, Fremont, CA 94538, USA.
(hereinafter referred to as "AVANEX").
WITNESSETH
WHEREAS, FUJITSU owns patents in certain countries of the world with respect to
LICENSED PRODUCTS (defined below); and
WHEREAS, AVANEX desires to acquire licenses under such FUJITSU's patents; and
WHEREAS, FUJITSU is willing to grant such licenses to AVANEX.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, the parties hereto agree as follows:
Section 1. DEFINITIONS
1.1 "SUBSIDIARY(IES)" shall mean any corporation, company or other entity more
than fifty percent (50%) of whose voting stock or other similar interests are
owned or controlled by AVANEX, directly or indirectly, as of EFFECTIVE DATE
(defined below) and thereafter so long as such ownership or control exists.
1.2 "LICENSED PRODUCTS" shall mean the following items (1) and (2):
(1) Wavelength multiplexer/demultiplexer devices which consist of the VIPA
element.
(2) Chromatic dispersion compensator devices which consist of the VIPA element
and a mirror.
1.3 "LICENSED PATENTS" shall mean all the patents issued under the following
patent applications and their divisions, continuations and
continuation-in-parts, and all reissues of any of the foregoing patents: [*]
1.4 "LICENSED TERRITORIES" shall mean the countries in which LICENSED PATENTS
are in existence.
1.5 "EFFECTIVE DATE" shall mean the date when all of the conditions of Section 2
are satisfied.
1.6 "DESIGN INFORMATION" shall mean the structural design information of
LICENSED PRODUCTS, which includes design parameters and parts design sheets, but
does not include the assembling know-how. FUJITSU can freely use this DESIGN
INFORMATION for its own use.
Section 2. CONDITIONS PRECEDENT AND EFFECTIVENESS OF AGREEMENT
The license pursuant to Section 3 below shall become available only after all of
the following conditions preceding have fulfilled for each LICENSED PRODUCT:
(a) Development by AVANEX of DESIGN INFORMATION used for LICENSED PRODUCTS in
accordance with the specifications which will be given by FUJITSU to AVANEX, no
later than one (1) month from the day when this agreement is signed by both
parties, pursuant to a separate confidential agreement. AVANEX shall perform
such development for FUJITSU with the first priority before manufacturing
LICENSED PRODUCTS for customers other than FUJITSU.
(b) DESIGN INFORMATION is given to FUJITSU with [*] charge.
Section 3. GRANTS OF LICENSES
3.1 FUJITSU hereby grants for the term of this Agreement to AVANEX, subject to
the
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 3
conditions under Section 4 below, a non-exclusive and non-transferable license,
without the right to sublicense, under LICENSED PATENTS to make or have made
LICENSED PRODUCTS and to use, lease, sell, offer to sell, import or otherwise
dispose of such LICENSED PRODUCTS in LICENSED TERRITORIES.
3.2 The license granted to AVANEX hereunder shall also extend to any of
SUBSIDIARY provided that AVANEX shall cause SUBSIDIARIES to assume the same
obligations as imposed on AVANEX hereunder.
Section 4. LICENSES FEE
4.1 In consideration of the license set forth in Section 3 above, AVANEX shall,
beginning on the EFFECTIVE DATE and to the extent that AVANEX and SUBSIDIARIES
manufacture, have manufactured, use, lease, sell, offer to sell, import or
otherwise dispose of LICENSED PRODUCTS under this Agreement, pay to FUJITSU a
running royalty of [*] of all NET SALES AMOUNT (hereinafter defined) of all
LICENSED PRODUCTS which are made or had made, and used, leased, sold, imported
or otherwise disposed of by AVANEX and SUBSIDIARIES in LICENSED TERRITORIES.
4.2 For the purpose of this Agreement, "NET SALES AMOUNT" shall mean the total
of the arm's length selling prices of LICENSED PRODUCTS at which distributors,
dealers, customers and users of AVANEX or SUBSIDIARIES paid, but the following
items may be excluded; normal discounts actually granted, insurance fees and
packing and transportation charges as invoiced separately to customers, and
duties and sales taxes actually incurred and paid by AVANEX or SUBSIDIARIES. If
LICENSED PRODUCTS are used, leased, imported or otherwise disposed of by AVANEX
or SUBSIDIARY, or sold by AVANEX or SUBSIDIARY not on arm's length basis, the
selling prices used in calculating NET
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 4
SALES AMOUNT shall be the average arm's length selling prices during the past
[*] for the same or similar LICENSED PRODUCTS sold by AVANEX or SUBSIDIARIES to
third party customers.
Section 5. PAYMENTS, REPORTS, RECORDS AND TAX
5.1 The running royalty set forth in Section 4.1 above shall be computed and
paid to FUJITSU by AVANEX within thirty (30) days after the end of each quarter
ending on March 31st, June 30th, September 30th and December 31st.
5.2 AVANEX shall, at the time of each payment of the running royalty under
Section 5.1 above, furnish to FUJITSU a royalty report in suitable form prepared
by Chief Financial Officer of AVANEX, which shall describe sales (including use,
lease, import or other disposition) quantity and gross sales price of LICENSED
PRODUCTS, any deduction from and/or adjustments to the gross sales price as
provided in Section 4.2 above, NET SALES AMOUNT, royalty amount, tax withheld
and royalty remitted. AVANEX shall, within sixty (60) days after the end of each
calendar year, also furnish to FUJITSU a royalty compliance report certified by
an outside Certified Public Accountant, for the period of the year.
5.3 The first royalty report and payment shall be made with respect to all
LICENSED PRODUCTS made or had made, and used, leased, sold, import or otherwise
disposed of by AVANEX and SUBSIDIARIES in LICENSED TERRITORIES from EFFECTIVE
DATE to the last day of the quarterly period next ending.
5.4 Payment hereunder shall be made without deductions of taxes, assessments or
other charges of any kind which may be imposed on FUJITSU by the Government of
the United States of America or any political subdivision thereof with respect
to any amounts due to FUJITSU pursuant to this Agreement, and such taxes,
assessments or other charges shall be paid by AVANEX. However, income taxes or
taxes of similar nature imposed on FUJITSU by the Government of the United
States of America or any other political subdivision thereof and paid by AVANEX
for the account of FUJITSU shall be deductible from the payment to FUJITSU to
the extent that such taxes are allowable as a credit against taxes imposed on
FUJITSU by the Government of Japan. To assist FUJITSU in obtaining such credit,
AVANEX shall furnish FUJITSU with such evidence as may be required by taxing
authorities of the Government of Japan to establish that any such taxes have
been paid.
5.5 If AVANEX fails to make any payment stipulated in this Agreement within the
time specified herein, AVANEX shall pay an interest of fifteen percent (15%) per
year on the unpaid balance payable from the due date until fully paid. The
foregoing payment of interest shall not affect FUJITSU's right to terminate this
Agreement in accordance with Section 7.2 below.
5.6 Any payment from AVANEX to FUJITSU hereunder shall be made by means of
telegraphic transfer remittance in U.S. Dollars to the following bank account of
FUJITSU, and notice of the payment shall be sent by AVANEX to FUJITSU's address
set forth in Section 8.6 below:
The Dai-Ichi Kangyo Bank, Ltd., Head Office, Tokyo, Japan
Account No. 011-1-167829
Section 6. ACCOUNTING AND AUDIT
With respect to the running royalty set forth in Section 4.1 above, AVANEX shall
keep full, clear and accurate records and accounts for LICENSED PRODUCTS subject
to royalty for a period of three (3) years. FUJITSU shall have the right through
a person(s) appointed by FUJITSU to audit, not more than once in each calendar
year and during normal business hours, all such records and accounts to the
extent necessary to verify that no underpayment has been made by AVANEX
hereunder. Such audit shall be conducted at FUJITSU's own expense, provided that
if any discrepancy or error exceeding five percent (5%) of the money actually
due is found through the audit, the cost of the audit shall be born by AVANEX.
Section 7. TERM AND TERMINATION
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the Commission. Confidential treatment has been requested with respect to the
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<PAGE> 5
7.1 This Agreement shall become effective on EFFECTIVE DATE and shall, unless
earlier terminated pursuant to Sections 7.2 or 7.3 below, continue until [*].
7.2 In the event of a breach of this Agreement by one party hereto, and if such
breach is not corrected within ninety (90) days after written notice complaining
thereof is received by such party, the other party may terminate this Agreement
forthwith by written notice to that effect to such party.
7.3 FUJITSU shall also have the right to terminate this Agreement forthwith by
giving written notice of termination to AVANEX at any time, upon or after:
(a) the filing by AVANEX of a petition in bankruptcy or insolvency; or
(b) any adjudication that AVANEX is bankrupt or insolvent; or
(c) the filing by AVANEX of any legal action or document seeking reorganization,
readjustment or arrangement of AVANEX's business under any law relating to
bankruptcy or insolvency; or
(d) the appointment of receiver for all or substantially all of the property of
AVANEX; or
(e) the making by AVANEX of any assignment for the benefit of creditors; or
(f) the institution of any proceedings for the liquidation or winding up of
AVANEX's business or for the termination of its corporate charter; or
(g) the assignment to third party of all or substantially all of the assets of
AVANEX; or
(h) important change in controlling ownership of AVANEX; or
(i) any activity or assistance by AVANEX or SUBSIDIARIES of challenging the
validity of any LICENSED PATENTS or restricting the scope thereof.
7.4 In the event of termination of this Agreement by FUJITSU pursuant to
Sections 7.2 or 7.3 above, the licenses granted hereunder to AVANEX and
SUBSIDIARIES shall automatically terminate when AVANEX received or deemed to be
received such termination notice hereunder. AVANEX shall pay the amount of the
running royalty accrued on or before the date of termination within thirty (30)
days thereafter.
Section 8. NEW PATENTS
A new patent derived from any improvement over inventions covered by the
LICENSED PATENTS:
(i) is owned by FUJITSU and the non-exclusive license shall be granted to AVANEX
at a reasonable royalty, if invention is made solely by FUJITSU. Detailed terms
and conditions for such license shall be separately agreed upon between the
parties.
(ii) is owned by AVANEX and the non-exclusive license shall be granted to
FUJITSU at a reasonable royalty, if invention is made solely by AVANEX. Detailed
terms and conditions for such license shall be separately agreed upon between
the parties. However, the non-exclusive license for a patent for which the
invention is made within [*] after the day when this agreement is signed by both
parties shall be royalty free.
(iii) is owned jointly by FUJITSU and AVANEX, if invention is made by FUJITSU
and AVANEX. Each party shall be free to practice and use such jointly owned
patent on a world-wide, non-exclusive basis without accounting to and
royalty-free to the-other party. Each party shall be free to license jointly
owned patent to SUBSIDIARIES but licenses to third parties may be granted only
upon the other party's prior consent, which may not be unreasonably withheld.
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 6
Section 9. SAMPLE PRODUCT
Upon the conditions Section 2(a) and Section 2(b) have been fulfilled for each
LICENSED PRODUCT, AVANEX shall sell 3 sets of LICENSED PRODUCT's samples to
FUJITSU, if FUJITSU wishes to purchase. Such product's samples shall be made
based on DESIGN INFORMATION given to FUJITSU and their performance shall be in
accordance with the specifications set forth in Section 2(a). The purchase shall
be with a separate purchase order.
Section 10. MISCELLANEOUS
10.1 The parties hereto shall keep the terms and conditions of this Agreement
(except the existence of this Agreement) confidential and shall not divulge the
same or any part thereof to any third party except:
(i) with the prior written consent of the other party; or
(ii) to any governmental body having jurisdiction to request and to read the
same; or
(iii) as otherwise may be required by law or legal process; or
(iv) to legal counsel representing either party; or
(v) as required for review by the competent authorities of the Japanese or the
U.S. Government.
10.2 The construction and performance of this Agreement shall be governed by and
shall be subject to the laws of Japan.
10.3 The parties hereto shall use their best efforts to resolve by mutual
agreement any disputes, controversies or differences which may arise from,
under, out of or in connection with this Agreement. If any such disputes,
controversies or differences cannot be settled between the parties hereto, they
shall be finally settled by arbitration in Tokyo, Japan under the Rules of
International Chamber of Commerce and by three (3) arbitrators appointed in
accordance with the said Rules. The award rendered by the arbitrators shall be
final and binding upon the parties hereto. Judgment upon the award may be
entered into any court having jurisdiction thereof.
10.4 Any failure of either party to enforce, at any time or for any period of
time, any of the provisions of this Agreement shall not be construed as a waiver
of such provisions or of the right of such party thereafter to enforce such
provisions.
10.5 If any term, clause or provision of this Agreement shall be judged by the
competent authority to be invalid, the validity of any other term, clause or
provision shall not be affected; and such invalid term, clause or provision
shall be deemed deleted from this Agreement.
10.6 All notices required or permitted to be given hereunder shall be sent in
writing by certified or registered airmail, or facsimile (with a confirmation
letter thereof) to the address specified below or to such changed address as may
have been previously specified in writing by the addressed party:
If to FUJITSU: FUJITSU LIMITED
4-1-1 Kamikodanaka, Nakahara-ku
Kawasaki-shi, Kanagawa, 211-8588, Japan
Attention: General Manager, Industry Relations Division I (H043)
Facsimile No. +81-44-754-8503
If to AVANEX: AVANEX Corporation
42501 Albrae Street, Fremont, CA 94538, USA
Attention: Dr. Simon Cao, President
Facsimile No. +1-510-360-0689
<PAGE> 7
Unless otherwise proven, each such notice given by either party hereto shall be
deemed to have been received by the other party on the fourteenth (14th) day
following the mailing date or on the second (2nd) day following the facsimile
date.
10.7 FUJITSU shall keep DESIGN INFORMATION disclosed by AVANEX confidential
against any third party However, the obligations on FUJITSU set out in this
Section 10.7 do not apply in respect of information:
(a) which is at any time in the public knowledge otherwise than through act or
failure to act on the part of FUJITSU; or
(b) which was known to FUJITSU before its receipt of the same from AVANEX,
without obligations of confidentiality; or
(c) which is at any time rightfully received by FUJITSU from any third party
without obligations of confidentiality; or
(d) which is at any time developed by FUJITSU independently of confidential
information.
The obligations set out in this Section 10.7 shall continue to bind FUJITSU for
[*] after the disclosure of DESIGN INFORMATION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in duplicate on the date below written.
FUJITSU LIMITED AVANEX Corporation
By: /s/ Yasuo Nagai By: /s/ Simon Cao
Name: Yasuo Nagai Name: SIMON CAO
------------ ---------
Title: General Manager Title: President
--------------- ---------
Date: 7/9/98 Date: 7/15/98
------ -------
- ----------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 8
Agreement on New Patents
This Agreement entered into as of August 26, 1998 by and between Fujitsu
Limited, a corporation of Japan, having an address at 4-1-1, Kamikodanaka,
Nakahara-ku, Kawasaki, Kanagawa, 211, Japan (hereinafter referred to as
"Fujitsu"), and Avanex Corporation, a corporation of the State of California,
having an address at 42501 Albrae Street, Fremont, CA 94538 (hereinafter
referred to as "Avanex").
WHEREAS, Fujitsu and Avanex have executed a PATENT LICENSE AGREEMENT in July,
1998, regarding the VIPA technologies.
WHEREAS, Fujitsu and Avanex are willing to have Technical Discussions between
the people from both parties regarding the VIPA technologies and other optics
technologies.
NOW, THEREFORE, both Fujitsu and Avanex agree that all patents produced directly
from the Technical Discussions stated above, regardless of whether the patents
are related to the VIPA technologies or not, are subject to the conditions in
the above mentioned PATENT LICENSE AGREEMENT, Section 8. NEW PATENTS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day above
written.
Fujitsu Limited Avanex Corporation
/s/Hideki Isono /s/ Simon Cao
Hideki Isono Simon Cao
Manager President and CEO
Photonic Devices Development Dept.
<PAGE> 1
EXHIBIT 10.24.1
July 1, 1998
Dr. Simon Cao
President
Avanex Corporation
42501 Albrae Street
Fremont, CA 94538
USA
Re: Patent License Agreement for the VIPA related devices between Fujitsu
Limited and Avanex Corporation
Dear Dr. Cao:
With regard to Section 7.3(h) of the agreement, Fujitsu Limited understands that
this term is defined as below.
"important change in controlling ownership of AVANEX" means acquisition of more
than half of Avanex Corporation by one of [*].
The [*] are defined as [*].
Sincerely,
/s/ Hideki Isono
Hideki Isono
Manager
Photonic Devices Development Dept.
Fujitsu Limited
- --------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.26
ASSIGNMENT OF SUBLEASE
THIS ASSIGNMENT OF SUBLEASE (this "Assignment") is entered into as of the
17th day of September, 1998, by and between PATHNET, INC., a Delaware
corporation ("Assignor") and AVANEX, INC., a California corporation
("Assignee").
RECITALS
A. Jackson-Shaw Partners No. 33 Ltd., as landlord ("Jackson-Shaw") and
KLA Instruments Corporation, n/k/a KLA-Tencor Corporation, as tenant
("Sublessor") are parties to that certain Commercial Lease Agreement executed
by Landlord on June 21, 1989, concerning certain premises located at 405
International Parkway, Richardson, Texas (the "Building"), as amended by an
Amendment, Modification and Ratification of Lease Between Jackson-Shaw and
Sublessor dated July 13, 1989, a Second Amendment Modification and Ratification
of Lease dated June 29, 1990 between Garlan Real Estate Corporation, successor
in interest to Jackson-Shaw, as landlord ("Garlan") and Sublessor, and a Third
Amendment of Commercial Real Estate Lease Agreement dated on or about August
28, 1995 between Garlan and Sublessor (together, the "Master Lease", a copy of
which is attached hereto as Exhibit A).
B. Sublessor, as sublessor, and Assignor, as sublessee, are parties to
that certain Sublease Agreement dated October 16, 1997, as amended by an
Amendment to Sublease dated January, 1998 (as amended, the "Sublease"), a copy
of which is attached hereto as Exhibit B, concerning certain premises
designated as Suite 209 at the Building, as more particularly described in the
Sublease (the "Premises").
C. Assignor has entered into a lease of certain other space (the "New
Lease") and desires to vacate the Premises and assign the Sublease to Assignee
as of the commencement of the New Lease.
D. The parties hereto desire that the Sublease be assigned to Assignee
and that Assignee assume all obligations under the Sublease, each on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises of the parties and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Assignment. Effective as October 1, 1998 (the "Effective Date"),
Assignor hereby assigns to Assignee all of Assignor's right, title and
interest in the Sublease, and Assignee hereby assumes from Assignor
all of the obligations of the sublessee accruing under the Sublease
from and after the Effective Date.
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<PAGE> 2
2. Terms of Assignment. All provisions, terms and conditions of the
Sublease shall apply to Assignee's occupancy of the Premises,
including, without limitation, the Sublease Term, Minimum Monthly
Rent, Additional Rent and any other charges, payments or rent owed by
the sublessee thereunder, but excluding the Security Deposit set forth
in Article 6 of the Sublease, and the Prepaid Rent set forth in
Section 5.4 of the Sublease. Assignee shall pay all Minimum Monthly
Rent, Additional Rent, and any other charges, payments or rent owed
under the Sublease directly to Sublessor as required by the Sublease.
3. Security Deposit. Within ten (10) days after the date hereof, Assignee
will deposit with Assignor a security deposit in the amount of TWELVE
THOUSAND FOUR HUNDRED AND EIGHTY AND 39/100 DOLLARS (12,480.39) (the
"Security Deposit"). The Security Deposit, which shall not bear
interest to Assignee, shall be considered as security for the payment
and performance by Assignee of all of Assignee's obligations,
covenants, conditions and agreements under the Sublease. In the event
of any breach or default by Assignee of any of the terms of the
Sublease, Assignor shall have the right, but shall not be obligated,
to apply all or any portion of the Security Deposit to cure such
breach or default, in which event Assignee shall be obligated promptly
to deposit with Assignor the amount necessary to restore the Security
Deposit to the amount held by Assignor immediately prior to such
advance by Assignor. Upon the expiration of the Sublease Term,
Assignor shall (provided that Assignee is not in default under the
terms of the Sublease) return and pay back the Security Deposit to
Assignee, less such portion thereof as Assignor shall have retained to
make good any breach or default by Assignee with respect to any of
Assignee's aforesaid obligations, covenants, conditions or agreements.
4. Acceptance of Premises. Assignee hereby agrees to accept the Premises
in their "as-is, where-is" condition, and acknowledges that Assignor
has made no representation or warranty concerning the Premises or the
suitability of the Premises for Assignee's intended uses. Assignor
will leave the Premises broom clean but is under no obligation to make
any other improvements, or perform any other activities, in
preparation for Assignee's occupancy of the Premises.
5. Modification of Sublease: Extension of Term. Notwithstanding anything
herein or in the Sublease to the contrary, Assignee shall have no
right or authority to modify or amend the Sublease in any manner, and
shall have no right or authority to extend the Sublease beyond the
Termination Date.
6. Notices under Lease. Assignor and Assignee each agrees to provide to
the other copies of any and all notices received by such party in
connection
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<PAGE> 3
with the Sublease or the Premises within twenty four (24) hours of
receipt thereof.
7. Indemnity by Assignor. Assignor hereby agrees to indemnify and hold
Assignee harmless from and against any and all loss, claims, damages
or expenses, including, without limitation, reasonable attorneys' fees
and costs of suit, arising out of Assignor's occupancy of the Premises
or under the Sublease, to the extent accruing prior to the Effective
Date. This paragraph shall survive the expiration or sooner
termination of the Sublease.
8. Indemnity by Assignee. Assignee hereby agrees to indemnify and hold
Assignor harmless from and against any and all loss, claims, damages
or expense, including, without limitation, reasonable attorneys' fees
and costs of suit, arising out of Assignee's occupancy of the Premises
or under the Sublease, to the extent accruing on or after the
Effective Date. This paragraph shall survive the expiration or sooner
termination of the Sublease.
9. Assignor's Remedies. In addition to all other remedies available to
Assignor at law, equity or set forth herein, in the event of a breach
or default by Assignee of any of the provisions of the Sublease,
Assignor shall have all the remedies of Sublessor as set forth in the
Sublease.
10. Brokerage. Each of Assignor and Assignee represents and warrants that
it has dealt with no broker, finder, agent or other person in
connection with this transaction except that Assignor has dealt with
The Enright Company, and Assignee has dealt with The Staubach Company.
Each party shall pay its respective broker a fee pursuant to a
separate agreement. Each party hereby agrees to indemnify and hold the
other party harmless from a breach of the representation in this
paragraph. The terms of this paragraph shall survive the expiration or
sooner termination of the Sublease.
11. Consent of Landlord. The effectiveness of this Assignment shall be
contingent on the approval of Sublessor and the landlord under the
Master Lease.
12. No Amendment. This Assignment may not be modified except by an
agreement in writing executed by both parties hereto.
13. Entire Agreement. This Assignment contains the entire agreement of the
parties as to the matters described herein, and no other
representations, warranties, promises or agreements, whether oral or
written, have been made or relied upon by either party.
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<PAGE> 4
14. Successors and Assigns. This Assignment shall be binding upon, and shall
inure to the benefit of, Assignor and Assignee and their respective
successors and assigns.
15. Governing Law. This Assignment shall be governed by the laws of the State
of Texas, other than its choice of law principles.
16. Definitions. All capitalized terms not defined herein shall have the
meanings given to such terms in the Sublease.
EXECUTED as of the day and year first written above.
ASSIGNOR:
PATHNET, INC.
By: /s/ MICHAEL A. LUBIN
-------------------------------------
Name: Michael A. Lubin
Title: Vice President & General
Counsel
ASSIGNEE:
AVANEX, INC.
By: /s/ SIMON CAO
-------------------------------------
Name: Simon Cao
Title: President
-4-
<PAGE> 1
EXHIBIT 10.28
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into by:
1. LANDLORD: Jackson-Shaw Partners No. 33, Ltd. ("Landlord").
2. TENANT: KLA Instruments Corporation ("Tenant").
3. LEASED PREMISES: In consideration of the rents, terms and covenants
of this Lease Agreement (the "Lease"). Landlord hereby leases to Tenant certain
premises (the "Leased Premises") containing approximately 3,151 square feet
within the building or project known as International Corporate Park, Phase II,
and located at 405 International Parkway, Suite 209 on a certain tract of land
in Richardson. Dallas County. Texas. Such land (which is described in the
attached Exhibit A), together with the building(s), landscaping, parking and
driveway areas, sidewalks, and other improvements thereon shall be referred to
in this Lease as the "Project." In the case of a multi-building Project, the
word "Building" shall refer to the particular building in which the Leased
Premises are located and the tract of land upon which such building is located.
In the case of a single building Project the term "Building" as used herein
shall be synonymous with the term "Project". If the Leased Premises encompass an
entire building, then the term "Leased Premises" shall be synonymous with
"Building". A fuller description of the Leased Premises, including a floor plan
thereof, is contained in Exhibit B to be attached.
4. TERM:
(a) The term of this Lease shall be Sixty, (60) months
commencing on
_____________________________, 19____ (the "Commencement Date" and terminating
on the last day of __________________________, 19___ (the "Termination Date").
The Commencement Date may be subject to change, however, pursuant to
Subparagraphs (b) and (c) below. However, any such change in the Commencement
Date shall have no effect upon the Termination Date.
(c) Landlord agrees to install at its cost and expense the
improvements, if any, described in the plans and specifications described in
Exhibit B. If such improvements are not completed and the Leased Premises are
not ready for occupancy on the Commencement Date stated above, other than as a
result of the omission, delay or default by Tenant or anyone acting under or on
behalf of Tenant, the rent under this Lease shall not commence until substantial
completion of the work described in said plans and specifications and the
Commencement Date of the Lease term shall be the date of such substantial
completion. Landlord shall notify Tenant in writing as soon as such improvements
are substantially completed and ready for occupancy. If such improvements have
not in fact been substantially completed as aforesaid, Tenant shall notify
Landlord in writing of its objections within five (5) days after receipt of the
completion notice from Landlord. Landlord shall have a reasonable time after
receipt of such notice in which to take such corrective action as may be
necessary and shall notify Tenant in writing as soon as it deems such corrective
action has been completed so that the Leased Premises are completed and ready
for occupancy. In the event of any dispute as to substantial completion or work
performed or required to be performed by Landlord, a certificate of a registered
architect shall be conclusive and binding on all parties.
(d) Tenant acknowledges that no representations or promises
regarding repairs, alterations, remodeling, or improvements to the Leased
Premises have been made by Landlord, its agents, employees, or other
representatives, unless such are expressly set forth in this Lease, and that
Tenant is solely responsible for applying for and obtaining a certificate of
occupancy for the Leased Premises. Tenant agrees that if its occupancy of the
Leased Premises is delayed under the circumstances described in Subparagraph (b)
or (c) above, this Lease shall nonetheless continue in full force and effect.
However, any rental amounts applicable to such period of delay shall be abated
and such abatement shall constitute full settlement of all claims by Tenant
against Landlord by reason of any such delay in possession of the Leased
Premises. Tenant's taking possession of the Leased Premises shall conclusively
establish that the improvements, if any, to be made by Landlord under the terms
of this Lease, have been completed in accordance with the plans and
specifications therefor and that the Leased Premises are in good and
satisfactory condition as of the date of Tenant's possession, unless Tenant
notifies Landlord in writing specifying any defects within ten (10) days after
taking possession. Landlord shall use reasonable diligence to repair promptly
such items but Tenant shall have no claim for damages or rebate or abatement of
rent by reason thereof. After the Commencement Date and upon completion of any
necessary repairs as provided above. Tenant shall, upon demand, execute and
deliver to Landlord a letter of acceptance of the Leased Premises and
acknowledgment of the date of the Commencement Date.
5. BASE RENT AND SECURITY DEPOSIT:
(a) Tenant agrees to pay to Landlord as rent the sum of One
hundred eight thousand seven hundred twenty and no/100 Dollars ($108,720.00)
subject to adjustment for early or delayed occupancy under the terms hereof.
Such rent shall be payable in monthly amounts of One Thousand eight hundred
twelve and no/100 Dollars ($1,812.00) each, in advance, without demand,
deduction or offset (sometimes referred to in this Lease as the "Base Rent" or
"Base Rental"). Such rental amounts shall be due and payable to Landlord in
lawful money of the United States of America at the address shown below. An
amount equal to one monthly Base Rental payment shall be due and payable on the
date Tenant executes this lease and such amount shall be applied to the rent due
for the first complete calendar month occurring after the Commencement Date,
provided that if the Commencement Date should be a date other than the first day
of a
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<PAGE> 2
under this Lease. Upon the occurrence of any event of default by Tenant or
breach by Tenant of its covenants under this Lease. Landlord may, from time to
time, without prejudice to any other remedy provided herein or provided by law,
use, apply, or retain all or part of the security deposit for the payment of any
rent or other sum in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default,
or for payment of any other amount which Landlord may spend or become obligated
to spend by reason of Tenant default or breach, or to compensate Landlord for
any damage, injury, expense or liability caused to Landlord by such default or
breach. If any portion of the security deposit is so used or applied, Tenant
shall, within five (5) days alter written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to the amount
required by this Paragraph. Tenant's failure to do so shall be a default under
this Lease. The balance of the security deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations have been fulfilled.
(c) Other remedies for nonpayment of Rent notwithstanding, if
the monthly Base Rental payment is not received by Landlord on or before the
tenth (10th) day of the month for which such rent is due, or if any other
payment due Landlord by Tenant hereunder (such sums being deemed to be
additional Rent) is not received by Landlord on or before the tenth (10th) day
of the month next following the month in which Tenant was invoiced, a service
charge of five percent (5%) of such past due amount shall be additionally due
and payable by Tenant. Such service charge shall be cumulative of any other
remedies Landlord may have for nonpayment of Rent and other sums payable under
this Lease.
(d) If three (3) consecutive monthly Rental payments or any five
(5) monthly Rental payments during the Lease term (or any renewal or extension
thereof) are not received by Landlord on or before the tenth (10th) day of the
month for which such Rent was due, the Base Rent hereunder shall automatically
become due and payable by Tenant in advance in quarterly installments equal to
three (3) months' Base Rent each. The first of such quarterly Base Rent payments
shall be due and payable on the first day of the next succeeding calendar month
and on the first day of every third (3rd) calendar month thereafter. This remedy
shall be cumulative of any other remedies of Landlord under this Lease for
nonpayment of Rent.
6. ADDITIONAL RENTAL:
(a) Taxes and Insurance:
(1) In the event the "Tax and Insurance Expenses" (as
defined below) of the Building shall in any calendar year during the term of
this Lease exceed the sum of $ 0.75 per square foot, then with respect to such
excess (the "Tax and Insurance Differential"). Tenant agrees to pay as
additional rental Tenant's pro rata share of the Tax and Insurance Differential
within ten (10) days following receipt of an invoice from Landlord stating the
amount due. The pro rata share to be paid by Tenant is Nineteen and 1/10 percent
(19.1%) subject, however, to adjustment for any expansion of the Leased
Premises. In the case of a multi-building Project, if such Tax and Insurance
Expenses are not separately assessed to the Building but are assessed against
the Project as a whole, Landlord shall determine the portion of such Tax and
Insurance Expenses allocable to the Building in which the Leased Premises are
located.
(2) At or prior to the commencement of this Lease and at
any time during the Lease term, Landlord may deliver to Tenant a written
estimate of any additional rent applicable to the Leased Premises (based on the
pro rata share stated above) which may be anticipated for excess Tax and
Insurance Expenses during the calendar year in which this Lease commences or for
any succeeding calendar year, as the case may be. Based upon such written
estimate, the monthly Base Rental shall be increased by one-twelfth (1/12) of
the estimated additional rent.
(3) Statements showing the actual Tax and Insurance
Expenses (as well as the actual Common Area Maintenance Expenses, as defined in
Paragraph 6(b) below) and Tenant's proportionate share thereof (hereinafter
referred to as the "Statement of Actual Adjustment") shall be delivered by
Landlord to Tenant after any calendar year in which additional rental was paid
or due by Tenant. Within ten (10) days after the delivery by Landlord to Tenant
of such Statement of Actual Adjustment. Tenant shall pay Landlord the amount of
any additional rental shown on such statement as being due and unpaid. If such
Statement of Actual Adjustment shows that Tenant has paid more than the amount
of additional rental actually due from Tenant for the preceding calendar year
and if Tenant is not then in default under this Lease, Landlord shall credit the
amount of such excess to the next Base Rental installment due from Tenant.
(4) "Tax and Insurance Expenses" shall mean: (i) all ad
valorem, rental, sales, use, and other taxes (other than Landlord's income
taxes), special assessments, and other governmental charges, and all assessments
due to deed restrictions and/or owner's associations which accrue against the
Building during the term of this Lease; and (ii) all insurance premiums paid by
Landlord with respect to the Building including, without limitation, public
liability, casualty, rental, and property damage insurance.
(b) Common Area Maintenance:
(1) In addition in the rental payable under Paragraphs 5
and 6(a) above. Tenant agrees to pay as additional monthly rental its pro rata
share (as stated in Paragraph 6(a)(1) above) of the "Common Area Maintenance
Expenses" (hereinafter defined). At or prior to the commencement of the Lease,
and at any time during the Lease term. Landlord may deliver to Tenant a written
estimate of any additional rent applicable to the Leased Premises which may be
anticipated for such Common Area Maintenance Expenses during the calendar year
in which this Lease commences or for any succeeding calendar year, as the case
may be. Based upon such written estimate, the monthly Base Rental shall be
increased by one-twelfth (1/12) of said estimated additional rent. The Statement
of Actual Adjustment shall then include the actual Common Area Maintenance
Expenses for the preceding period, and adjustments effected, as provided in
Paragraph 6(a)(3) above. In the case of a multi-building Project, if such Common
Area Maintenance Expenses are not separately assessed or charged to the Building
but are assessed or charged against the
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<PAGE> 3
Project as a whole, Landlord shall determine the portion of such Common Area
Maintenance Expenses allocable to the Building in which the Leased Premises are
located.
(2) "Common Area Maintenance Expenses" shall mean all expenses
(other than the Tax and Insurance Expenses described above) incurred by Landlord
for the maintenance, repair, and operation of the Building, (excluding only
structural soundness of the roof, foundation, and exterior walls) including, but
not limited to, management fees, utility expenses of not separately metered),
maintenance and repair costs, sewer, landscaping, trash and security costs (if
furnished by Landlord), wages and fringe benefits payable to employees of
Landlord whose duties are connected with the operation and maintenance of the
Building, amounts paid to contractors or subcontractors for work or services
performed in connection with the operation and maintenance of the Building, all
services, supplies, repairs, replacements or other expenses for maintaining,
repairing and operating the Building, including without limitation common areas
and parking areas and roof, exterior wall and foundation work that is not
related to structural soundness.
(3) The term "Common Area Maintenance Expenses" does not include
the cost of any capital improvement to the Building other than the reasonably
amortized cost of capital improvements which result in the reduction of
Insurance Expenses or Common Area Maintenance Expenses. Further, the term
"Common Area Maintenance Expenses" shall not include repair, restoration or
other work occasioned by fire, windstorm or other casualty with respect to which
Landlord actually receives insurance proceeds, income and franchise taxes of
Landlord, expenses incurred in leasing to or procuring of tenants, leasing
commissions, advertising expenses, expenses for the renovating of space for new
tenants, interest or principal payments on any mortgage or other indebtedness of
Landlord, compensation paid to any employee of Landlord above the grade of
building superintendent, or depreciation allowance or expense.
(c) If the Commencement Date of this Lease is a day other than
the first day of a month, or if the Termination Date is a day other than the
last day of a month, the amount shown as due by Tenant on the Statement of
Actual Adjustment shall reflect a proration based on the ratio that the number
of days this Lease was in effect during such month bears to the actual number of
days in said month.
(d) The failure of Landlord to exercise its rights hereunder to
estimate expenses and require payment of same as additional rental shall not
constitute a waiver of such rights which rights may be exercised from time to
time at Landlord's discretion.
(e) If the nature of Tenant's business or use of the Leased
Premises is such that additional costs are incurred by Landlord for cleaning,
sanitation, trash collection or disposal services, Tenant agrees to pay as
additional rental to Landlord the amount of such additional costs upon demand.
7. TENANT REPAIRS AND MAINTENANCE:
(a) Tenant shall maintain all parts of the Leased Premises and
their appurtenances (except those for which Landlord is expressly responsible
under this Lease) in good, clean and sanitary condition at its own expense.
Tenant shall promptly make all necessary repairs and replacements to the Leased
Premises, including but not limited to, electric light lamps or tubes, windows,
glass and plate glass, interior and exterior doors, any special office entry,
interior walls and finish work, floors and floor coverings, downspouts, gutters,
heating and air conditioning systems dock boards, truck doors, dock bumpers,
plumbing work and fixtures other than common building sewage lines. Tenant shall
be obligated to repair wind damage to glass caused by events other than
hurricanes or tornadoes. Otherwise, however, Tenant shall not be obligated to
repair any damage caused by fire, hurricane, tornado or other casualty covered
by the insurance maintained by Landlord.
(b) Tenant shall not damage or disturb the integrity, structural
soundness, or support of any wall, roof, or foundation of the Leased Premises.
Any damage to these walls caused by Tenant or its employees, agents or invitees
shall be promptly repaired by Tenant at its sole cost and expense.
(c) Landlord shall have the right to coordinate any repairs and
other maintenance of any rail tracks serving or to serve the Project, and if
Tenant uses such rail tracks. Tenant shall reimburse Landlord from time to time
upon demand for a share of the cost of such repairs and maintenance and any
other sums specified in any agreement to which Landlord is a party respecting
such tracks. Tenant's share of such costs shall be additional rent and shall
reflect a proration based on the ratio that the space contained in the Leased
Premises bears to the entire space occupied by rail users in the Project.
(d) Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all heating and air conditioning systems and equipment
within the Leased Premises. The maintenance contractor and the contract must be
approved by Landlord, The service contract must include all services suggested
by the equipment manufacturer within the operation/maintenance manual and must
become effective (and a copy delivered to Landlord) within thirty (30) days of
the date Tenant takes possession of the Leased Premises. If Tenant fails to
enter into such service contract as required. Landlord shall have the right to
do so on Tenant's behalf and Tenant agrees to pay Landlord the cost and expense
of same upon demand.
(e) Tenant shall pay all charges for pest control and
extermination within the Leased Premises.
(f) At the termination of this Lease, Tenant shall deliver the
Leased Premises "broom clean" to Landlord in the same good order and condition
as existed at the Commencement Date of this Lease, ordinary wear, natural
deterioration beyond the control of Tenant, damage by fire, tornado or other
casualty excepted.
(g) Not in limitation on the foregoing, it is expressly
understood that Tenant shall repair and pay for all damage caused by the
negligence of Tenant. Tenant's employees, agents or invitees, or caused by
Tenant's default hereunder. All requests for repairs or maintenance that are the
responsibility of Landlord under this Lease must be made in writing to Landlord
at the address set forth below.
8. LANDLORD'S REPAIRS: Landlord shall be responsible, at its expense,
only for the structural soundness of the roof, foundation and
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exterior walls of the Building. Any repair to the roof, foundation or exterior
walls occasioned by the act or omission of Tenant, or its agents, employees,
guests or invitees shall be the responsibility of Tenant. The term "walls" as
used in this Paragraph 8 shall not include windows, glass or plate glass,
interior doors, special store fronts, office entries or exterior doors.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible at its expense under this Lease shall be limited
to the cost of such repairs or maintenance or the curing of such defect. As
expenses included in Common Area Maintenance Expenses. Landlord will be
responsible for landscaping and maintenance of common areas and parking areas,
exterior painting, and common sewage line plumbing. Tenant shall immediately
give Landlord written notice of defects or need for repairs, alter which
Landlord shall have a reasonable opportunity to repair same or cure such defect.
Landlord shall not be required to perform any covenant or obligation of this
Lease, or be liable in damages to Tenant, so long as the performance or
non-performance of the covenant or obligation is delayed, caused by, or
prevented by an act of God or force majeure. An "act of God" or "force majeure"
is defined for purposes of this Lease as strikes, lockouts, sit-downs, material
or labor restrictions by any governmental authority, riots, floods, washouts,
explosions, earthquakes, fire, storms, acts of the public enemy, wars,
insurrections and any other similar cause not reasonably within the control of
Landlord, and which by the exercise of due diligence Landlord is unable, wholly
or in part, to prevent or overcome.
9. UTILITY SERVICE: Tenant shall pay the cost of all utility services,
including, but not limited to, initial connection charges and all charges for
gas, water, and electricity used on the Leased Premises. If the Leased Premises
are separately metered, Tenant shall pay such costs directly to the appropriate
utility company. Otherwise, Tenant shall pay such costs pursuant to Paragraph
6(b) above. Tenant shall pay all costs caused by Tenant introducing excessive
pollutants into the sanitary sewer system, including permits, fees and charges
levied by any governmental subdivision for any pollutants or solids other than
ordinary human waste. If Tenant can be clearly identified as being responsible
for obstructions or stoppage of the common sanitary sewage line, then Tenant
shall pay the entire cost thereof, upon demand, as additional rent. Tenant shall
be responsible for the installation and maintenance of any dilution tanks,
holding tanks, settling tanks, sewer sampling devices, sand traps, grease traps
or similar devices which may be required by the appropriate governmental
subdivision for Tenant's use of the sanitary sewer system. Tenant shall also pay
all surcharges (i.e., charges in excess of normal charges) levied due to
Tenant's abnormal use of sanitary sewer or waste removal services so that no
such surcharges shall affect Landlord or other tenants in the Project under
Paragraph 6(b) above.
10. SIGNS: No sign, door plaques, advertisement, or notice shall be
displayed, painted or affixed by Tenant on any part of the Project or Building,
parking facilities, or Leased Premises without prior written consent of
Landlord. The color, size, character, style, material, and placement shall be
approved by Landlord, and subject to any applicable governmental laws,
ordinances, regulations, project specifications, and other requirements. Signs
on doors and entrances to the Leased Premises, if approved by Landlord, shall be
placed thereon by a contractor approved by Landlord and paid for by Tenant.
Tenant shall remove all such signs at the termination of this lease. Such
installations and removals shall be made in such manner as to avoid injury or
defacement of the Project and other improvements, and Tenant, at its sole
expense, shall repair any injury or defacement, including, without limitation,
any discoloration caused by such installation and/or removal.
11. USAGE: Tenant warrants and represents to Landlord that the Leased
Premises shall be used and occupied only for the purpose of General offices and
Field Engineering Group of KLA Any change in the stated usage purposes or in the
scope or extent of such usage as previously described to Landlord by Tenant
shall be subject to the prior written approval of Landlord. Tenant shall occupy
the Leased Premises, conduct its business and control its agents, employees,
invitees and visitors in a lawful and reputable way and as not to create any
nuisance or otherwise interfere with, annoy or disturb any other tenant in its
normal business operations or Landlord in its management of the Project. Tenant
shall not commit, or allow to be committed, any waste on the Leased Premises.
12. INSURANCE:
(a) Tenant shall not permit the Leased Premises to be used in
any way which would, in the opinion of Landlord, be hazardous or which would in
any way increase the cost of or render void the fire insurance on improvements
or contents in the Project belonging to Landlord or other tenants. If at any
time during the term of this Lease the State Board of Insurance or other
insurance authority disallows any of Landlord's sprinkler credits or imposes an
additional penalty or surcharge in Landlord's insurance premiums because of
Tenant's original or subsequent placement or use of storage racks or bins,
method of storage, or nature of Tenants inventory or any other act of Tenant,
Tenant agrees to pay as additional rental the increase in Landlord's insurance
premiums. If an increase in the fire and extended coverage premiums paid by
Landlord for the Building in which Tenant occupies space is caused by Tenant's
use or occupancy of the Leased Premises; or if Tenant vacates the Leased
Premises and causes an increase, then Tenant shall pay as additional rental the
amount of such increase to Landlord.
(b) Tenant shall procure and maintain throughout the term of
this lease a policy or policies of insurance, at its sole cost and expense,
insuring both Landlord and Tenant against all claims, demands or actions arising
out of or in connection with: (i) the Leased Premises: (ii) the condition of the
Leased Premises; (iii) Tenant's operations in and maintenance and use of the
Leased Premises; and (iv) Tenant's liability assumed under this Lease. The
limits of such policy or policies shall be not less than one million dollars
($1,000,000) combined single limit coverage per occurrence for injury to persons
(including death) and/or property damage or destruction, including loss of use.
All such policies shall be procured by Tenant from responsible insurance
companies satisfactory to Landlord. Certified copies of such policies, together
with receipts for payment of premiums, shall be delivered to Landlord prior to
the Commencement Date of this Lease. Not less than fifteen (15) days prior to
the expiration date of any such policies, certified copies of renewal policies
and evidence of the payment of renewal premiums shall be delivered to Landlord.
All such original and renewal policies shall provide for at least thirty (30)
days written notice to Landlord before such policy may be cancelled or changed
to reduce insurance coverage provided thereby. Upon request of Landlord, Tenant
further agrees to complete and return to Landlord an insurance questionnaire
(such form to be provided by Landlord) regarding Tenant's insurance coverage and
intended use of the Leased Premises. Tenant warrants and represents that all
information contained in such questionnaire shall be true and correct as of the
date thereof and shall be updated by Tenant from time to time upon Landlord's
request.
13. RELOCATION: Upon request by Landlord during the term of this Lease.
Tenant agrees to relocate to other space in the Building and/or Project
designated by Landlord, provided such other space is as large or larger than the
Leased Premises and has at least the same number of windows. Landlord shall pay
all out-of-pocket expenses of any such relocation, including the expenses of
moving and reconstructing all Tenant furnished and Landlord furnished
improvements. In the event of such relocation, this Lease shall continue in full
force and effect without any change in its terms other than substitution of the
new description of the Leased Premises for the original description set forth in
Paragraph 3 of this lease
14. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Tenant shall comply
with all applicable laws, ordinances, orders, rules and regulations of state,
federal, municipal, or other agencies or bodies relating to the use, condition
and occupancy of, and business conducted
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on, the Leased Premises, including without limitation, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response Act, and the rules,
regulations and directives of the U.S. Environmental Protection Agency. Tenant
shall also comply with the rules of the Project which may hereafter be adopted
by Landlord. Landlord shall have the right at all times to change the rules and
regulations of the Project or to amend them in any reasonable manner as may be
deemed advisable for the safety, care, cleanliness, and good order of the
Project and Leased Premises. All rules and regulations of the Project and any
changes or amendments thereto will be sent by Landlord to Tenant in writing and
shall thereafter be carried out and observed by Tenant.
15. ASSIGNMENT AND SUBLETTING: The Tenant agrees not to assign,
transfer, or mortgage this lease or any right or interest therein, or sublet the
Leased Premises or any part thereof, without the prior written consent of
Landlord. No assignment or subletting made with the consent of Landlord shall
relieve Tenant of its obligations hereunder, and Tenant shall continue to be
liable as a principal (and not as a guarantor or surety to the same extent as
though no assignment or sublease had been made. Consent by Landlord to an
assignment or sublease shall not be construed to be consent to any additional
assignment or subletting. Each such successive act shall require similar consent
of Landlord. Landlord shall be reimbursed by Tenant for any costs or expenses
incurred as a result of Tenant's request for consent to any such assignment or
subletting. In the event Tenant subleases the Leased Premises, or any portion
thereof, or assigns this Lease with the consent of the Landlord at an annual
Base Rental exceeding that stated herein, such excess shall be paid by Tenant to
Landlord as additional rental hereunder within ten (10) days after receipt by
Tenant. Upon the occurrence of an "event of default" as defined below, if all or
any part of the Leased Premises are then assigned or sublet, Landlord may, in
addition to any other remedies provided by this lease or provided by law,
collect directly from the assignee or subtenant all rents due to Tenant.
Landlord shall have a security interest in all properties on the Leased Premises
to secure payment of such sums. Any collection directly by Landlord from the
assignee or subtenant shall not be construed, however, to constitute a novation
or a release of Tenant from the further performance of its obligations under
this lease. Notwithstanding the foregoing, it is expressly agreed that if this
Lease is assigned to any person or entity pursuant to the provisions of the
Bankruptcy Code, 11 U.S.C. Section 101 et esq. (the "Bankruptcy Code"), any and
all monies or other considerations payable or otherwise to be delivered in
connection with such assignment shall be paid or delivered to Lessor, shall be
and remain the exclusive property of Landlord and shall not constitute property
of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code.
Any and all monies or other considerations constituting Landlord's property
under the preceding sentence not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and be promptly paid or delivered to Landlord.
Any person or entity to which this Lease is assigned pursuant to the provisions
of the Bankruptcy Code shall be deemed without further act or deed to have
assumed all of the obligations arising under this Lease on and after the date of
such assignment. Any such assignee shall upon demand execute and deliver to
Landlord an instrument confirming such assumption.
16. ALTERATIONS AND IMPROVEMENTS:
(a) Tenant shall not make or perform, or permit the making or
performance of, any initial or subsequent tenant finish work or any alterations,
installations, decorations, improvements, additions or other physical changes in
or about the Leased Premises (referred to collectively as "Alterations") without
Landlord's prior consent. Landlord agrees not to withhold its consent
unreasonably to any nonstructural Alterations proposed to be made by Tenant to
adapt the Leased Premises for Tenant's business purposes. Notwithstanding the
foregoing provisions or Landlord's consent to any Alterations, all Alterations
shall be made and performed in conformity with and subject to the following
provisions: All Alterations shall be made and performed at Tenant's sole cost
and expense and at such time and in such manner as Landlord may from time to
time reasonably designate. Alterations shall be made only by contractors or
mechanics approved by Landlord, such approval not to be unreasonably withheld.
No Alteration shall affect any part of the Building other than the Leased
Premises or adversely affect any service required to be furnished by Landlord to
Tenant or to any other tenant or occupant of the Building or reduce the value or
utility of the Building. No alteration shall affect the outside appearance of
the Building. Tenant shall submit to Landlord detailed plans and specifications
(including layout, architectural, mechanical and structural drawings) for each
proposed Alteration and shall not commence any such Alteration without first
obtaining Landlord's written approval of such plans and specifications. Prior to
the commencement of each proposed Alteration. Tenant shall furnish to Landlord
duplicate original policies of worker's compensation insurance covering all
persons to be employed in connection with such Alterations, including those to
be employed by all contractors and subcontractors, and of comprehensive public
liability insurance (including property damage coverage) in which Landlord, its
agents, and any lessor under any ground or underlying lease, and any mortgagee
of the Building shall be named as parties insured, which policies shall be
issued by companies, and shall be in form and amounts, satisfactory to Landlord
and shall be maintained by Tenant until the completion of such Alteration. If
Landlord shall require to assure payment of all costs of such alterations, prior
to commencement of any approved Alteration. Tenant shall cause to be issued and
delivered to Landlord an irrevocable documentary letter of credit or payment
bond in the full amount of the cost of the said approved Alterations issued by a
substantial banking institution reasonably acceptable to Landlord payable in
whole or in part, from time to time to the order of Landlord upon written demand
accompanied by Landlord's certification that Tenant has defaulted with respect
to the obligation secured thereby. The term of the letter of credit shall be
from date of issuance through ninety (90) days after completion of construction
of the approved Alterations. Tenant shall cause its contractor to provide
Landlord with a certificate of completion of the Alterations and a bills paid
affidavit and full lien waiver: and upon receipt of same, and no fewer than
thirty-one (31) days following completion, if Tenant is not in default
hereunder, Landlord shall return the letter of credit to Tenant unused and
endorsed for cancellation. Tenant shall, if requested by Landlord at the time of
Landlord's consent to the Alterations, agree to restore the Leased Premises at
the termination of this Lease to their condition prior to making such
Alterations. All permits, approvals and certificates required by all
governmental authorities shall be timely obtained by Tenant and submitted to
Landlord. Notwithstanding Landlord's approval of plans and specifications for
any Alterations, all Alterations shall be made and performed in full compliance
with all applicable laws, orders and regulations of Federal, State, County, and
Municipal authorities and with all directions, pursuant to law, of all public
officers, and with all applicable rules, orders, regulations and requirements of
the Dallas Board of Fire Underwriters or any similar body. All alterations shall
be made and performed in accordance with the Building rules. All materials and
equipment to be incorporated in the Leased Premises as a result of all
Alterations shall be new and first quality. No such materials or equipment shall
be subject to any lien, encumbrance, chattel mortgage or title retention or
security agreement. If such Alterations are being performed by Tenant in
connection with Tenant's initial occupancy of the Leased Premises, Tenant agrees
to make proper application for, and obtain, a certificate of occupancy from the
city in which the Leased Premises are located. Tenant shall furnish such
certificate to Landlord promptly after issuance of same.
(b) Tenant shall not at any time prior to or during the term of
this Lease, directly or indirectly employ or permit the employment of, any
contractor, mechanic, or laborer in the Leased Premises, whether in connection
with any Alteration or otherwise, if such employment will interfere or cause any
conflict with other contractors, mechanics, or laborers engaged in the
construction, maintenance or operation of the Building by Landlord, Tenant, or
other, in the event of any such interference or conflict, Tenant, upon demand of
Landlord, shall cause all contractors, mechanics, or laborers causing such
interference or conflict to leave the Building immediately.
(c) All appurtenances, fixtures, improvements, and other
property attached to or installed in the Leased Premises, whether by Landlord or
Tenant or others, and whether at Landlord's expense or Tenant's expense, or the
joint expense of Landlord and Tenant, shall be and remain the property of
Landlord, except that any such fixtures, improvements, additions, and other
property which have been installed at the sole expense of Tenant and which are
removable without material damage to the Leased Premises shall be and remain the
property of Tenant. At Landlord's option. Tenant shall remove any property
belonging to Tenant at the end of the term hereof, and Tenant shall repair or,
at Landlord's option, shall pay to
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Landlord the cost of repairing any damage arising from such removal. Any
replacements of any property of Landlord, whether made at Tenant's expense or
otherwise, shall be and remain the property of Landlord.
17. CONDEMNATION:
(a) If, during the term (or any extension or renewal) of this
Lease, all or a substantial part of the Leased Premises are taken for any public
or quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain or by private purchase in lieu thereof, and the taking
would prevent or materially interfere with the then current use of the Leased
Premises, this Lease shall terminate and the Rent shall be abated during the
unexpired portion of this Lease effective on the date physical possession is
taken by the condemning authority.
(b) If a portion of the Leased Premises is taken as described
above and this Lease is not terminated as provided in subparagraph (a) above the
Rent payable under this Lease during the unexpired portion of the term shall be
adjusted to such an extent as may be fair and reasonable under the
circumstances.
(c) In the event of such taking or private purchase in lieu
thereof. Landlord and Tenant shall each be entitled to receive any sums
separately awarded to each party by the condemning authority. In the event
separate awards to Landlord and Tenant are not made, Landlord shall be entitled
to receive any and all sums by the condemning authority.
18. FIRE AND CASUALTY:
(a) If the Building should be damaged or destroyed by fire,
tornado, or other casualty, Tenant shall give immediate written notice thereof
to Landlord.
(b) If the Building should be totally destroyed by fire,
tornado, or other casualty, or if it should be so damaged thereby that
rebuilding or repairs cannot in Landlord's estimation be completed within one
hundred eighty (180) days after the date on which Landlord is notified by Tenant
of such damage, this Lease shall terminate and the Rent shall be abated during
the unexpired portion of this Lease, effective upon the date of occurrence of
such damage.
(c) If the Building should be damaged by any peril covered by
the insurance maintained by Landlord, but only to such extent that rebuilding or
repairs can in Landlord's estimation be completed within one hundred eighty
(180) days after the date on which Landlord is notified by Tenant of such
damage, this Lease shall not terminate and Landlord shall, to the extent of
insurance proceeds received, then proceed with reasonable diligence to rebuild
and repair the Building to substantially the same condition in which it existed
prior to such damage. Landlord shall not be required, however, to rebuild,
repair, or replace any part of the partitions, fixtures, additions, and other
improvements which may have been placed in, on, or about the Leased Premises by
Tenant. If the Leased Premises are untenantable in whole or in part following
such damage, the Rent payable hereunder during the period in which they are
untenatable shall be reduced to such extent as may be fair and reasonable under
all of the circumstances. If Landlord should fail to complete such repairs and
rebuilding within one hundred eighty (180) days after the date on which Landlord
is notified by Tenant of such damage, Tenant may terminate this Lease by
delivering written notice of termination to Landlord. Such termination shall be
Tenant's exclusive remedy and all rights and obligations of the parties under
this Lease shall then cease. Notwithstanding the foregoing provisions of this
subparagraph (c). Tenant agrees that if the Leased Premises, the Building and/or
Project are damaged by fire or other casualty caused by the fault or negligence
of Tenant or Tenant's agents, employees or invitees, Tenant shall have no option
to terminate this Lease, even if the damage cannot be repaired within one
hundred eighty (180) days, and the Rent shall not be abated or reduced before or
during the repair period.
(d) Notwithstanding anything herein to the contrary, if the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Building and/or Project requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made. All rights and obligations under this Lease
shall then cease.
19. CASUALTY INSURANCE: Landlord shall at all times during the term of
this Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and binding upon some solvent insurance company, insuring the
Building against loss or damage by fire, explosion, or other hazards and
contingencies. Landlord shall not be obligated, however, to insure any personal
property (including, but not limited to, any furniture, machinery, goods, or
supplies) of Tenant or which Tenant may have in the Leased Premises or any
fixtures installed by or paid for b Tenant upon or within the Leased Premises or
any improvements which Tenant may construct or install on the Leased Premises or
any signs identifying Tenant's business located on the exterior of the Building.
20. WAIVER OF SUBROGATION: To the extent that Landlord or Tenant
receives casualty insurance proceeds, such recipient hereby waives and releases
any and all rights, claims, demands and causes of action such recipient may have
against the other on account of any loss or damage occasioned to such recipient
or its businesses, real and personal properties, the Leased Premises, the
Building, the Project, or its contents, arising from any risk or peril covered
by any insurance policy carried by either party. Inasmuch as the above mutual
waivers will preclude the assignment of any such claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
hereby agrees immediately to give to its respective insurance companies written
notice of the terms of such mutual waivers and to have their respective
insurance policies properly endorsed, if necessary, to prevent the invalidation
of such insurance coverages by reason of such waivers. This provision shall be
cumulative of Paragraph 21 below.
21. HOLD HARMLESS: Landlord shall not be liable to Tenant, Tenant's
employees, agents, invitees, licensees or visitors, or to any other person, for
any injury to person or damage to property on or about the Leased Premises or
the Project caused by the negligence or misconduct of Tenant, its agents,
employees, invitees, or of any other persons entering upon the Leased Premises
or the Project under express or implied invitation by Tenant. Tenant agrees to
indemnify and hold Landlord harmless from any and all loss, attorney's fees,
expenses, or claims arising out of any such damage or injury.
22. QUIET ENJOYMENT: Landlord warrants that it has full right to execute
and to perform this Lease and to grant the estate demised and that Tenant, upon
payment of the required Rent and performing the covenants and agreements
contained in this Lease, shall peaceably and quietly have, hold, and enjoy the
Leased Premises during the full term of this Lease, including any extensions or
renewals thereof.
23. LANDLORD'S RIGHT OF ENTRY: Landlord shall have the right, at all
reasonable hours, to enter the Leased Premises for the
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Following reasons: inspection, cleaning or making repairs, making such
alterations or additions as Landlord may deem necessary or desirable:
installation of utility lines servicing the Leased Premises or any other space
in the Building: determining Tenant's use of the Leased Premises, or for
determining it any act of default under this Lease has occurred. Landlord shall
give twenty-four (24) hours written notice to Tenant prior to such ?? except in
cases of emergency when Landlord may enter the Leased Premises at any time and
without prior notice. During the period that is six (6) months prior to the end
of the Lease term. Landlord and Landlord's agents and representatives shall have
the right to enter the Leased Premises at any reasonable time during business
hours, without notice, for the purpose of showing the Leased Premises and shall
have the right to erect on the Leased Premises a suitable sign indicating the
Leased Premises are available for lease. Tenant shall give written notice to
Landlord at least thirty (30) days prior to vacating the Leased Premises and
shall arrange to meet with Landlord for a joint inspection of the Leased
Premises prior to vacating. In the event of Tenant's failure to give such notice
or arrange such joint inspection, Landlord's inspection at or after Tenant's
vacating the Leased Premises shall be conclusively deemed correct for purposes
of determining Tenant's responsibility for repairs and restoration.
24. ASSIGNMENT OF LANDLORD'S INTEREST IN LEASE: Landlord shall have the
right to transfer and assign, in whole or in part, its rights and obligations
with respect to the Project and premises that are the subject of this Lease,
including Tenant's security deposit. In such event, Landlord shall be released
from any further obligation under this Lease and Tenant agrees to look solely to
Landlord's successor for the performance of such obligations.
25. LANDLORD'S LIEN: In addition to any statutory lien for Rent in
Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a
continuing security interest for all Rentals and other sums of money becoming
due under this Lease from Tenant upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, and other personal property of
Tenant situated on or (arising from the Leased Premises. Such property shall not
be removed without the consent of Landlord In the event of a default under this
Lease, Landlord shall have in addition to any other remedies provided in this
lease or by law, all rights and remedies under the Texas Uniform Commercial
Code, including without limitation the right to sell the property described in
this Paragraph at public or private sale upon five (5) days notice to Tenant.
Tenant hereby agrees to execute such financing statements and other instruments
necessary or desirable in Landlord's discretion to perfect the security interest
hereby created. The express contractual lien herein granted, is in addition and
supplementary to any statutory lien for Rent. * which consent may be withheld by
Landlord without cause so long as any of Tenant's duties or obligations
hereunder have not been fully performed.
26. DEFAULT BY TENANT: The following shall be events of default by
Tenant under this Lease:
(a) Tenant shall fail to pay when due any installment of Rent or
other payment required pursuant to this Lease;
(b) Tenant shall abandon or vacate any substantial portion of
the Leased Premises, whether or not Tenant is in default of the Rental payments
due under this Lease;
(c) Tenant shall fail to comply with any term, provision or
covenant of this Lease, other than the defaults listed in this paragraph 26, and
the failure is not cured within ten (10) days after written notice thereof to
Tenant;
(d) Tenant shall file a petition or be adjudged a debtor or
bankrupt or insolvent under the National Bankruptcy Code, as amended, or any
similar law or statute of the United States or any state: or a receiver or
trustee shall be appointed for all or substantially all of the assets of Tenant:
or Tenant shall make a transfer in fraud of creditors or shall make an
assignment for the benefit of creditors:
(e) Tenant shall do or permit to be done any act which results
in a lien being filed against the Leased Premises.
27. REMEDIES FOR TENANT'S DEFAULT: Upon the occurrence of any event of
default set forth in this Lease, Landlord shall have the option to pursue any
one or more of the following remedies without any prior notice or demand:
(a) Landlord may terminate this Lease, in which event Tenant
shall immediately surrender the Leased Premises to Landlord, and if Tenant fails
to do so. Landlord may, without prejudice to any other remedy which it may have,
enter upon and take possession of the Leased Premises, and expel or remove
Tenant and any other person who may be occupying all or any part of the Leased
Premises. Landlord shall not be liable for prosecution or any claim for damages
as a result of such actions. Tenant agrees to pay on demand the amount of all
losses, costs, expenses, deficiencies, and damages, including, without
limitation, reconfiguration expenses, rental concessions and other inducements
to new tenants, advertising expenses and broker's commissions, which Landlord
may incur or suffer by reason of Tenant's default or the termination of the
lease under this subparagraph, whether through inability to relet the Leased
Premises on satisfactory terms or otherwise. Tenant acknowledges that its
obligation to pay Base Rent and all additional Rent hereunder is not only
compensation for use of the Leased Premises but also compensation for sums
already expended and/or being expended by Landlord with respect to its
obligations hereunder and with respect to the Leased Premises, and Tenant
acknowledges that Tenant's default in timely payment of all sums due hereunder
shall constitute significant financial loss to Landlord. Tenant further
acknowledges that any failure to pay any sum due hereunder shall evidence
Tenant's inability to meet its debts as they become due. In such event, in
addition to Landlord's other remedies hereunder. Landlord shall be entitled to
accelerate all Base Rental remaining unpaid hereunder, the entirety of which
shall, at the option of Landlord, be immediately due and payable.
(b) Landlord may enter upon and take possession of the Leased
Premises and expel or remove Tenant and any other person who may be occupying
all or any part of the Leased Premises (without being liable for prosecution or
any claim for damages therefor) and relet the Leased Premises on behalf of
Tenant and receive directly the rent of the reletting. Tenant agrees to pay
Landlord on demand any deficiency that may arise by reason of any reletting of
the Leased Premises and to reimburse Landlord on demand for any losses, costs,
and expenses, including without limitation, reconfiguration expenses, rental
concessions and other inducements to new tenants, advertising costs or broker's
commissions, which Landlord may incur or suffer as a result of Tenant's default
or in reletting the Leased Premises. Tenant further agrees to reimburse Landlord
for any expenditures made by if for remodeling or repairs necessary in order to
relet the Leased Premises. In the event Landlord is successful in reletting the
Leased Premises at a rental in excess of that agreed to be paid by Tenant
pursuant to this Lease. Landlord and Tenant agree that Tenant shall not be
entitled under any circumstances, to such excess rental, and Tenant does hereby
specifically waive any claim to such excess rental.
-7-
<PAGE> 8
(c) Landlord may enter upon the Leased Premises (without being
liable for prosecution or any claim for damages therefor) and do whatever Tenant
is obligated to do under the terms of this Lease. Tenant agrees to reimburse
Landlord on demand for any losses, costs and expenses which Landlord may incur
in effecting compliance with Tenant's obligations under this Lease. Tenant
further agrees that Landlord shall not be liable for any damages resulting to
Tenant from effecting compliance with Tenant's obligations under this
subparagraph, whether caused by the negligence of Landlord or otherwise.
(d) Landlord may pursue any remedy provided at law or in equity.
(e) Landlord shall have no duty to relet the Premises, and the
failure of Landlord to do so shall not release or affect Tenant's liability for
Rentals and other charges due hereunder or for damages.
(f) No re-entry or reletting of the Premises or any filing or
service of an unlawful detainer action or similar action shall be construed as
an election by Landlord to terminate Tenant's right to possession under this
Lease unless a written notice of such intention is given by Landlord to Tenant.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease and Tenant's right to possession
hereunder.
28. TERMINATION OF OPTIONS: If there exist any options or special rights
which Landlord may have granted Tenant under this lease including, but not
limited to, options or rights regarding extensions of the lease term, expansion
of the Leased Premises, or acquisition of any other interest in the Leased
Premises or the Building, then all such options and rights are independent of
the leasehold estate hereby granted to Tenant by Landlord. Landlord and Tenant
agree and acknowledge that the negotiated consideration for any such options or
special rights is Tenant's entry into this Lease and that no portion of any sums
due and payable by Tenant to Landlord hereunder is attributable thereto. In
addition to, and not in lieu of, the above remedies of Landlord for Tenant's
default, any and all such options or special rights shall be automatically
terminated upon the occurrence of the following events:
(a) Tenant shall have failed to pay when due any installment of
Rent or other sums payable under this Lease for any three (3) consecutive months
during the Lease term or any renewal or extension thereof, or for any five (5)
months during the Lease term or any renewal or extension thereof, whether or not
said defaults are cured by Tenant; or
(b) Tenant shall have received two (2) or more notices of
default under Paragraph 26(c) above with respect to any other covenant of this
Lease, whether or not such default(s) is/are cured; or
(c) Tenant shall have committed or suffered to exist any other
event of default described under Paragraph 26 above, whether or not such default
is cured by Tenant.
29. WAIVER OF DEFAULT OR REMEDY: Failure of Landlord to declare a
default immediately upon its occurrence, or delay in taking any action in
connection with an event of default, shall not be waiver of the default.
Landlord shall have the right to declare the default at any time and take such
action as is lawful or authorized under this Lease. Pursuit of any one or more
of the remedies set forth in Paragraphs 27 or 28 above shall not preclude
pursuit of any one or more of the other remedies provided therein or elsewhere
in this Lease provided by law, nor shall pursuit of any remedy be a forfeiture
or waiver of any Rent or damages accruing to Landlord by reason of the violation
of any of the terms of this Lease. Failure by Landlord to enforce one or more of
its remedies upon an event of default shall not be construed as a waiver of the
default or of any other violation or breach of any of the terms contained in
this Lease.
30. ATTORNEY'S FEES: In the event any litigation arises hereunder, it is
specifically stipulated that this Lease shall be interpreted and construed
according to the laws of the State in which the Leased Premises are located.
Further, the prevailing party in any such litigation between the parties shall
be entitled to recover, as a part of its judgment, reasonable attorney's fees.
31. HOLDING OVER: Tenant will, at the termination of this Lease by lapse
of time or otherwise, surrender immediate possession to Landlord. If Landlord
agrees in writing that Tenant may hold over after the expiration or termination
of this Lease and if the parties do not otherwise agree, the hold over tenancy
shall be subject to termination by Landlord at any time upon not less than five
(5) days advance written notice, or by Tenant at any time upon not less than
thirty (30) days advance written notice. Further, all of the terms and
provisions of this Lease shall be applicable during the hold over period, except
that Tenant shall pay Landlord from time to time upon demand, as Base Rent for
the period of any hold over, an amount equal to one and one-half times (1-1/2)
the Base Rent in effect on the termination date, computed on a daily basis for
each day of the hold over period, plus all additional rental and other sums due
hereunder. If Tenant shall fail immediately to surrender possession of the
Leased Premises to Landlord upon termination of this Lease, by lapse of time or
otherwise, and Landlord has not agreed to such continued possession as above
provided, then, until Landlord can dispossess Tenant under the terms hereof or
otherwise. Tenant shall pay Landlord from time to time upon demand, as Base Rent
for the period of any such holdover, an amount equal to twice the Base Rent in
effect on the termination date, computed on a daily basis for each day of the
hold over period, plus all additional rental and other sums due hereunder. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as otherwise expressly agreed by the
parties. The preceding provisions of this Paragraph shall not be construed as
Landlord's consent for Tenant to hold over.
32. RIGHTS OF MORTGAGEE: Tenant accepts this Lease subject and
subordinate to any recorded mortgage, deed of trust or other lien presently
existing or hereafter to exist with respect to the Leased Premises. Landlord is
hereby irrevocably vested with full power and authority to subordinate Tenant's
interest under this Lease to any mortgage, deed of trust or other hen hereafter
placed on the Leased Premises, and Tenant agrees upon demand to execute such
additional instruments subordinating this Lease as Landlord or the holder of any
such mortgage, deed of trust, or lien may require. If the interests of Landlord
under this Lease shall be transferred by reason of foreclosure or other
proceedings for enforcement of any mortgage on the Leased Premises. Tenant shall
be bound to the transferee (sometimes called the "Purchaser") under the terms
and conditions of this Lease for the balance of the remaining lease term,
including any extensions or renewals, with the same force and effect as if the
Purchaser were Landlord under this Lease. Tenant further agrees to attorn to the
Purchaser, including the mortgagee under any such mortgagee if it be the
Purchaser, as its Landlord. Such attornment shall be effective without the
execution of any further instruments upon the Purchaser succeeding to the
interest of Landlord under this Lease. The respective rights and obligations of
Tenant and the Purchaser upon the attornment, to the extent of the then
remaining
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<PAGE> 9
balance of the term of this Lease, and any extensions and renewals, shall be and
are the same as those set forth in this Lease. Each such holder of any mortgage,
deed of trust, or lien, and each such Purchaser, shall be a third-party
beneficiary of the provisions of this Paragraph.
33. ESTOPPEL CERTIFICATES: Tenant agrees to furnish within (10) days,
from time to time, upon request of Landlord or Landlord's mortgagee, a statement
certifying that Tenant is in possession of the Leased Premises; the Leased
Premises are acceptable; the Lease is in full force and effect; the Lease is
unmodified; Tenant claims no present charge, lien, or claim of offset against
Rent; the Rent is paid for the current month, but is not paid and will not be
paid for more than one month in advance; there is no existing default by reason
of some act or omission by Landlord; and such other matters as may be reasonably
required by Landlord or Landlord's mortgagee.
34. SUCCESSORS: This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed that
should Landlord's interest in the Leased Premises cease to exist for any reason
during the term of the Lease, then notwithstanding the happening of such event
this Lease shall nevertheless remain unimpaired and in full force and effect and
Tenant hereunder agrees to attorn to the then owner of the Leased Premises.
35. REAL ESTATE COMMISSION: Tenant represents and warrants that it has
dealt with no broker, agent, or other person in connection with this transaction
and that no other broker, agent, or other person brought about this transaction
other than Ken Boyd of Jackson-Cooksey; and Tenant agrees to indemnify and hold
Landlord harmless from and against any claims by any other broker, agent, or
other person claiming a commission or other form of compensation by virtue of
having dealt with Tenant with regard to this leasing transaction. The provisions
of this paragraph shall survive the termination of this Lease.
36. EXPANSION: If during the term of this Lease, Tenant occupies, under
a new written lease with Landlord, space of a size substantially larger than the
present Leased Premises within any development owned by Landlord, this Lease
shall be terminated upon execution of the Lease for such substitute space.
Notwithstanding the above-stated, Tenant shall remain obligated to pay for any
Rents or other sums due Landlord as a result of Tenant's tenancy hereunder, and
such obligation shall survive the termination of this Lease pursuant to this
Paragraph 36.
37. MECHANIC'S LIENS: Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
Leased Premises or to charge the Rentals payable hereunder for any claim in
favor of any person dealing with Tenant, including those who may furnish
materials or perform labor for any construction or repairs. Each such claim
shall affect and each such lien shall attach to, if at all, only the leasehold
interest granted to Tenant by this Lease. Tenant covenants and agrees that it
will pay or cause to be paid all sums legally due and payable by it on account
of any labor performed or materials furnished in connection with any work
performed on the Leased Premises on which any lien is or can be validly and
legally asserted against its leasehold interest in the Leased Premises or the
improvements thereon. Tenant further agrees to save and hold Landlord harmless
from any and all loss, cost, or expense based on or arising out of asserted
claims or liens against the leasehold estate or against the right, title and
interest of the Landlord in the Leased Premises or under the terms of this
Lease. Under no circumstances shall Tenant be or hold itself out to be the agent
or representative of Landlord with respect to any alteration of the Leased
Premises whether or not consented to or approved by Landlord hereunder.
38. ENTIRE AGREEMENT, AND LIMITATION OF WARRANTIES: It is expressly
agreed by Tenant, as a material consideration for the execution of this Lease,
that this Lease is the entire agreement of the parties and that there are and
were no verbal representations, warranties, understandings, stipulations,
agreements, or promises pertaining to this Lease not incorporated in this Lease.
Landlord and Tenant expressly agree that there are and shall be no implied
warranties of merchantability of fitness or of any other kind arising out of
this Lease and that Tenant's acceptance of the Leased Premises shall be "as is".
It is likewise agreed that this Lease may not be altered, waived, amended, or
extended except by an instrument in writing signed by both Landlord and Tenant.
Not in limitation upon the foregoing, Landlord agrees that to the extent
assignable, all warranties, if any shall exist, from contractors or suppliers
with respect to the improvements to the Leased Premises hereunder are hereby
assigned to Tenant.
39. MISCELLANEOUS:
(a) Words of any gender used in this Lease shall be held and
construed to include any other gender; and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
(b) Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization and power of such
party to enter into this Lease.
(c) The captions inserted in this Lease are for convenience only
and in no way define, limit, or otherwise describe the scope or intent of this
Lease or any provision hereof, or in any way affect the interpretation of this
Lease.
(d) If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease shall not be affected thereby; and it is also
the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid, or unenforceable there be
added as a part of this Lease a clause as similar in terms to such illegal,
invalid, or unenforceable clause or provision as may be possible and be legal,
valid, and enforceable.
(e) Because the Leased Premises are on the open market and are
presently being shown, this Lease shall be treated as an offer to lease only.
Unless and until this Lease is accepted by Landlord and Tenant in writing and a
fully executed copy delivered to both parties, this offer is subject to
withdrawal or non-acceptance by Landlord and the Leased Premises may be leased
to another party or used for another purpose by Landlord without notice.
(f) All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
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<PAGE> 10
(g) If the Commencement Date shall be determined under
Paragraphs 4(b) or (c) of this Lease. Landlord and Tenant shall enter into an
agreement in recordable form setting forth the Commencement Date and Termination
Date of the Lease term.
(h) In the event that Tenant shall fail to perform any duty or
obligation hereunder, whether maintenance, repair or replacement of the Leased
Premises, maintenance of insurance, or otherwise, then Landlord may, but shall
in no event be obligated to, without notice of any kind, take such actions as
Landlord deems necessary or appropriate to remedy such Tenant failure, and any
sums expended by Landlord and fair and just compensation for the time and effort
of Landlord shall be deemed additional Rental hereunder due and payable by
Tenant on demand.
(i) If Tenant shall fail to pay, when the same is due and
payable, any Rent, any additional Rent, or any other sum due hereunder, such
unpaid amount shall bear interest from the due date thereof to the date of
payment at the highest non-usurious rate permitted by applicable law.
(j) Landlord does not in any way or for any purpose become a
partner of Tenant in the conduct of its business or otherwise, nor a member of a
joint venture with Tenant.
(k) Tenant shall not record this Lease without the prior written
consent of Landlord. However, upon the request of either party hereto, the other
party shall join in the execution of a memorandum or so-called "short form" of
this Lease for the purposes of recordation.
(l) Time is of the essence in the performance of all the
covenants, conditions, and agreements contained in this Lease.
(m) Any duty, obligation, or debt and any right or remedy
arising hereunder and not otherwise consummated and/or extinguished by the
express terms hereof at or as of the time of termination of this Lease, whether
at the end of the term hereof or otherwise, shall survive such termination as
continuing duties, obligations, and debts of the obligated party to the other or
continuing rights and remedies of the benefited party against the other.
(n) This Agreement may be executed in one or more counterparts,
each of which counterparts shall for all purposes be deemed to be an original;
but all such counterparts together shall constitute but one instrument.
(o) Attached hereto, marked Exhibit "A" through Exhibit "D", are
certain exhibits to this Lease all of which are hereby incorporated herein by
reference.
40. NOTICE:
(a) All Rent and other payments required to be made by Tenant
shall be payable to Landlord at the address set forth below or any other address
Landlord may specify from time to time by written notice delivered to Tenant.
(b) All payments, if any, required to be made by Landlord to
Tenant shall be payable to Tenant at the address set forth below or at any other
address within the United States as Tenant may specify from time to time by
written notice
(c) Any notice or document required or permitted to be delivered
by this Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the United States Mail, postage prepaid, certified mail, or
return receipt requested, addressed to the parties at the respective addresses
set out below or such other address as hereinafter specified by notice given in
accordance with this paragraph.
LANDLORD: TENANT:
Jackson-Shaw Partners No. 33, Ltd. KLA Instruments Corporation
- ---------------------------------- ---------------------------
3860 West Northwest Highway, Suite 300 405 International Parkway, Suite 209
- -------------------------------------- ------------------------------------
Dallas, Texas 75220 Richardson, Texas
- ------------------- -----------------
EXECUTED by Landlord and Tenant on the date below stated as their
respective Dates of Execution.
LANDLORD TENANT
Jackson-Shaw Partners No. 33, Ltd. KLA Instruments Corporation
- ---------------------------------- ---------------------------
By: /s/ JOHN M. FITZGIBBONS By: /s/
-------------------------------- ---------------------------------
John M. Fitzgibbons, Attorney-in-Fact /s/
- ------------------------------------- ------------------------------------
(Type Name and Title) (Type Name and Title)
Date of Execution: Date of Execution:
4/21/89, 198__ ______, ____________________, 1989
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<PAGE> 11
EXHIBIT "A"
Being a tract of land situated in the Baurch Cantrell Survey, Abstract No. 265
City of Richardson, Dallas County, Texas and being more particularly describes
as follows:
BEGINNING at an Iron rod set for corner situated In the intersection of the
North line of Apollo Road and the West line of International Parkway;
THENCE S 89 degree 22' 17" W along the North line of said Apollo Road a distance
of 185.95 feet to an Iron rod set for corner, said rod also being the beginning
of a curve to the right and having a central angle of 08 degree 35' 53", a
radius of 1300.32', and a tangent of 97.75':
THENCE along said curving line of Apollo Road an are distance of 195.13 feet to
an Iron rod set for corner;
THENCE N 82 degree 01' 50" W and continuing along said North line of Apollo Road
a distance of 1.95 feet to an Iron rod set for corner, said rod also being the
beginning of a curve to the left and having a central angle of 03 degree 36'
58", a radius of 1456.13', and a tangent of 45.97';
THENCE along said curving line of Apollo Road an are distance of 91.90 feet to
an Iron rod set for corner;
THENCE N 00 degree 37' 43" W departing the North line of Apollo Road a distance
of 569.19 feet to an Iron rod set for corner;
THENCE N 89 degree 22' 17" E a distance of 473.52 feet to an Iron rod set for
corner, said rod also being on the West line of aforementioned International
Parkway;
THENCE S 00 degree 37' 43" E along said West line of International Parkway a
distance of 594.96 feet to the POINT OF BEGINNING and containing 6.4016 acres of
278,852 square feet of land more or less.
[CHART OMITTED]
<PAGE> 12
EXHIBIT "B"
See Space Plans
Plans and Specifications for Construction to follow!
<PAGE> 13
EXHIBIT "C"
RULES AND REGULATIONS
The following Rules and Regulations are prescribed by Landlord in order
to provide and maintain, to the best of Landlord's ability, orderly, clean and
desirable leased premises building and parking facilities for the Tenants
therein and to regulate conduct in and use of leased premises, the building and
parking facilities in such a manner as to minimize interference by others in the
proper use of leased premises by Tenant. In the following Rules and Regulations,
all references to Tenant include not only the Tenant, but, also, Tenant's
agents, servants, employees, invitees, licensees, visitors, assignees, and/or
sublessees:
1. Tenant shall not block or obstruct any of the entries, passages,
doors, hallways, or stairways of building or parking area, or place, empty, or
throw any rubbish, litter, trash, or material of any nature into such areas, or
permit such areas to be used at any time except for ingress or egress of
Tenants.
2. Landlord will not be responsible for lost or stolen personal
property, equipment, money, or any article taken from the leased premises,
building, or parking facilities regardless of how or when loss occurs.
3. The plumbing facilities shall not be used for any other purpose than
that for which they are constructed, and no foreign substance of any kind shall
be placed therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by Tenant.
4. Tenant shall permit Landlord, during the six (6) months prior to the
termination of this lease to show leased premises during business or nonbusiness
hours to prospective lessees and to advertise leased premises for rent.
5. Any additional keys required by Tenant during the term of the lease
shall be requested from Landlord and shall be paid for by Tenant upon delivery
of keys to premises, In the event new locks are requested by Tenant, then all
costs associated with such request (including hardware, installation and keys)
shall be paid by Tenant.
6. The common parking facilities are available for use by any and all
Tenants. Landlord reserves the right to assign or allocate parking in the event
of conflicts, abuse or improper use of these common parking facilities. It is
generally understood that any Tenant should utilize only those parking spaces
immediately adjacent to that Tenant's specific leased premises.
Proper use of the common parking facilities is deemed to be that use
which is occasioned by the normal in and out traffic required by the Tenant, in
the normal course of the Tenant's business operations.
Vehicles that are abandoned, disabled, have expired registration
stickers, obstructing any means of ingress or egress to any leased premises, or
in any way a general nuisance or hazard are subject to removal without notice by
Landlord's designated wrecker and towing service. All costs associated with such
removal shall be at the Tenant's/Vehicle Owner's expense.
7. Tenant shall not use the building, leased premises, or parking
facilities for housing, lodging, or sleeping purposes without the express
consent of Landlord in writing.
<PAGE> 14
EXHIBIT "D"
Options
Right of First Refusal
Landlord will provide Tenant with notice that adjacent space has been offered to
another prospective user.
Tenant shall have five (5) business days to execute this Right of First Refusal
by signing a new Lease Agreement for the adjacent area.
If Tenant elects not to lease adjacent space, this Right of First Refusal is
then cancelled and considered null and void.
Renewal option
Tenant shall have, and is hereby granted, one (1) option to renew and to extend
the term of this Lease for a period of thirty-six (36) months (the "Renewal
Term"), such option to follow consecutively upon the expiration of the initial
sixty (60) month term of this Lease, provided that at the time such option to
renew is exercised, this Lease shall be in full force and effect and Tenant
shall not be in default hereunder. Such option shall be exercised, if at all, by
Tenant giving written notice of its intention to renew and extend the term of
this Lease to Landlord at least one hundred eighty (180) days before the
expiration of the initial sixty (60) month term of this Lease. Any assignment or
subletting by Tenant in violation or breach of Paragraph 10 of this Lease shall
terminate all rights of renewal and extension set forth herein. The renewal, if
elected by Tenant, shall be under all of the terms and conditions of this Lease
except Basic Rental (below provided), except the amount of Security Deposit,
which will be increased in an amount corresponding to the new Basic Rental, and
except that no further renewal option shall exist.
Commencing with the first (1st) day of the first (1st) calendar month for the
Renewal Term, the applicable annual Basic Rental for each calendar month for the
Renewal Term shall be adjusted so that it is equal to the prevailing market rate
per annum for comparable space available in buildings of a quality similar to
the Building within reasonable proximity thereto at such time, provided however,
in no event shall such adjusted Basic Rental be less than the product of
multiplying the number of months of the Renewal Term by the Monthly Rental
Payment for the last full month of the Lease Term.
[?? Text Illegible ??]
<PAGE> 15
AMENDMENT, MODIFICATION AND RATIFICATION OF LEASE
July 13, 1989
This Amendment, Modification and Ratification of Lease is executed on
the date last below stated by and between Jackson-Shaw Partners No. 33, Ltd.
("Landlord"), and KLA Instruments Corporation ("Tenant").
By Commercial Lease Agreement (the "Lease"), dated June 21, 1989,
Landlord leased to Tenant 3,151 square feet of office space in the building
described as International Corporate Park II, located at 405 International
Parkway, Suite 209, Richardson, Texas, for a term of Sixty (60) months,
beginning January 1, 1990. Tenant has requested that additional space in the
building be added to the Lease, and Landlord and Tenant have agreed upon such
expansion in accordance with the terms of this Amendment. References in this
Amendment are to the numbered Paragraphs in the Lease.
In consideration of the mutual obligations and benefits hereof, Landlord
and Tenant agree as follows:
1. Beginning January 1, 1990, and ending on the Termination date, December 31,
1994, the 840 square foot portion of the building marked on a floor plan
thereof and attached hereto as Exhibit "A" dated July 13, 1989 incorporated
herein by reference, shall be added to the Leased Premises under all the
terms, conditions and obligations of the Lease, except as otherwise herein
expressly provided. Total square footage leased to Tenant shall be 3,991 s.f.
and Tenant's address shall not change.
2. Base Rentals for this Sixty month (60) period with respect to the Total
Leased Premises is One Hundred Thirty Seven Thousand Seven Hundred and No/100
Dollars ($137,700.00) payable as Base Rentals under the Lease in monthly
installments of Two Thousand Two Hundred Ninety-five and No/100 ($2,295.00)
each beginning January 1, 1990.
3. With respect to the Total Rentable Space, the expense stop (Paragraph 6(a))
shall be $0.75 p.s.f., and Tenant's pro rata share of Tax and Insurance
expenses with respect to the Total Rentable Space shall now be Twenty-four
and 2/10 24.2%.
4. Except as expressly hereby modified, the Lease is hereby ratified and
affirmed in all respects.
LANDLORD: TENANT:
JACKSON-SHAW PARTNERS NO. 33, LTD. KLA INSTRUMENTS CORPORATION
/s/ JOHN M. FITZGIBBONS /s/ HOWARD GORE 7-19-89
- ------------------------------------- -------------------------------
John M. Fitzgibbons, Attorney-in-Fact Howard Gore, Treasurer
<PAGE> 16
?? along said curving line of Apollo Road an arc distance of 195.13 feet to an
iron rod set for corner;
THENCE N 82 degree 01' 50" W and continuing along said North line of Apollo Road
a distance of 1.95 feet to an iron rod set for corner, said rod also being the
beginning of a curve to the left and having a central angle of 03 degree 36'
58", a radius of 1456.13', and a tangent of 45.97';
THENCE along said curving line of Apollo Road an arc distance of 91.90 feet to
an iron rod set for corner;
THENCE N 00 degree 37' 43" W departing the North line of Apollo Road a distance
of 569.19 feet to an iron rod set for corner;
THENCE N 89 degree 22' 17" E a distance of 473.52 feet to an iron rod set for
corner, said rod also being on the West line of aforementioned International
Parkway;
THENCE S 00 degree 37' 43" E along said West line of International Parkway a
distance of 594.96 feet to the POINT OF BEGINNING and containing 6,4016 acres of
278,852 square feet of land more or less.
[CHART OMITTED]
<PAGE> 17
SECOND, AMENDMENT, MODIFICATION AND RATIFICATION OF LEASE
June 29, 1990
This Second Amendment, Modification and Ratification of Lease is
executed on the date last below stated by and between Garlan Real Estate
Corporation and KLA Instruments Corporation ("Tenant").
By Commercial Lease Agreement (the "Lease"), dated June 21, 1989 and
amended on 7-19-89 Landlord leased to Tenant 3,991 square feet of office space
in the building described as International Corporate Park II, located at 405
International Parkway, Suite 209. Richardson, Texas, for a term of Sixty (60)
months, beginning January 1, 1990. Tenant has requested that additional space in
the building be added to the Lease, and Landlord and Tenant have agreed upon
such expansion in accordance with the terms of this second amendment. References
in this Amendment are to the numbered Paragraphs in the Lease.
In consideration of the mutual obligations and benefits hereof, Landlord
and Tenant agree as follows:
1. Beginning November 1, 1990, and ending on the new Termination date September
30, 1995, the 760 square foot portion of the building marked on a floor plan
thereof and attached hereto as Exhibit "A" dated June 29, 1990 Incorporated
herein by reference, shall be added to the Leased Premises under all the
terms, conditions and obligations of the Lease, except as otherwise herein
expressly provided. Total square footage leased to Tenant shall be 4,751 s.f.
and Tenant's address shall not change.
2. Base Rentals for this new sixty month (60) period with respect to the Total
Leased Premises is One Hundred Seventy-five Thousand Seven Hundred Forty and
No/100 ($175,740.00) payable as Base Rentals under the Lease in monthly
Installments of Two Thousand Nine Hundred Twenty-Nine and No/100 ($2,929.00)
each beginning November 1, 1990.
3. With respect to the Total Rentable Space, the expense stop (Paragraph 6(a))
shall be $0.75 p.s.f., and Tenant's pro rata share of Tax and Insurance
expenses and Common Area Maintenance with respect to the Total Rentable Space
shall now be Twenty-eight percent and 8/10 (28.8%).
4. Except as expressly hereby modified, the Lease is hereby ratified and
affirmed in all respects.
LANDLORD: TENANT:
GARLAN REAL ESTATE CORPORATION KLA INSTRUMENTS CORPORATION
/s/ Signature Illegible /s/ F.S. MICHAEL ROM
- ------------------------------ ---------------------------------
Director of F.S. MICHAEL ROM,
/s/ DAVE PEFELY
---------------------------------
CONTROLLER, DAVE PEFELY
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[EXHIBIT OMITTED]
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THIRD AMENDMENT OF COMMERCIAL LEASE AGREEMENT
THIS THIRD AMENDMENT OF COMMERCIAL LEASE AGREEMENT (the "Amendment"), is
entered into as of the ?? day of August, 1995 by and between GARLAN REAL ESTATE
CORPORATION, a Delaware corporation ("Landlord"), and KLA INSTRUMENTS
CORPORATION, a DELAWARE corporation ("Tenant").
W I T N E S S E T H:
WHEREAS, Jackson-Shaw Partners No. 33, Ltd. ("Original Landlord") and
Tenant, entered into that certain Commercial Lease Agreement executed by
Original Landlord on or about June 21, 1989 (the "Commercial Lease") pursuant to
which Original Landlord agreed to lease to Tenant the premises (the "Original
Premises") consisting of Suite 209 containing approximately 3,151 rentable
square feet of floor area in the Building, as more fully described in the
Commercial Lease, situated in International Corporate Park, Phase II located at
405 International Parkway, Richardson, Texas.
WHEREAS, Original Landlord and Tenant, amended the Commercial Lease by
entering into that certain Amendment, Modification and Ratification of Lease
(the "First Amendment") dated July 13, 1989 pursuant to which 840 rentable
square feet of floor area were added to the Original Premises and the Commercial
Lease was otherwise amended as set forth therein.
WHEREAS, Landlord and Tenant further amended the Commercial Lease by
entering into that certain Second Amendment, Modification and Ratification of
Lease (the "Second Amendment") dated June 29, 1990 pursuant to which 760
rentable square feet of floor area were added to the Leased Premises and the
Commercial Lease was otherwise amended as set forth therein (the Commercial
Lease, the First Amendment and the Second Amendment are collectively referred to
herein as the "Lease").
WHEREAS, Landlord and Tenant desire to (i) extend the term of the Lease
for a period of five (5) years, (ii) add to the Leased Premises the Additional
Premises (as hereinafter defined), and (iii) amend certain other terms and
provisions of the Lease as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual terms and
conditions set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
1. "Additional Premises" means 1,923 rentable square feet of floor area
in the Building as depicted on Schedule 1 attached hereto and made a part hereof
for all purposes.
2. "Additional Premises Commencement Date" means the earlier of (i)
October 1, 1995, or (ii) the date on which Tenant first occupies the Additional
Premises (or any part thereof) for the conduct of its business.
3. Effective as of the Additional Premises Commencement Date, the
Additional Premises shall be part of the Leased Premises, and all references in
the Lease and herein to the "Leased Premises" and/or the "Premises" shall be
deemed to collectively refer to the Premises and the Additional Premises.
4. Section 4 of the Lease is hereby amended to provide that the
Termination Date is September 30, 2000.
5. From the Additional Premises Commencement Date through the remainder
of the term of the Lease, annual Base Rent for the Leased Premises shall be
$48,386.50, payable in monthly payments of $4,032.21 (pro-rated for partial
calendar months as set forth in the Lease).
6. As of the Additional Premises Commencement Date the pro rata share to
be paid by Tenant (referenced in Subparagraph 6(a)(1) of the Original Lease,
Paragraph 3 of the First Amendment and Paragraph 3 of the Second Amendment) is
changed to reflect that the Leased Premises contain 40.52% of the rentable area
of the Building.
7. The Tax and Insurance Differential (see Paragraph 6(a) of the Lease)
shall be adjusted as of October 1, 1995 to reflect a 1995 base year expense
stop. In other words,
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commencing October 1, 1995 for any calendar year (or applicable portion thereof)
the Tax and Insurance Differential shall be the amount by which Tax and
Insurance Expenses for such calendar year (or applicable portion thereof) exceed
the Tax and Insurance Expenses for calendar year 1995 (or the applicable
prorated portion thereof).
8. Paragraph 6(b) of the Lease is hereby amended as follows:
(a) As of October 1, 1995, the first sentence of Paragraph 6(b)
of the Lease is hereby amended to reflect a 1995 base year expense stop.
In other words, commencing October 1, 1995 for any calendar year (or
applicable portion thereof) Tenant shall be obligated to pay its pro
rata share of the amount by which the Common Area Maintenance Expenses
for such calendar year (or applicable portion thereof) exceed the Common
Area Maintenance Expenses for calendar year 1995 (or the applicable
prorated portion thereof).
(b) In the event that during all or any portion of any calendar
year the Building is not fully rented or fully occupied, Landlord may
elect to make an appropriate adjustment in the Common Area Maintenance
Expenses for such calendar year by determining the Common Area
Maintenance Expenses that would have been incurred had the Building been
ninety-five (95%) rented and occupied, and the amount so determined
shall be deemed to have been the Common Area Maintenance Expenses for
the applicable period.
(c) Notwithstanding anything to the contrary contained in this
Amendment or in the Lease, for purposes of calculating Common Area
Maintenance Expenses for the period beginning January 1, 1996 and for
each year thereafter (or portion hereof) for the remainder of the term
of the Lease, the components of Common Area Maintenance Expenses
involving management fees and wages and fringe benefits payable to
employees of Landlord shall not annually increase by more than eight
percent (8%) in the aggregate and calculated on a cumulative and
compounded basis.
9. Notwithstanding anything in Paragraph 7(a) of the Lease to the
contrary Landlord and Tenant hereby agree as follows:
In the event the maintenance contractor engaged pursuant to
Paragraph 7(d) of the Lease reasonably determines that it is
necessary to replace the heating and air conditioning system(s)
serving the Leased Premises (the "HVAC"), Landlord shall cause
such HVAC to be replaced and the monthly Base Rent payments
under the Lease shall immediately be increased by an amount
which would cause the full amount of all costs incurred by
Landlord for the HVAC replacement, together with interest
thereon at the rate of twelve percent (12%) per annum, to be
repaid to Landlord over a five (5) year period. Nothing in the
immediately preceding sentence shall in any way obviate Tenant's
obligations under the Lease to maintain and repair the HVAC.
10. Notwithstanding anything in the Lease to the contrary, construction
of leasehold improvements (the "Leasehold Improvements") in the Leased Premises
and the Construction Allowance as defined in Schedule 2 hereof, shall be
governed by Schedule 2 attached hereto and made a part hereof for all purposes.
11. Tenant shall be responsible, at Tenant's sole cost and expense, for
compliance with the law commonly known as the "Americans With Disabilities Act",
as amended ("ADA") as such compliance relates to the Leased Premises. Tenant
shall be responsible, at Tenant's sole cost and expense, for compliance with any
and all present and future laws, rules and/or regulations regarding air quality
as such compliance relates to the Leased Premises. Landlord shall be responsible
for compliance with the ADA as such compliance relates to the common areas of
the Building. Any expenses incurred by Landlord in connection with such
compliance shall be included in Common Area Maintenance Expenses.
12. Exhibit D of the Lease is hereby deleted from the Lease in its
entirety. Schedule 3 attached hereto is hereby made a part of the Lease and a
part hereof for all purposes.
13. All capitalized terms used in this Amendment and not otherwise
defined herein, shall have the meaning ascribed to such terms in the Lease.
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14. The Lease, as amended herein, is hereby ratified and confirmed and
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
LANDLORD:
GARLAN REAL ESTATE CORPORATION,
a Delaware corporation
By: /s/Signature Illegible
--------------------------------
Name: /s/Signature Illegible
------------------------------
Title: /s/Signature Illegible
-----------------------------
TENANT:
KLA INSTRUMENTS CORPORATION,
a ___________ corporation
By: /s/Signature Illegible
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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SCHEDULE 1
[CHART OMITTED]
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SCHEDULE 2
LEASEHOLD IMPROVEMENTS
1. Construction of Leasehold Improvements. Tenant shall retain its own
contractor to construct and install leasehold improvements in or respecting the
Leased Premises (the "Leasehold Improvements"), pursuant to a written
construction contract (the "Construction Contract") and subject to and in
accordance with this Schedule 2. Landlord and Tenant expressly understand and
agree (i) that Landlord shall have no responsibility or obligation for the
construction and installation of the Leasehold Improvements in and to or
respecting the Leased Premises, and (ii) Landlord shall have no responsibility
or obligation to pay for any of the Leasehold Improvements, except for the
Construction Allowance.
2. Tenant's Contractor. Landlord shall have the right to approve
Tenant's selection of the contractor ("Tenant's Contractor") to construct the
Leasehold Improvements. Landlord shall have no obligation or duty to ensure
timely completion of, or supervise or manage in any way, the construction of the
Leasehold Improvements, and Landlord shall have no obligation to provide
builder's risk or other insurance on behalf of Tenant or Tenant's Contractor.
Landlord will cooperate with Tenant in the manner provided in subparagraphs (a)
and (b) below.
(a) Access. Tenant shall be entitled to immediate possession of
the Leased Premises for the purpose of constructing Tenant's Leasehold
Improvements. Landlord shall take reasonable steps to provide any
contractors and/or subcontractors engaged by Tenant and approved by
Landlord with access to the common areas of the Building and to the
Leased Premises as is reasonably necessary in order to allow Tenant to
construct the Leasehold Improvements, subject to such requirements,
rules and regulations as Landlord may reasonably impose from time to
time.
(b) Water and Electrical Power. Landlord will provide to Tenant
and Tenant's Contractor water and electrical power to the Leased
Premises 24 hours per day, 7 days per week during the period of
construction of the Leasehold Improvements.
3. Construction Allowance.
(a) Landlord shall provide to Tenant an allowance (the
"Construction Allowance") not to exceed $38,992.00 to be used by Tenant
to construct and install the Leasehold Improvements in the Leased
Premises upon the terms and conditions set forth in this Schedule 2.
Landlord and Tenant agree that Landlord shall own the Leasehold
Improvements as constructed by Tenant and Tenant shall have no right or
interest in the Leasehold Improvements except as a lessee hereunder. The
cost of the Leasehold Improvements shall include all costs of labor and
materials for the physical improvements to the Leased Premises
including, but not limited to, partitioning, doors, frames, hardware,
millwork, finishes, mechanical work and electrical work, plus fees and
overhead to Tenant's Contractor. Any portion of the Construction
Allowance not used for construction of the Leasehold Improvements shall
be forfeited by Tenant and Tenant shall not receive such unused portion
of the Construction Allowance or any credit therefor.
(b) Landlord shall disburse the Construction Allowance to Tenant
to enable Tenant to make progress payments to pay costs of constructing
and installing the Leasehold Improvements until the Construction
Allowance has been fully exhausted; provided, that Landlord shall not be
obligated to disburse funds for materials stored off-site, and provided
further, that Landlord receives from Tenant and is reasonably satisfied
with the form and content of (a) a request for payment, (b) a copy of a
certificate signed by Tenant's architect certifying the percentage of
completion of the Leasehold Improvements and approving payment of an
amount at least equal to the amount set forth in Tenant's request for
payment, (c) partial releases of liens and/or lien waivers from Tenant's
Contractor and subcontractors requesting payment, and (d) a copy of the
Construction Contract (collectively, the "Back-Up"). Landlord shall not
be obligated to make any payment of the Construction Allowance at any
time there is an
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unbonded lien outstanding against the Building or the Leased Premises or
Tenant's interest therein by reason of work done, or claimed to have
been done, or materials supplied, or claimed to have been supplied, to
or for Tenant or the Leased Premises or if the conditions to advances of
the Construction Allowance are not satisfied. Notwithstanding anything
in this Paragraph 3 to the contrary Landlord shall not be required to
make more than one (1) advance during any calendar month.
4. Compliance of Leased Premises. Tenant shall be responsible for
complying with laws, ordinances and regulations applicable to the Leasehold
Improvements.
5. Plans. Tenant's architect shall, at Tenant's expense, prepare all
plans and documents for the construction of the Leasehold Improvements, it being
understood and agreed, however, that all such plans and documents shall be
subject to Landlord's written approval. Tenant shall submit to Landlord final
working drawings for all Leasehold Improvements and such final working drawings
shall be subject to Landlord's prior approval. If there are any significant
changes by Tenant from the improvements set forth in the final working drawings
referred to above, each such change must receive the prior written approval of
Landlord. In the event of any change in the working drawings, Tenant shall, upon
completion of the Leasehold Improvements, furnish Landlord with an accurate
"as-built" plan of the portion of the Leasehold Improvements covered by such
changes as constructed. All design, construction and installation of the
Leasehold Improvements shall conform to the requirements of applicable building,
plumbing and electrical codes and the requirements of any authority having
jurisdiction with respect to such work. All plans and working drawings submitted
to Landlord for approval shall be deemed approved by Landlord on the fifteenth
(15th) business day after submission unless Landlord notifies Tenant to the
contrary.
6. Construction Contractors. Landlord shall have the right to approve
the mechanical, electrical and structural contractors and engineers retained by
Tenant or Tenant's Contractor. The mechanical, electrical and structural
contractors and engineers retained by Tenant or Tenant's Contractor shall be
deemed approved by Landlord on the fifteenth (15th) business day after their
names are submitted to Landlord unless Landlord notifies Tenant to the contrary.
Any contractors and/or subcontractors engaged shall comply with all standards
and regulations established by Landlord in its reasonable discretion, provided
that same have been furnished to Tenant in advance by Landlord. Such contractors
and subcontractors shall coordinate their efforts to ensure timely completion of
all work. During construction of any improvements, all contractors and
subcontractors shall coordinate with Landlord the movement of equipment and
materials. All contractors and subcontractors shall ensure that the work be
conducted in such manner so as to maintain harmonious labor relations and not to
interfere with Landlord's operation of the Building and/or the use of the
Building by other tenants. Tenant shall provide Landlord with a copy of the
Construction Contract for Landlord's approval, prior to full execution thereof.
In addition, Tenant shall provide Landlord with all reasonable information that
Landlord may request concerning the construction and installation of the
Leasehold Improvements. Tenant shall maintain builder's risk and other insurance
during the construction of the Leasehold Improvements in conformity with
Tenant's obligations to maintain insurance as set forth in the Lease and shall
provide Landlord with certificates evidencing such builder's risk and other
insurance.
7. Landlord's Approval. Any approval by Landlord or its architects of
any of Tenant's drawings, plans and specifications which are prepared in
connection with the construction of the Leasehold Improvements or any inspection
by Landlord of the Leasehold Improvements shall not in any way be construed or
operate to bind Landlord or to constitute a representation or warranty of
Landlord as to the adequacy of sufficiency of such drawings, plans and
specifications or the Leasehold Improvements to which they relate, for any use,
purpose or condition, but such approval shall merely be the consent of Landlord
as may be required hereunder in connection with the construction of Leasehold
Improvements.
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SCHEDULE 3
RENEWAL OPTION
Tenant shall have the right to renew and extend the term of this Lease
with respect to the Leased Premises then subject to this Lease for the Renewal
Term (herein so called) upon and subject to the following terms and conditions:
1. Tenant may extend this Lease for one (1) Renewal Term of five (5)
years by Tenant's giving written notice thereof to Landlord no later than April
1, 2000. The Renewal Term shall commence immediately upon the expiration of the
original term of this Lease (as extended by the Third Amendment of Commercial
Lease Agreement), and upon exercise of the renewal option the date of expiration
of the term of this Lease shall automatically become the last day of the Renewal
Term.
2. The exercise by Tenant of the renewal option set forth herein must be
made, if at all, by written notice executed by Tenant and delivered to Landlord
on or before the date set forth hereinabove. Once Tenant shall exercise the
renewal option, Tenant may not thereafter revoke such exercise. Tenant shall not
have the right to exercise the renewal option if Tenant is in default under this
Lease, either at the time Tenant gives notice of its election to renew, or
immediately prior to the commencement of the Renewal Term. Tenant's failure to
exercise timely the renewal option for any reason whatsoever shall conclusively
be deemed a waiver of such renewal option.
3. Tenant shall take the Leased Premises "as is" for the Renewal Term
and Landlord shall have no obligation to make any improvements or alterations to
the Leased Premises.
4. Base Rent for the Renewal Term shall be at the Fair Market Value Rate
(hereinafter defined) multiplied by the number of net rentable square feet of
floor space in the Leased Premises, provided, however, that in no event shall
the Base Rent for the Renewal Term be less than the Base Rent in effect
immediately prior to the expiration of the original term of this Lease (as
extended by the Third Amendment of Commercial Lease Agreement). For purposes
hereof the "Fair Market Value Rate" means the fair market rental rate per square
foot of net rentable square feet of floor space in the Leased Premises which
Landlord is charging for a comparable lease term at the appropriate time for
comparable tenants leasing space of comparable size similarly situated in the
Building.
5. Except as set forth in this Schedule 3, the leasing of the Leased
Premises for the Renewal Term shall be upon the same terms and conditions as are
applicable for the original term of this Lease (as extended by the Third
Amendment of Commercial Lease Agreement), and shall be upon and subject to all
of the provisions of this Lease, including without limitation the obligation of
Tenant to pay the amounts set forth in Paragraph 4 above.
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EXHIBIT 10.29
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement (the "Agreement") is made
as of July 8, 1999, by and between Avanex Corporation ("Grantor"), and COMERICA
BANK-CALIFORNIA, ("Secured Party")
RECITALS
A. Secured Party has agreed to lend to Grantor, certain funds (the
"Loan") and Grantor desires to borrow such funds from Secured Party pursuant to
the terms of a REVOLVING CREDIT & SECURITY AGREEMENT, dated of even date
herewith, (the "Loan Documents"). All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Loan Documents.
B. In order to induce Secured Party to make the Loan, Grantor has agreed
to assign certain intangible property to Secured Party for purposes of securing
the obligations of Grantor to Secured Party.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance of all of Grantor's present or future
indebtedness, obligations and liabilities to Secured Party, Grantor hereby
grants a security interest and mortgage to Secured Party, as security, in and to
Grantor's entire right, title and interest in, to and under the following (all
of which shall collectively be called the "Collateral"):
(a) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on Exhibit A
attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Grantor
now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B attached
hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Grantor connected with
and symbolized by such trademarks, including without limitation those set forth
on Exhibit C attached hereto (collectively, the "Trademarks");
(f) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights; and
(h) All amendments, extensions, renewals and extensions of any of
the Copyrights, Trademarks or Patents; and
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(i) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
Notwithstanding the foregoing, the security interest granted herein shall not
extend to and the term "Collateral" shall not include any property, rights or
licenses to the extent the granting of a security interest therein (i) would be
contrary to applicable law or (ii) is prohibited by or would constitute a
default under any agreement or document governing such property, rights or
licenses (but only to the extent such prohibition is enforceable under
applicable law including without limitation Section 9318 of the Code); provided
that immediately and automatically upon the ineffectiveness, lapse or
termination of any such prohibition or restriction, the Collateral shall include
such property, rights or licenses, and Borrower shall be deemed to have granted
a security interest in all such rights and interests as if such prohibition or
restriction has never been in effect.
2. Authorization and Request. Grantor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this security agreement.
3. Covenants and Warranties. Grantor represents, warrants, covenants and
agrees as follows:
(a) Grantor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Grantor to its customers in the ordinary
course of business;
(b) Performance of this Agreement does not conflict with or
result in a breach of any agreement to which Grantor is party or by which
Grantor is bound, except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the licensor's or other party's consent and this Agreement constitutes
an assignment;
(c) During the term of this Agreement, Grantor will not transfer
or otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Grantor in the ordinary course of business, or as set forth
in this Agreement or other Permitted Liens (as defined in the Loan Documents);
(d) Each of the Patents is valid and enforceable, and no part of
the Collateral has been judged invalid or unenforceable, in whole or in part,
and no claim has been made that any part of the Collateral violates the rights
of any third party;
(e) Grantor shall deliver to Secured Party within thirty (30)
days of the last day of each fiscal quarter, a report signed by Grantor, in form
reasonably acceptable to Secured Party, listing any applications or
registrations that Grantor has made or filed in respect of any patents,
copyrights or trademarks and the status of any outstanding applications or
registrations. Grantor shall promptly advise Secured Party of any material
change in the composition of the Collateral, including but not limited to any
subsequent ownership right of the Grantor in or to any Trademark, Patent or
Copyright not specified in this Agreement;
(f) Grantor shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Secured Party in writing of material infringements detected and
(iii) not allow any Trademarks, Patents or Copyrights to be abandoned, forfeited
or dedicated to the public without the written consent of Secured Party, which
shall not be unreasonably withheld, unless Grantor determines that reasonable
business practices suggest that abandonment is appropriate;
(g) Grantor shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those intellectual
property rights listed on Exhibits A, B and C hereto within thirty (30) days of
the date of this Agreement. Grantor shall register or cause to be registered
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, those additional intellectual property rights
developed or acquired by Grantor from time to time in connection with any
product prior to the sale or licensing of such product to any third party
(including without limitation revisions or additions to the intellectual
property rights listed on such Exhibits A, B and C). Grantor shall, from time to
time, execute and file such other instruments, and take such further actions as
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Secured Party may reasonably request from time to time to perfect or continue
the perfection of Secured Party's interest in the Collateral:.
(h) This Agreement creates, and in the case of after acquired
Collateral, this Agreement will create at the time Grantor first has rights in
such after acquired Collateral, in favor of Secured Party a valid and perfected
first priority security interest in the Collateral in the United States securing
the payment and performance of the obligations evidenced by the Loan Documents
upon making the filings referred to in clause (i) below;
(i) Except for, and upon, the filing with the United States
Patent and Trademark office with respect to the Patents and Trademarks and the
Register of Copyrights with respect to the Copyrights necessary to perfect the
security interests created hereunder, and, except as has been already made or
obtained, no authorization, approval or other action by, and no notice to or
filing with, any U.S. governmental authority or U.S. regulatory body is required
either (i) for the grant by Grantor of the security interest granted hereby or
for the execution, delivery or performance of this Agreement by Grantor in the
U.S. or (ii) for the perfection in the United States or the exercise by Secured
Party of its rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects.
(k) Grantor shall not enter into any agreement that would
materially impair or conflict with Grantor's obligations hereunder without
Secured Party's prior written consent, which consent shall not be unreasonably
withheld. Grantor shall not permit the inclusion in any material contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Grantor's rights and interests in
any property included within the definition of the Collateral acquired under
such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts if Grantor is required, in its commercially reasonable judgment
to accept such provisions; and
(l) Upon any executive officer of Grantor obtaining knowledge
thereof, Grantor will promptly notify Secured Party in writing of any event that
materially adversely affects the value of any of the Collateral, the ability of
Grantor to dispose of any Collateral or the rights and remedies of Secured Party
in relation thereto, including the levy of any legal process against any of the
Collateral.
4. Secured Party's Rights. Secured Party shall have the right, but not
the obligation, to take, at Grantor's sole expense, any actions that Grantor is
required under this Agreement to take but which Grantor fails to take, after
fifteen (15) days' notice to Grantor. Grantor shall reimburse and indemnify
Secured Party for all reasonable costs and expenses incurred in the reasonable
exercise of its rights under this section 4.
5. Inspection Rights. Grantor hereby grants to Secured Party and its
employees, representatives and agents the right to visit, during reasonable
hours upon prior reasonable written notice to Grantor, any of Grantor's plants
and facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable notice to Grantor and as often as may be reasonably
requested. Notwithstanding any provision of this Agreement to the contrary,
except upon the occurrence and continuation of an Event of Default, Grantor
shall not be required to disclose, permit the inspection, examination, copying
or making extracts of, or discuss, any document, information or other matter
that (i) constitutes non-financial trade secrets or non-financial proprietary
information, or (ii) the disclosure of which to the Secured Party, or its
designated representative, is then prohibited by (a) law, or (b) an agreement
binding on the Grantor that was not entered into by the Grantor for the primary
purpose of concealing information from the Secured Party.
6. Further Assurances; Attorney in Fact.
(a) On a continuing basis, Grantor will make, execute,
acknowledge and deliver, and file and record in the proper filing and recording
places in the United States, all such instruments, including, appropriate
financing and continuation statements and collateral agreements and filings with
the United States Patent and
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Trademark Office and the Register of Copyrights, and take all such action as may
reasonably be deemed necessary or advisable, or as requested by Secured Party,
to perfect Secured Party's security interest in all Copyrights, Patents and
Trademarks and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to Secured Party the grant or perfection of a
security interest in all Collateral.
(b) Grantor hereby irrevocably appoints Secured Party as
Grantor's attorney-in-fact, with full authority in the place and stead of
Grantor and in the name of Grantor, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(i) To modify, in its sole discretion, this Agreement
without first obtaining Grantor's approval of or signature to such modification
by amending Exhibit A, Exhibit B and Exhibit C, hereof, as appropriate, to
include reference to any right, title or interest in any Copyrights, Patents or
Trademarks acquired by Grantor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Grantor no longer has or claims any right, title or
interest;
(ii) To file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Grantor where permitted by law; and
(iii) After the occurrence of an Event of Default, to
transfer the Collateral into the name of Secured Party or a third party to the
extent permitted under the California Uniform Commercial Code.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under this Agreement:
(a) An Event of Default occurs under the Loan Documents; or
(b) Grantor breaches any warranty or agreement made by Grantor in
this Agreement and, as to any breach that is capable of cure, Grantor fails to
cure such breach within ten (10) days of Grantor learns of such breach.
8. Remedies. Upon the occurrence of an Event of Default, Secured Party
shall have the right to exercise all the remedies of a secured party under the
California Uniform Commercial Code, including without limitation the right to
require Grantor to assemble the Collateral and any tangible property in which
Secured Party has a security interest and to make it available to Secured Party
at a place designated by Secured Party. Secured Party shall have a nonexclusive,
royalty free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Secured Party to exercise its rights and remedies
upon the occurrence of an Event of Default. Grantor will pay any expenses
(including attorneys' fees) incurred by Secured Party in connection with the
exercise of any of Secured Party's rights hereunder, including without
limitation any expense incurred in disposing of the Collateral. All of Secured
Party's rights and remedies with respect to the Collateral shall be cumulative.
9. Indemnity. Grantor agrees to defend, indemnify and hold harmless
Secured Party and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement, and
(b) all losses or expenses in any way suffered, incurred, or paid by Secured
Party as a result of or in any way arising out of, following or consequential to
transactions between Secured Party and Grantor, whether under this Agreement or
otherwise (including without limitation attorneys fees and expenses), except for
losses arising from or out of Secured Party's gross negligence or willful
misconduct.
10. Course of Dealing. No course of dealing, nor any failure to
exercise, nor any delay in exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
11. Attorneys Fees. If any action relating to this Agreement is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys fees, costs and disbursements.
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12. Amendments. This Agreement may be amended only by a written
instrument signed by both parties hereto
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
14. California Law and Jurisdiction: Jury Waiver. This Agreement shall
be governed by the laws of the State of California, without regard for choice of
law provisions. Grantor and Secured Party consent to the exclusive jurisdiction
of any state or federal court located in Santa Clara County, California. GRANTOR
AND SECURED PARTY EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LOAN DOCUMENTS, THIS
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Address of Grantor: GRANTOR:
42501 Albrae Street Avanex Corporation
Fremont, Ca. 94538
By: /s/ JESSY CHAO
----------------------------------
Title:
--------------------------------
JESSY CHAO
--------------------------------------
DIRECTOR OF FINANCE
Address of Secured Party: SECURED PARTY:
75 E. Trimble Road Comerica Bank-California, a California
San Jose, CA. 95131 Banking Corporation
By: /s/ ELIZABETH WILKERSON
----------------------------------
Elizabeth Wilkerson
Title: Corporate Banking Officer
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EXHIBIT A
List Of Copyrights
N/A
6
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EXHIBIT B
List of Patents
N/A
7
<PAGE> 8
EXHIBIT C
List of Trademarks
<TABLE>
<CAPTION>
Name Serial Number Date of Filing
<S> <C> <C>
A AVANEX 75 673,262 April 2, 1999
DESIGN ONLY 75 673,256 April 2, 1999
AVANEX 75 673,049 April 2, 1999
</TABLE>
8
<PAGE> 1
EXHIBIT 10.30
AVANEX CORPORATION
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement (the "Agreement") is made and entered
into by and between Avanex Corporation, a California corporation with principal
offices at 42501 Albrae Street, Fremont, California 94538 ("Avanex"), and
Concord Micro-Optics, Inc. a California corporation with principal offices at
_____________________________ ("CMI"). The parties hereby agree as follows:
1. Scope. In order to avoid repetitive negotiations, this Agreement
shall apply to all purchase orders placed by Avanex and accepted by CMI (or the
JV Co., as defined below) during the Term (as defined below) for the Products
described in Exhibit A attached hereto ("Product(s)"), as such Exhibit may be
amended from time to time to add products upon the mutual agreement of the
parties. This Agreement shall apply to all current or future divisions,
subsidiaries, affiliates, locations and operations of Avanex, wherever located.
It is acknowledged and agreed by the parties that as soon as practicable after
the execution of this Agreement, CMI will establish and control a Sino-foreign
joint venture company in Tianjin, China (the "JV Co.") organized under the laws
of the People's Republic of China ("PRC") and that CMI shall, within ten (10)
days of the establishment of the JVCo, cause the JV Co. to execute, and its
board of directors to ratify, the Acknowledgment and Agreement, in the form set
out in Exhibit B attached hereto, pursuant to which the JV Co. shall become a
party hereto. CMI and the JV Co. shall be jointly and severally liable for all
obligations of CMI contained herein.
2. Term. The term of this Agreement shall commence upon execution of
this Agreement by Avanex and CMI (the "Effective Date") and shall continue for
[*](the "Initial Term"). Subject to a maximum aggregate of [*]), this Agreement
shall be automatically renewed for additional [*] (the "Extended Term") unless
either party gives written notice of termination at least [*] before the end of
the Initial Term or any [*] thereof or unless sooner terminated in accordance
with the provisions hereof (collectively the "Extended Term"). "Term" shall mean
the Initial Term and the Extended Term, if applicable.
3. Terms and Conditions.
(a) This Agreement contains the exclusive terms and conditions
which apply to all purchases, notwithstanding any purchase order, acknowledgment
or other business forms transmitted by CMI, the JV Co. or Avanex. All CMI and JV
Co. acknowledgments and invoices must reference this Agreement and the
applicable Avanex purchase order.
(b) This Agreement does not constitute a purchase order.
Purchases hereunder shall be made only by Avanex's purchase orders issued by
Avanex's purchasing department. Avanex shall be liable under this Agreement only
for those Products covered by such purchase orders. [*]
4. Products and Prices.
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(a) The Products covered by this Agreement and the prices for
such Products are as specified in Exhibit A. Prices are set forth in United
States Dollars.
(b) CMI represents that to the best of its knowledge this
Agreement does not violate provisions of the Robinson-Patman Act.
(c) [*]
(d) The prices set forth in Exhibit A are inclusive of any and
all applicable taxes including any PRC and U.S. federal, state and local VAT
sales, use and like taxes and any such applicable taxes shall be detailed on
CMI's invoice. If Avanex complies with the U.S. statutory resale tax certificate
requirements of states where appropriate, no sales, use or like taxes shall be
included in the price.
(e) The parties agree that any new or modified Products will be
priced based upon assumed volumes and complexity factors employed in the pricing
model of that Product that most closely resembles the new or modified Products
to be priced.
5. F.O.B. Point. Unless otherwise specifically provided on the face of
the purchase order, Products shall be delivered on an F.O.B. destination basis
to the Avanex's designated plant in Fremont, California, at which time title
shall pass to Avanex. CMI shall insure and ship such items at Avanex's expense.
Orders which are to be drop shipped to Avanex's customers will be designated on
the purchase order as F.O.B. CMI, at CMI's manufacturing facility. Avanex will
specify carrier, insurer and freight terms.
6. Invoices.
(a) Upon shipment of Products ordered, CMI will submit to Avanex
an invoice showing invoice number and date, remit to address, the purchase order
number, Avanex part number and revision, quantity of each Product, unit prices,
each applicable tax and extended totals.
(b) Avanex shall pay each invoice by the later of:
(i) Payment Due Date which is defined as thirty (30)
days after the receipt of invoice, or
(ii) thirty (30) days after receipt of the shipment.
7. Ordering and Delivery.
(a) Avanex shall provide CMI with a non-binding rolling [*]
forecast on a [*] basis of the quantity of each Product desired. Actual
Avanex orders shall be submitted by telecopier or in writing on Avanex's
standard purchase order form and shall
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the Commission. Confidential treatment has been requested with respect to the
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specify the purchase order number, Avanex part number for each Product, quantity
of Product desired, the locations to which the Product is to be delivered, and
the date or dates desired for delivery of the ordered Product to such locations.
(b) CMI agrees to accept each order for the full quantity of
Product ordered. After receipt of an order from Avanex, CMI shall notify Avanex
within seventy-two (72) hours if CMI cannot meet the desired delivery date(s)
and will propose alternative delivery date(s). If, within seven (7) business
days after notification of any proposed alternative delivery date(s), Avanex
does not notify CMI of Avanex's rejection of CMI's alternative delivery date(s),
or otherwise reach agreement with CMI on the agreed delivery date, then the
order shall be considered confirmed with the alternative delivery date(s)
becoming the agreed delivery date. CMI's failure to so notify Avanex shall
constitute CMI's agreement to Avanex's desired delivery date(s), which will then
become the agreed delivery date. CMI shall send Avanex a formal written
acknowledgment of each Avanex purchase order within five (5) business days. All
delivery dates and the terms "deliver" and "delivery" as used herein, shall
refer to delivery to Avanex's designated plant in Fremont, California, or in the
instance of any order to be drop shipped to Avanex's customer, delivery by CMI
to the freight carrier specified in such order, or if no carrier is specified,
to the carrier selected by CMI.
(c) Notwithstanding anything set forth above to the contrary,
all Avanex requested delivery dates providing the minimum number of business
days lead time specified in Exhibit A of this Agreement for a Product (the "Lead
Time") shall be the Agreed delivery date. The Lead Time set forth on Exhibit A
may be adjusted by CMI: (i) upon thirty (30) days written notice with respect to
increases in Lead Times; or immediately upon written notice to Avanex with
respect to decreases in Lead Times. CMI agrees to use its best efforts to
minimize the Lead Times set forth on Exhibit A.
(d) CMI shall meet the agreed delivery dates and understands
that time is of the essence with respect to its performance of its obligations
hereunder. CMI agrees that its obligations to use its best efforts include an
obligation to diligently monitor its performance against its delivery
obligations hereunder and agrees that any failure to perform such monitoring
obligations shall constitute a material default of this Agreement.
(e) CMI agrees to maintain safety stock of component parts for
the quantities of Products set forth on Exhibit C hereto as amended by Avanex
from time to time by written notice to CMI.
(f) Certain long lead time components (the "Long Lead
Components") are set forth on Exhibit D. Avanex shall update Exhibit D from time
to time by written notice to CMI. CMI agrees to use Avanex's forecast of
Products volumes and its material planning system to calculate the quantities of
such Long Lead Components which should be ordered in advance of Avanex's
issuance of a purchase order for Products hereunder in order for CMI to meet the
Lead Times set forth on Exhibit A. CMI shall prepare a report setting forth the
quantities of such Long Lead Components which must be ordered, the quantities
already on order in advance of Avanex's issuance of purchase orders.
8. Avanex Requested Changes.
(a) Avanex may, at any time, make changes in writing to any of
the following:
(i) applicable drawings, designs or specifications,
(ii) method of shipment or packing, and
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(iii) place of delivery.
If the change causes an increase in the cost or the time required by CMI for
performance of any purchase order issued under this Agreement and CMI so
notifies Avanex in writing, then if Avanex wishes such change to be made, an
equitable adjustment will be made in the price or delivery schedule or both and
the Agreement and/or any applicable purchase order will be modified accordingly
in writing. With respect to rework orders, the parties shall negotiate in good
faith to determine the price of such changes. Claims by CMI for adjustment due
to an Avanex change order must be made within fifteen (15) days from the date of
CMI's receipt of the change order; such period may be extended upon the written
approval of Avanex.
(a) If Avanex decides to cancel any definitive purchase order,
Avanex must give CMI forty-five (45) days' notice before CMI's committed
delivery date. If the time period remaining between the then current date and
CMI's committed delivery date for a Product is less than forty-five (45) days,
Avanex must pay CMI [*] of the canceled amount.
(b) If the time period remaining between the then current date
and CMI's committed delivery date for a Product is more than forty-five (45)
days, then Avanex may with respect to each purchase order and at no charge make
any changes to delivery dates and unit quantities for such Product.
9. Over Shipments. Avanex will pay only for maximum quantities ordered,
unless Avanex has issued a change order authorizing an over shipment prior to
such delivery by CMI.
10. Early Shipments and Late Shipments. For Products delivered five (5)
or more days before or seven (7) or more days after the agreed delivery date,
Avanex may:
(a) Return such Products to CMI (or to the JV Co., as the case
may be) freight collect,
(b) Accept such Products with payment based upon the agreed
delivery date and not the date of receipt by Avanex, or
(c) In the event of late shipments, charge CMI (or the JV Co.,
as the case may be) a late delivery fee equal to [*] of the agreed delivery
amount for each full week of delay.
11. Modifications to Agreed Delivery Dates. CMI shall at all times use
its best efforts to deliver the unit quantity of Products to be delivered to
Avanex on the agreed delivery date. If, after employing such best efforts, CMI
first determines that it will be unable to deliver the unit quantity of Products
to be delivered to Avanex on the Agreed delivery date, then CMI shall notify
Avanex within twenty-four hours of such determination, and the parties will
negotiate in good faith new agreed delivery date, predicated on CMI's continued
use of such best efforts, for such Product(s). Any partial deliveries resulting
from such re-scheduling shall be separately invoiced by CMI and paid for by
Avanex without regard to subsequent deliveries.
12. [*]
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13. Packing, Shipping Documents and Markings.
(a) Shipping materials and practices must meet or exceed general
industry standards and must be adequate to protect the Products from damage,
contamination, or degradation during shipment and during unpacking at the
destination. Electrostatic Discharge (ESD) protection must extend to
intermediate container level. Intermediate containers shall contain no loose
packing materials or Styrofoam.
(b) Shipments of Product having multiple date codes at the
intermediate container level must have the unit containers organized to afford
easy identification and separation, Therefore:
(i) unit containers may not contain mixed date
codes;
(ii) intermediate containers may not contain more
than two (2) date codes; and
(iii) shipments may not contain more than five (5)
date codes.
(c) Intermediate containers shall be marked with a label on the
end listing:
(i) CMI's name, part number, part description;
(ii) total quantity of Product in the container, date
code(s) by quantity; and
(iii) Avanex's part number and purchase order number
(d) The maximum acceptable weight for the shipping container is
45 pounds. Skids or pallets must be used with containers that are unsuitable for
manual handling.
14. Acceptance and Quality.
(a) Avanex may inspect the Products, materials and components
held by JV Co. for Avanex at JV Co.'s facilities during JV Co.'s regular
business hours. Avanex and its representatives shall observe all reasonable
security and handling measures of the JV Co. while on JV Co.'s premises.
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(b) CMI covenants to Avanex that Products sold to Avanex will
meet or exceed Avanex's product qualification requirements. Subject to the
provisions of Section 14(f) below, CMI will provide the following types of
quality inspections in accordance with its own published manual and, when
applicable, Avanex provided specifications, drawings and other such
documentation:
(i) incoming material inspections;
(ii) in-process inspections;
(iii) vendor control; and
(iv) final inspection.
(c) CMI may not make parts substitutions without the prior
written approval of Avanex. CMI shall direct all such requests for parts
substitutions to Avanex's Contract Administrator, as set forth below.
(d) Avanex may inspect, and based upon the results of such
inspection, reject or accept Products delivered hereunder in a reasonable period
of time. Any Products rejected shall be returned to CMI (or JV Co.) upon
Avanex's receipt of a return materials authorization ("RMA") for such return.
CMI shall issue RMA numbers within two (2) business days. Avanex shall return
Products in the original shipping container, if possible; otherwise Avanex shall
use a similar shipping container and such container shall be marked with the RMA
number. CMI shall repair or replace such rejected Products within five (5)
business days. With respect to Products to be repaired or replaced, the date
determined in the prior sentence shall be deemed an Agreed Delivery Date for
purposes of this Agreement, subject to modification in accordance with Section
11 hereof.
(e) Personnel designated by Avanex may freely communicate with
designated personnel of CMI (or JV Co.) with respect to technical assistance and
exchanges of information. Avanex's designated personnel shall, as reasonable,
provide technical assistance and answer questions for JV Co. personnel from time
to time, provided, however, that such communication shall not permit CMI to
deviate from any of its obligations under this Agreement.
15. End of Term Orders. Purchase orders placed by Avanex prior to the
termination of this Agreement for which the Agreed delivery date are after the
termination of this Agreement but not more than sixty (60) days after the end of
this Agreement shall continue to be governed by the terms and conditions of the
Agreement.
16. [Intentionally Omitted]
17. [Intentionally Omitted]
18. Risk of Loss or Damage. CMI shall be responsible for any loss or
damage to Product due to CMI's failure to properly preserve, package, or handle
the Product. In addition, notwithstanding any prior inspection, and only with
respect to Products delivered to Avanex's designated plant in Fremont,
California: (i) CMI will bear all risk of loss, damage or destruction to the
ordered Products until delivery to Avanex; and (ii) CMI will also bear the risk
of loss with respect to any Products rejected by Avanex and returned to CMI,
except that Avanex will be responsible for any damage to rejected or unaccepted
Product occasioned by the willful misconduct or negligence of its employees
acting within the scope of their employment.
19. Import/Export and Product Licenses.
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(a) CMI shall provide all information under its control which is
necessary or useful for Avanex to obtain any export or import licenses required
for Avanex to ship or receive Product(s), including, but not limited to, U.S.
customs certificates of delivery, affidavits of origin, and U.S. Federal
Communications Commissions identifier, if applicable.
(b) With respect to Product(s), each party shall comply with
export laws enacted by its respective government, and the regulations
thereunder.
(c) CMI shall be solely responsible for obtaining any and all
licenses required for production of Products in China, and CMI covenants to use
its best efforts to obtain such licenses in a prompt manner. CMI shall be
responsible for submitting executed versions of this Agreement to the relevant
government authorities in the PRC for approval under the Regulations of the
People's Republic of China for the Administration of Technology Import Contracts
and for registration under the Provisional Measures for the Administration of
Trade in Connection with the Import of Technology and Equipment. CMI shall
promptly deliver to Avanex satisfactory evidence that the approval and
registration have been obtained.
20. New Process Inclusion. CMI agrees to keep Avanex informed of any new
process(es) or improvements to existing process(es) involved in the production
of Products.
21. Qualification. CMI shall ensure that all Products delivered
hereunder meet Avanex's Product and test specifications as set forth in Exhibit
E and the Bellcore standard, as applicable. CMI shall ensure that the JV Co.
shall receive ISO 9002 certification within [*] months of its establishment, but
in no event later than [*]. CMI shall also ensure that the JV Co. complies with
all PRC law in its operations including, without limitation, the Labor Law of
the PRC and other employment regulations.
22. Correlation. At Avanex's option, correlation of test
programs/procedures between Avanex and CMI shall be completed prior to Avanex's
first customer shipment ("FCS") of an Avanex product containing Product. In the
event of a conflict between test results, Avanex's test method, programs and
analysis shall prevail. Details and specific procedures of the correlation plan
between Avanex and CMI will be as mutually defined and agreed to by the parties.
23. Programs and Services. It is the intention of the parties hereto to
negotiate in good faith and to enter into an agreement for the programs and
services described hereunder.
(a) Avanex wishes to develop with CMI a Dock to Stock Program.
Such program shall be designed to supply Avanex with Products that meets
established quality levels and to eliminate incoming inspection.
(b) Avanex wishes to develop with CMI a Just In Time delivery
program ("JIT"). The JIT shall be designed to supply Avanex with the Products at
the time at which Avanex requires such Products so as to reduce the inventory
which Avanex and/or CMI are required to retain in order to meet Avanex's
Products needs.
24. CMI's Communication and Report to Avanex. CMI shall establish an
information infrastructure that allows Avanex freely assess the JV Co's cost,
production and inventory information via electronic data exchange as soon as CMI
commences production for Avanex. CMI shall prepare and deliver to Avanex a
Quarterly Report containing the following information for each Product by
ordering location:
(a) Product;
(b) quantity ordered during the quarter;
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(c) total quantity shipped;
(d) date of each shipment with quantity, dollar amount, ship to;
and
(e) quantity on back order.
Such Quarterly Reports shall be delivered to Avanex within thirty (30) days
after the end of each calendar quarter during the term of this Agreement.
25. Transfer of Information. In connection with this Agreement, Avanex
shall provide CMI with information necessary to produce the Products. Such
information transfer shall take place in the manner set forth in Exhibit F
attached hereto. CMI acknowledges that all information to be transferred to it
by Avanex pursuant to this Section 25 is Proprietary and Confidential
Information (as defined below) of Avanex subject to the obligations of
Confidentiality in Section 26.
26. Confidential Information.
(a) CMI acknowledges that information which Avanex may disclose
to CMI (or JV Co.) in a tangible form marked "Confidential," "Proprietary" (or
with similar legend), or that is disclosed orally and confirmed in writing as
confidential within a reasonable time, comprises proprietary and confidential
information of Avanex ("Confidential Information"). In addition, Confidential
Information shall include all designs, engineering details, schematics,
drawings, and specifications developed by CMI (or JV Co.) with respect to the
Products. If Confidential Information is orally disclosed it shall be identified
as such at the time of disclosure and a confirmation of the confidential nature
of the information shall be sent to the CMI (or JV Co.) within thirty (30) days
after the disclosure.
(b) CMI agrees not to use Confidential Information or disclose,
distribute or disseminate such Confidential Information to any third person
except as expressly permitted under this Agreement or as expressly agreed in
writing by Avanex. CMI agrees to restrict access to such Confidential
Information to those employees, contractors or consultants of CMI or JV Co. who
have agreed to be bound by and have duly executed a Confidentiality Undertaking
in the form set forth in Exhibit G. CMI shall not use such materials at a
location other than at the JV Co.'s registered address in Tianjin, China without
Avanex's prior written consent. CMI agrees to establish adequate internal
safeguards and otherwise use reasonable care in restricting the use and
dissemination of any Confidential Information in order to protect against its
unauthorized use or disclosure to any third party. CMI shall exercise the same
degree of care to prevent unauthorized use or disclosure of the Confidential
Information to others as it takes to preserve and safeguard its own confidential
information, but in any event, no less than a reasonable degree of care.
(c) CMI (or JV Co.) shall be permitted to disclose to any
government, regulatory authority or court, any Confidential Information if CMI
(or JV Co.) is required by law or judicial decree to do so for the express
purposes of obtaining their approval to make Licensed Products in the PRC. Such
disclosure shall not constitute a breach of this Agreement provided that CMI
promptly notifies Avanex when such obligation of disclosure arises to enable CMI
to seek an appropriate protective order and to make known to the said
government, regulatory authority or court the proprietary nature of the
Confidential Information to be disclosed and to make any applicable claim of
confidentiality prior to the disclosure being made and provided CMI has first
informed Avanex of any requirement that exists in Chinese laws, regulations or
judicial decrees for that government, regulatory authority or court to make
further disclosures of the information to any third party.
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(d) CMI shall be relieved of this obligation of confidentiality
to the extent any Avanex information:
(i) was in the public domain at the time it was
disclosed or has become in the public domain through no fault of CMI;
(ii) CMI can prove was known to CMI, without
restriction, at the time of disclosure as shown by the files of the CMI in
existence at the time of disclosure;
(iii) is disclosed by CMI with the prior written
approval of Avanex;
(iv) CMI can prove was independently developed by CMI
without any use of the Confidential Information and by employees or other agents
of (or independent contractors hired by) CMI who have not had access to any
Confidential Information; or
(v) becomes known to CMI, without restriction, from a
source other than Avanex without breach of this Agreement by CMI and otherwise
not in violation of Avanex's rights.
(e) CMI acknowledges that breach of the confidentiality
obligation would cause irreparable harm to Avanex, the extent of which would be
difficult to ascertain. Accordingly, CMI agrees that Avanex may seek immediate
injunctive relief in the event of breach of the confidentiality obligation by
CMI or JV Co.
(f) Within seventy-five (75) business days after termination of
this Agreement, CMI shall promptly return all tangible materials containing such
Confidential Information to Avanex. Concurrently with the return of such
materials, CMI agrees to confirm in writing that all materials containing
Confidential Information have been returned to Avanex by CMI.
27 License, Intellectual Property Rights
(a) For so long as this license remains in effect under PRC law,
Avanex hereby grants to CMI and JV Co. (i) a [*] restrictive, nontransferable,
license with no right to sublicense under which CMI may (A) make Licensed
Products (as set forth on Exhibit H) in the PRC (excluding the Hong Kong SAR,
Macau, and Taiwan) and in the United States and use and sell Licensed Products
worldwide, and (ii) use the Licensed Information (as set forth on Exhibit H) in
China and the United States. This license shall be exclusive with respect to the
manufacture of Licensed Products in the PRC (excluding the Hong Kong SAR, Macau,
and Taiwan) and the use of Licensed Information in the PRC (excluding the Hong
Kong SAR, Macau, and Taiwan), but shall be nonexclusive with respect to all
other rights and purposes and territories. The parties agree that until the [*]
of this Agreement (unless earlier terminated), each party shall provide the
other party information related to any revision or improvement of Licensed
Products or Licensed Information.
(b) Notwithstanding the foregoing, Avanex retains for itself all
proprietary and intellectual property rights including all patent rights in and
to all designs, engineering details, schematics, drawings, specifications and
other similar data and Confidential Information which:
(i) pertain to the Products; and are
(ii) provided to CMI or JV Co. under this Agreement or
developed by CMI or JV Co. for Avanex. CMI hereby assigns to Avanex all
proprietary and intellectual
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<PAGE> 10
property rights, including all patent rights, in and to such designs,
engineering details, schematics, drawings, specifications and other similar data
and Confidential Information. Avanex shall have the sole right to file any
patent applications thereon. CMI agrees to cooperate with Avanex and take all
reasonable additional actions and execute such agreements, instruments, and
documents as may be necessary or desirable to perfect Avanex's ownership
interests in accordance with the intent of this Section 27(b), including, but
not limited to, the execution of necessary and appropriate instruments of
assignment.
(c) Any such information and materials which Avanex may furnish
to CMI (or JVCo) shall be in CMI's (or JV Co.'s) possession pursuant only to a
restrictive, nontransferable, nonexclusive license with no right to sublicense
under which CMI may use such information and materials solely for the purposes
of manufacturing, operating, servicing and repairing the Products for Avanex's
purposes pursuant to this Agreement. Within seventy-five (75) business days
after termination of this Agreement, CMI shall promptly return all tangible
materials containing such Confidential Information to Avanex. Concurrently with
the return of such materials, CMI agrees to confirm in writing that all
materials containing Confidential Information have been returned to Avanex by
CMI.
(d) CMI shall inform Avanex in writing immediately upon becoming
aware of any use, suspected use, of the Licensed Information, or any party of
it, by any other party. In the event of any actual, any threatened or potential
litigation against Avanex alleging infringement of a third party's patent or any
other rights of such third party arising from the use of the Licensed
Information, CMI shall give immediate written notice to Avanex. Avanex shall
bear all legal and economic responsibilities for defending or otherwise dealing
with such actual or threatened litigation and CMI shall in a timely manner
provide Avanex with all assistance as may be reasonably requested by Avanex from
time to time. CMI agrees not to be involved in any discussions with any third
party relating to nor to take any steps relating to or to compromise any
litigation or threatened or potential litigation relating to the Licensed
Information, without the prior written consent of Avanex.
28. Documentation Reproduction
Subject to CMI's strict compliance with Sections 26 and 27 of
this Agreement, CMI may reproduce documentation, including Confidential
Information, in the performance of its obligations under this Agreement.
29. Avanex-unique Components. Except in accordance with Section 27, CMI
will not ship any Product that is developed by, in conjunction with, or in
accordance with specifications from Avanex ("Avanex-unique Components"), to any
third party without the express, prior written consent of Avanex.
30. Inventions.
(a) All discoveries, improvements and inventions, whether or not
patentable, conceived or first reduced to practice, as those terms are used
before the U.S. Patent and Trademark Office, in the performance of this
Agreement by Avanex personnel shall be the sole and exclusive property of Avanex
and Avanex shall retain any and all rights to file any patent applications
thereon.
(b) Subject to the provisions of Section 27(b) hereof, all
discoveries, improvements and inventions conceived or first reduced to practice,
as those terms are used before the U.S. Patent and Trademark Office, whether or
not patentable, in the performance of this Agreement by CMI's personnel shall be
the sole and exclusive property of CMI and CMI shall retain any and rights to
file any patent applications thereon.
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<PAGE> 11
(c) Subject to the provisions of Section 27(b) hereof, all
discoveries, improvements and inventions conceived or first reduced to practice,
as those terms are used before the U.S. Patent and Trademark Office, whether or
not patentable, in the performance of this Agreement jointly by CMI personnel
and Avanex personnel (the "Joint Inventions"), shall be the property jointly of
CMI and Avanex, each party having [*] interest therein. Each party shall be
entitled to use, exploit, transfer, and grant licenses with respect to its
interest in Joint Inventions without notice or accounting to the other party.
31. CMI's Process Changes. CMI agrees that it will not invoke any
changes in process, design or method of manufacturing that might affect form,
fit or function of the Products, including without limitation, changes in
performance, maintenance procedures, interchangeability, interconnectability,
reliability or manufacture compatibility of Products during the term of this
Agreement without Avanex's prior written consent. CMI further agrees that any
contemplated changes in process or method of manufacturing will be submitted to
Avanex in writing, (the original notification to be provided to the
Administrator and copies to Avanex personnel as may be required), in sufficient
time to enable Avanex a reasonable opportunity in which to evaluate such
changes. If said design change, in Avanex's opinion, necessitates evaluation by
Avanex of compatibility with Avanex's systems, CMI, upon request from Avanex,
will provide Avanex prototype units of Product for evaluation. Such design
change, once approved by Avanex, shall cause the revision level of the Product
to be rolled. CMI WILL NOT IMPLEMENT SUCH CHANGES WITHOUT THE PRIOR WRITTEN
CONSENT OF AVANEX.
32. Discontinuance or Reduction of Production of a Product. CMI may
reduce or discontinue its production of a Product upon [*] prior written notice
to Avanex, so long as CMI does not offer such Product to any other of its
customers after it stops offering such Product to Avanex. Within sixty (60) days
after receipt by Avanex of written notice of such discontinuance ("Notice
Date"), Avanex may place and CMI shall accept all orders unless otherwise
precluded by any law, regulation, court judgment, order or permit, for delivery
over a [*] period following Notice Date with respect to any Product adversely
affected by such Product discontinuance. As a material inducement to entering
into this Agreement, CMI represents to Avanex that after diligent inquiry CMI is
aware of no Product or process involved in the production of any Product which
violates any law, regulation, judgment, order or permit.
33. Safety Standards and Legal Compliance.
(a) CMI will use its best efforts to provide information,
participate in inspections and perform all other actions reasonably requested by
Avanex to receive and/or maintain safety certifications by governmental
agencies, to the extent required or applicable.
(b) CMI agrees to notify Avanex of any post-sale warnings,
retrofits or recalls which CMI implements with respect to any suppliers,
materials, and processes that are used by or for, or included in the Product(s).
(c) CMI will promptly notify Avanex with respect to any matter
to which CMI receives or develops knowledge with respect to the safe and
reliable operation of the Product(s).
34. Insurance. During the Term of this Agreement, CMI, at its sole cost
and expense, shall carry and maintain insurance adequate to cover its
manufacturing operations, product liability (naming Avanex as loss payee) and
its other obligations under this Agreement. CMI shall provide Avanex with a
Certificate of Insurance stating that such insurance policies are in full force
and effect. CMI shall require its insurer(s) to give Avanex thirty (30) days
written notice before the policy or policies are canceled or materially altered.
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35. Warranty.
(a) CMI represents and warrants to Avanex that for a period of
[*] from the quality assurance date stamped on each Product delivered hereunder,
all Products delivered: (i) are new, unused, will be free from defects in
workmanship and manufacture; and (ii) will conform to the product and test
specifications incorporated by reference in Exhibit D and the Bellcore
standards, as applicable. CMI shall assign to Avanex any warranties with respect
to material. CMI MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED WITH RESPECT TO PRODUCT(S), AND EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. All
warranties run to the benefit of Avanex. Avanex's approval of CMI's materials
will not relieve CMI of any warranties.
(b) Defective or non-conforming Products shall be returned to
CMI (or JV Co.) upon Avanex's receipt of a RMA for such return. CMI shall issue
RMA numbers within two (2) business days. Avanex shall return Products in the
original shipping container, if possible, otherwise Avanex shall use a similar
shipping container and such container shall be marked with the RMA number. CMI
shall repair or replace such rejected Products within five (5) business days.
With respect to Products to be repaired or replaced, the date determined in the
prior sentence shall be deemed an Agreed Delivery Date for purposes of this
Agreement, subject to modification in accordance with Section 11 hereof.
(c) CMI shall not unreasonably withhold its approval of Avanex's
offer to correct itself, or to reimburse a third party to correct, the defective
or non-conforming Products and charge CMI with the cost of such correction.
(d) Any repaired or replaced Products shall be subject to the
warranty set forth above. Out of warranty service shall be provided at CMI's
standard terms, conditions, and rates.
(e) Subject to Avanex's rights with respect to Section 35(c) and
Section 36 hereof such repair or replacement shall be Avanex's exclusive remedy
and CMI's sole liability for any breach of the warranty set forth in this
Section.
36. Indemnification and Hold Harmless. Subject to the limitations
provided in Section 39 of this Agreement, in connection with the transactions
contemplated by this Agreement CMI agrees to indemnify and hold Avanex harmless
from and against any claims, actions, losses, damages, costs and expenses
(including without limitation, reasonable attorneys' fees) arising from any of
the following:
(a) breach or violation of any import or export laws of China or
the United States;
(b) breach of any representation or warranty made by CMI in this
Agreement;
(c) claim brought by any third party that CMI's (or the JV
Co.'s) (i) manufacture of Products or Licensed Products or (ii) use of the
Licensed Technology, violates any intellectual property rights of such party or
another third party; or
(d) claim brought by any third party against Avanex for any
loss, damage, cost, expense or liability arising from defects in the Products
manufactured by CMI (or the JV Co.).
37. Cancellation for CMI's Default.
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(a) Avanex may, at any time prior to delivery, by written
notice, cancel this Agreement in whole or in part, or any purchase order issued
hereunder if, in Avanex's good faith opinion, CMI has:
(i) failed to make delivery of Product on an Agreed
Delivery Date as such date may be modified under Section 11 hereof;
(ii) other than as provided in the previous clause,
failed to replace or correct defective items in accordance with the provisions
of Sections 14 or 35 above;
(iii) failed to provide adequate assurance of
performance within five (5) business days of having received Avanex's notice of
a failure by CMI to make progress under this Agreement so as to endanger
performance in accordance with its terms;
(iv) becomes bankrupt or insolvent, suffers a receiver
to be appointed or makes an assignment for the benefit of creditors; or
(v) is in material default of any obligations, except as
set forth in Section 37(a)(i), (ii), (iii) and (iv), above, under this
Agreement, and such default is not cured within thirty (30) days of Avanex's
notice of such default.
(b) If this Agreement or any purchase order under this Agreement
is canceled for CMI's default, Avanex may, in addition to all legal and
equitable remedies that may be available to Avanex, procure upon such terms and
in such manner as Avanex may deem appropriate, goods or services similar or
substantially similar to those canceled. CMI will then be liable to Avanex for
any excess costs occasioned thereby.
(c) If all or a portion of this Agreement or any purchase order
is canceled for CMI's default, Avanex may, in addition to all other remedies
that may be available to Avanex, require CMI to transfer title and to deliver to
Avanex, in the manner and to the extent directed by Avanex, provided that Avanex
pays for such property pursuant to Section 37(e), below:
(i) any completed items not yet delivered; and/or
(ii) any partially completed items and materials that
CMI (or JV Co.) has produced or acquired for the performance of the terminated
portion.
(d) CMI will, upon direction of Avanex, protect and preserve the
property listed in this Section that is in the possession of CMI or JV Co.
Nothing in this Section 37 is intended to excuse CMI from proceeding with any
uncanceled portion of this Agreement or purchase order(s) under this Agreement.
(e) Avanex will pay CMI the following amounts for property for
which title has been transferred and delivery completed under Section 37(c),
and/or for any services performed under Section 37(d), above:
(i) the contract price for any completed Products or
services rendered in accordance with this Agreement;
(ii) the actual costs incurred by CMI which are properly
allocable under recognized commercial accounting practices to the terminated
portion of this Agreement, plus a fair and reasonable profit on such costs (as
reasonably agreed to by the parties) with respect to partially completed
Products and materials that CMI has produced or acquired for the performance of
the terminated portion of this Agreement. With respect to work in progress, if
it
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<PAGE> 14
appears that CMI would have sustained a loss on the order, no profit will be
allowed, and an adjustment will be made reducing the amount of the settlement to
reflect the indicated rate of loss; or
(iii) the reasonable costs incurred by CMI in protecting
property in which Avanex has or may acquire an interest under this Section 37.
(f) Payments made under this Section 37 may not exceed the
aggregate price specified in this Agreement or purchase order(s) under this
Agreement less payments otherwise made or to be made. Any amounts payable for
property lost, damaged, stolen or destroyed prior to delivery to Avanex will be
excluded from amounts otherwise payable to CMI under this Section 37.
(g) Both parties agree to negotiate in good faith the settlement
of any dispute that may arise under this Agreement. Pending settlement of any
dispute, CMI agrees to continue to fabricate and deliver Products under the
terms of this Agreement as directed by Avanex.
38. Termination for Convenience.
(a) At any time for convenience, Avanex may terminate work under
this Agreement in whole or in part, by [*] written notice to CMI specifying the
extent to which performance of work is terminated and the time at which such
termination becomes effective. Upon such termination, CMI will to the extent and
at the times specified by Avanex, stop all work under this Agreement or purchase
order under this Agreement, place no further orders for materials to complete
the work, assign to Avanex all CMI's interests under terminated subcontracts and
orders, settle all claims thereunder after obtaining Avanex's approval, protect
all property in which Avanex has or may acquire an interest, and transfer title
and make delivery to Avanex of all articles, materials, work in process, and
other things held or acquired by CMI in connection with the terminated portion
of this Agreement. CMI will proceed promptly to comply with Avanex's
instructions respecting each of the foregoing without awaiting settlement or
payment of its termination claim. Within thirty (30) days after such
termination, CMI may submit to Avanex its written claim for termination charges,
in the form and with the certifications prescribed by Avanex. Failure to submit
such a claim within thirty days will constitute an unconditional and absolute
waiver of all claims and a release of all Avanex's liability arising out of the
termination. The parties may agree upon the amount to be paid CMI for such
termination. If they fail to agree, Avanex will pay CMI the following amounts:
(i) the contract price for any completed Products or
services rendered in accordance with this Agreement;
(ii) the actual costs incurred by CMI which are properly
allocable under recognized commercial accounting practices to the terminated
portion of this Agreement, plus a fair and reasonable profit on such costs (as
reasonably agreed to by the parties) with respect to partially completed
Products and materials that CMI has produced or acquired for the performance of
the terminated portion of this Agreement. With respect to work in progress, if
it appears that CMI would have sustained a loss on the order, no profit will be
allowed, and an adjustment will be made reducing the amount of the settlement to
reflect the indicated rate of loss; or
(iii) the reasonable costs incurred by CMI in making
settlement and in protecting property in which Avanex has or may acquire an
interest.
(b) Payments made under this Section 38 may not exceed the
aggregate price specified in this Agreement or purchase order(s) under this
Agreement less payments otherwise
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made or to be made. Any amounts payable for property lost, damaged, stolen or
destroyed prior to delivery to Avanex will be excluded from amounts otherwise
payable to CMI under this Section 38.
(c) Cancellation by Avanex under this Section 38 of any purchase
order shall not excuse CMI's performance with respect to any other Agreement or
Purchase order.
39. LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER AVANEX OR CMI OR JV
CO. BE LIABLE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT
OF THIS AGREEMENT, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), PRODUCT LIABILITY OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES AND EVEN IF SUCH DAMAGES COULD HAVE BEEN REASONABLY FORESEEN.
NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS AGREEMENT IS MEANT TO ALTER THE
RIGHTS OR REMEDIES OF EITHER PARTY AGAINST THE OTHER PARTY IN ANY ACTION IN LAW
OR EQUITY BROUGHT BY A THIRD PARTY WITH REGARD TO ANY CLAIM MADE BY SUCH THIRD
PARTY.
40. Force Majeure. Neither party shall be liable for any delay or
failure in performance hereunder caused by acts of God or other causes beyond
the parties' control and without fault or negligence. In the event CMI fails to
deliver Product due to such causes, Avanex may suspend this Agreement in whole
or in part for the duration of the delaying cause, and at Avanex's option, buy
the Products elsewhere and deduct from any purchase order to CMI the quantity so
purchased. CMI shall resume performance under this Agreement immediately after
the delaying cause ceases and, at Avanex's option, extend the Initial Term
and/or Term for a period equivalent to the length of time the excused delay
endured.
41. Equal Opportunity. The "Equal Opportunity Clause" set forth in 41
C.F.R. section 60-1.4(a), the clause labeled "Affirmative Action of Disabled
Veterans and Veterans of the Vietnam Era" set forth in 41 C.F.R. section
60-250.4 and the clause labeled "Affirmative Action for Handicapped Workers" set
forth in 41 C.F.R. section 60-741.4 are hereby incorporated by reference and all
references in such clauses to "the contractor" shall be deemed to be references
to CMI.
42. Government Contracts. If any purchase order under this Agreement is
issued for any purpose that is either directly or indirectly connected with the
performance of a prime contract with the U.S. government or a subcontract
thereunder, the terms that the Federal Acquisition Regulations or other
appropriate regulations required to be inserted in contracts or subcontracts,
except for those terms pertaining to cost and pricing data and cost accounting
standards, will be deemed to apply to any purchase order under this Agreement.
CMI will promptly notify Avanex if CMI becomes, or with the passage of time will
become, ineligible to perform contracts or subcontracts under U.S. Federal
Acquisition Regulations. Avanex shall use its best efforts to notify CMI of any
provision that is so passed on.
43. Survival. Notwithstanding the termination or expiration of the
Initial Term of this Agreement or any Extended Term thereof, it is acknowledged
and agreed that those rights and obligations which by their nature are intended
to survive such expiration or earlier termination shall survive including,
without limiting the foregoing, following Sections: 26, 27(b) and (c), 28, 29,
30, 35, 39, 44, 45, 47 and 48, for a period of [*]. All obligations to return
information and materials shall survive the termination of this Agreement.
44. Relationship of Parties.
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(a) Neither party shall have, or shall represent that it has,
any power, right or authority to bind the other party, or to assume or create
any obligation or responsibility, express or implied, on behalf of the other
party or in the other party's name.
(b) Nothing stated in this Agreement shall be construed as
constituting CMI (or JV Co.) and Avanex as partners, joint venturers, or as
creating the relationships of employer and employee, franchiser and franchisee,
master and servant, or principal and agent.
45. Publicity. Neither Avanex or CMI shall publicize or disclose the
existence or terms and conditions of this Agreement, or any transactions
hereunder, without the express, prior written consent of the other, except as
may be required under the rules and regulations of the United States Securities
Exchange Commission.
46. Administration.
(a) Avanex and CMI shall each assign an individual to administer
this Agreement throughout this term:
Avanex's Administrator shall be:
Mr. Jessy Chao
Avanex Corporation
42501 Albrae Street
Fremont, California 94538
(510) 360-0693
CMI's Administrator shall be:
--------------------------
--------------------------
--------------------------
(b) Each party shall inform the Administrator of the other in
writing of a change of Administrator or such Administrator's address or
telephone number.
(c) Any notice required or permitted to be given under this
Agreement shall be given in writing and shall be addressed to Avanex or CMI, as
the case may be, at the address set forth above or at such other address as may
be given in writing and: (i) by airmail, postage prepaid, certified mail, return
receipt requested; (ii) transmitted by facsimile with a confirming copy
immediately mailed thereafter; or (iii) delivered by a messenger or overnight
delivery service.
47. General. This Agreement and all of its referenced Exhibits, which
are incorporated herein by reference as if set forth in full, together with all
purchase orders, but not the preprinted terms and conditions thereof, constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior proposals, negotiations and communications, oral
or written, between the parties with respect to the subject matter hereof. No
deviation from these provisions shall be binding unless in writing and signed by
an authorized representative of the party to be charged.
Except as specifically set forth herein, all rights and remedies
conferred under this Agreement or by any other instrument or law shall be
cumulative and may be exercised singularly or concurrently. Failure by either
party to enforce any provision shall not be deemed a waiver of future
enforcement of that or any other provision. In the event that any portion of
this
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Agreement shall be held to be unenforceable, the remaining portions of this
Agreement shall remain in full force and effect and the parties shall negotiate
substitute provisions for those provisions held to be unenforceable that most
nearly effect the parties intent in entering into this Agreement. In the event
any provisions of this Agreement shall be held unenforceable against the JV Co.
under PRC law, CMI shall nevertheless be obligated to perform such obligation
unless the same shall be unenforceable under California law.
48. Governing Law and Dispute Resolution. This Agreement is entered into
at Fremont, California and shall be governed by and construed in accordance with
the laws of the State of California, USA, except that body of law of California
law concerning conflicts of law. Any dispute, controversy or claim arising out
of or relating to this Agreement shall be finally and exclusively resolved by
submission to a single arbitrator in San Francisco, California in accordance
with the commercial arbitration rules of the American Arbitration Association.
The prevailing party shall be entitled to reasonable attorneys' fees and costs.
The arbitrator shall set a limited time period and establish procedures designed
to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrator shall rule on motions to compel or limit discovery and
shall have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law or equity, should the
arbitrator determine that the discovery was refused or objected to without
substantial justification. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted under California substantive law to resolve a dispute. Any award
issued by the arbitrator shall be final and binding on the parties and
enforceable against them. Any award issued against the JV Co. shall be
enforceable by any competent court having jurisdiction over the JV Co. in
accordance with the terms of the NEW YORK (UN) CONVENTION FOR THE RECOGNITION,
AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS.
49. Assignments.
(a) The rights, duties and obligations of CMI (or JV Co.) under
this Agreement may not be assigned in whole or in part by operation of law or
otherwise without the prior express written consent of Avanex, and any attempted
assignment of any rights, duties or obligations hereunder without such consent
shall be null and void. This Agreement shall be binding on the parties and their
respective successors and permitted assigns.
(b) Avanex shall not assign its rights duties and obligations
under this Agreement without the prior written approval of CMI, which approval
CMI shall not unreasonably withhold, provided, however, that Avanex may assign
this Agreement without the prior written approval of CMI to a person or entity
into which Avanex has merged or which has otherwise succeeded to all or
substantially all of its business and assets, and which has assumed in writing
or by operation of law its obligations under this Agreement.
50. Exhibits. The following is the list of Exhibits which are attached
hereto and hereby incorporated into this Agreement by reference:
A. Product Description, Production Pricing and Lead Times
B. Form of Acknowledgement and Agreement
C. Safety Stock
D. Long Lead Components
E. Product and Test Specifications
F. Method of Information Transfer
G. Confidentiality Undertaking
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H. Licensed Products and Licensed Information
51. Language. For purposes of submission of this Agreement to the
relevant PRC authorities, this Agreement may be translated into Chinese. Such a
transaction shall be for this purpose only and the English text shall be only
the authoritative and binding text.
52. CMI Board Seat. During the period that this Agreement is in effect,
CMI shall offer Avanex the option of appointing its designee to the board of
directors of the CMI and the JV Co.
IN WITNESS WHEREOF, the parties have caused this Agreement to executed
by their duly authorized representatives.
Accepted for Avanex:
AVANEX CORPORATION
By: /s/ Walter Alessandrini
Name: Walter Alessandrini
-------------------
Title: CEO
---
Date: 5/8/1999
--------
Accepted for CMI:
CONCORD MICRO-OPTICS, INC.
By: /s/ Jeanette J. Zhou
Name: Jeanette J. ZHOU
----------------
Title: CEO
---
Date: 05/24/99
--------
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Exhibit A
Products:
[*]
Price:
[*]
Lead Times:
To be determined on a product-by-product basis.
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Exhibit B
Form of
Acknowledgment and Agreement
to the Terms of the
Avanex Corporation License and Supply Agreement
______________________________, a Sino-foreign joint venture organized and
existing under the laws of the People's Republic of China, with a principal
place of business at Tianjin, People's Republic of China ("JV Co."), hereby
agrees to fully comply with all obligations of Concord Micro-Options, Inc.
("CMI") as set out under the Avanex Corporation License and Supply Agreement
(the "Agreement"), entered into between Avanex Corporation and CMI and duly
executed by said parties on ___________, 1999, including without limitation the
provisions relating to protection of Confidential Information set forth in
Section 26 of the Agreement.
JV Co. acknowledges receipt of an executed copy of the Agreement and agrees to
deliver an executed original of this Acknowledgment and Agreement to Avanex
within seven (7) days after the execution hereof.
Accepted for JV Co. by its duly authorized legal representative:
By:
----------------------------------
Name:
--------------------------------
Title: Legal Representative
-------------------------------
Date:
--------------------------------
<PAGE> 21
Exhibit C
Safety Stock:
To be determined subsequently.
<PAGE> 22
Exhibit D
Long Lead Components:
[*]
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Exhibit E
Product and test Specifications:
[To be provided subsequently by Avanex]
<PAGE> 24
Exhibit F
Method of Information Transfer:
Avanex will furnish two copies, in the English language, of the Licensed
Information to CMI, to the extent such information exists in tangible form.
Avanex will provide [*] engineers and/or technicians dispatched by CMI up to [*]
hours of theoretical and practical training at Avanex's facilities. The parties
shall make a good faith effort to ensure that this training shall be adequate to
ensure that qualified CMI engineers and technicians can manufacture, at Avanex's
facilities, samples of the Licensed Products that meet current standards.
Upon the reasonable request of CMI, Avanex will dispatch one engineer or
technician for up to two weeks to inspect the production process at MCI's
facility and to provide further training.
If CMI requires further training or consultation beyond the above allowable
time, CMI will pay Avanex at [*] per hour per trainer.
CMI shall be solely responsible for all costs and expenses relating to the
travel, lodging and meals for the purpose of technical transfer.
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Exhibit G
Confidentiality Undertaking
In consideration of my employment and/or the continuance of my employment by the
JV Co. [or engagement by the JV Co. in the event of a consultant], I hereby
undertake to Avanex Corporation ("Avanex"), which has provided certain
Confidential Information (as defined below) to the JV Co. as follows:
1. I hereby recognize that unpublished patentable or unpatentable items of
technical or non-technical information such as, but not limited to,
materials, tooling, equipment, designs, processes, formulae, projects,
products, costs, financial data, software programs and subroutines,
source and object code, algorithms, trade secrets, designs, technology,
know-how, processes, data, ideas, techniques, utility models,
inventions, works of authorship, formulas, business and product
development plans, customer lists, research or development, production,
manufacturing and engineering processes, prices and pricing structures,
marketing and sales information, product lines and any information and
materials relating thereto, or which is received in confidence by or for
the JV Co. or used by Avanex in its business constitute valuable trade
secrets or confidential information (referred to hereafter collectively
as "Confidential Information") which are the property of Avanex and I
agree not to disclose or use the same other than in the business of the
JV Co. Specifically, I agree:
(a) not to, directly or indirectly, disclose or make available to
anyone or use outside of the JV Co. during and after my
employment, any Confidential Information without the prior
written consent of an authorized official of Avanex;
(b) to safeguard all Confidential Information at all times so it is
not exposed to, or taken by, unauthorized persons, and when
entrusted to me will exercise my best efforts to assure its
safe-keeping;
(c) upon termination of my employment, to deliver all materials,
including personal notes and reproductions relating to the JV
Co. or Avanex business in my possession or control, with full
understanding that compensation and benefits may be withheld if
I fail to comply; and
(d) to prevent any non-employees from viewing those portions of the
JV Co. plant on which any Confidential Information is in use
without the prior express written consent of an authorized
official of Avanex.
2. With respect to all work done by me in relation to the JV Co., I hereby
agree that all right, title and interest in and to all ideas which I
have conceived or may conceive and all inventions, improvements or
discoveries which I have made or may make, whether
<PAGE> 26
conceived or made during working hours or otherwise and whether alone or
jointly with others, are the sole property of the JV Co. or Avanex (as
they have agreed between them). With respect to all patent conceptions
and implementing projects, I also agree that during and after
termination of my employment, I and my heirs or representatives, shall,
as requested, assist in the preparation and execution of all patent
applications and other instruments, as well as execute all requested
assignments and do all other things which Avanex deems necessary to
obtain or to maintain Chinese, and foreign patents and to protect Avanex
rights and interests.
- ---------------------------- --------- -------------------------------------
Name of Employee/Consultant Date Signature of Employee/Consultant
ACCEPTED BY OFFICER OF THE JV CO. ON BEHALF OF AVANEX
By:
----------------------------------
Title:
-------------------------------
Date:
--------------------------------
<PAGE> 27
Exhibit H
Licensed Products:
[*]
Licensed Information:
Technical information and manufacturing process deemed by Avanex (in its
discretion) to be necessary or desirable for the production of the Licensed
Products
- ----------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.31
INTERNATIONAL DISTRIBUTOR AGREEMENT
This International Distributor Agreement (the "Agreement") is made and entered
into this ___ day of November, 1999, by and between Avanex Corporation, a
corporation duly organized and existing under the laws of California, having its
principal place of business at 40919 Encyclopedia Circle, Fremont, California
94538 (hereinafter referred to as "Manufacturer") and Hakuto Co., Ltd., a
corporation duly organized and existing under the laws of Japan, having its
principal place of business at 1-13, Shinjuku 1-chome, Shinjuku-ku, Tokyo
160-8910, Japan (hereinafter referred to as "Hakuto" or "Distributor"),
WITNESSETH:
WHEREAS, Manufacturer is engaged in the business of the manufacture of various
photonic processors including the Products hereinafter defined; and
WHEREAS, Hakuto is engaged in the business of the sale and marketing of
merchandise throughout the world, including products similar or related to the
Products of Manufacturer; and
WHEREAS, Hakuto is desirous of being appointed distributor of the Products in
the Territory hereinafter defined.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Manufacturer and Hakuto do hereby agree the terms and conditions set
forth below:
1. Distributorship, Products and Territory
1.01 Distributorship. Manufacturer hereby grants to Hakuto during the term of
this Agreement the non-exclusive right to sell the Products in the Territory all
in accordance with the terms and conditions herein set forth. Distributor shall
pursue aggressive sales policies and procedures to realize the maximum sales
potential for the Products in the Territory. Manufacturer reserves the right to
market its products directly to the House Accounts set forth on Exhibit A.
1.02 Products. The term Products as used herein shall refer to the equipment set
forth on Exhibit B attached hereto and made a part hereof, as well as all
accessories, attachments, spare parts and renewal parts therefor. Manufacturer
shall have the right to modify, alter, improve, change or discontinue any or all
of the Products covered by this Agreement but only upon [*] prior written notice
to Hakuto. In the event Manufacturer manufactures any new or additional products
similar to or related to the Products hereunder, said products, at the option of
Hakuto, shall be added to the Products covered by this Agreement.
1.03 Territory. Territory shall have the meaning set forth in Exhibit C.
1.04 Conflict of Interest. Distributor warrants to Manufacturer that it does not
currently represent or promote any lines or products that compete with the
Products. During the term of this Agreement, Distributor shall not, without
Manufacturer's prior written consent, represent, promote or otherwise try to
sell within the Territory any lines or products that, in Manufacturer's
judgment, compete with the Products covered by this Agreement.
2. Orders and Shipment
2.01 Order and Acceptance. Before accepting order from its customers, Hakuto
shall place written order inquiry for the Products with Manufacturer on Hakuto's
standard order inquiry form setting forth the quantity of Products, the
specifications therefor, and the desired delivery date. Manufacturer shall use
its reasonable best efforts to notify Distributor of the acceptance or rejection
of an order inquiry and of the assigned delivery date for accepted orders within
five (5) days after receipt of the order inquiry. Upon acceptance of the order
inquiry by the Manufacturer, Hakuto shall place written orders for the Products
with Manufacturer on Hakuto's standard purchase order form setting forth the
quantity of Products, the specifications therefor, and the desired delivery date
as agreed by Manufacturer. To facilitate Manufacturer's production scheduling,
Distributor shall submit purchase orders to Manufacturer at least sixty (60)
days prior to the first day of the requested month of delivery. No order shall
be binding upon Manufacturer until accepted by Manufacturer in writing, and
Manufacturer shall have no liability to Distributor with respect to purchase
orders that are not accepted. No partial shipment of an order shall constitute
the acceptance of the entire order, absent the written acceptance of such entire
order. Manufacturer shall use its reasonable best efforts to deliver Products at
the times specified
- --------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
either in its quotation or in its written acceptance of Distributor's purchase
orders. The Products sold to Hakuto by Manufacturer shall be shipped F.O.B. (as
defined in Section 2319 of the California Uniform Commercial Code)
Manufacturer's factory at Fremont, CA to the destination in the Territory
designated by Hakuto in the purchase order, unless otherwise agreed by the
parties. Hakuto will supply a [*] rolling forecast throughout the agreement.
2.02 Reservation of Title. Title to and all risks of loss or damage of the
Products shipped to Hakuto from Manufacturer shall be subject to full payment of
the Purchase Price therefor. Until such full payment, the Product shall remain
the property of Manufacturer. For all Products to which Manufacturer retains
title, Distributor shall (i) carry full insurance on the Products throughout the
time they are in Distributor's possession and (ii) segregate those Products from
other products in Distributor's inventory.
2.03 Terms of Purchase Orders. Distributor's purchase orders submitted to
Manufacturer from time to time with respect to Products to be purchased
hereunder shall be governed by the terms of this Agreement, and nothing
contained in any such purchase order shall in any way modify such terms of
purchase or add any additional terms or conditions.
2.04 Import and Export Requirements. Distributor shall, at its own expense, pay
all import and export licenses and permits, pay customs charges and duty fees,
and take all other actions required to accomplish the export and import of the
Products purchased by Distributor. Distributor understands that Manufacturer is
subject to regulation by agencies of the U.S. government, including the U.S.
Department of Commerce, which prohibit export or diversion of certain technical
products to certain countries. Distributor warrants that it will comply in all
respects with the export and re-export restrictions set forth in the export
license for every Product shipped to Distributor.
3. Price and Terms of Payment
3.01 Prices. The difference between Distributor's purchase price and
Distributor's selling price to its customers shall be Distributor's sole
remuneration for sale of the Products. The initial prices for Manufacturer's
Products shall be delivered by Manufacturer to Distributor within a reasonable
time after the date of this Agreement. Said price shall be subject to change by
Manufacturer from time to time by [*] days' prior written notice to Hakuto;
provided, however, that no such price change shall affect purchase orders
accepted by Manufacturer prior to notification of Hakuto of the price change by
Manufacturer. Hakuto shall pay all freight, insurance, taxes, duty and customs,
and any other charges associated with transportation after shipment and import
of the Products.
3.02 Terms of Payment. Unless otherwise agreed by the parties, payment shall be
made by Hakuto separately for each purchase order accepted by Manufacturer.
Payment by Hakuto to Manufacturer for Products shall be made by cash remittance
within thirty (30) days from the invoice date.
3.03 Currency. Currency for payments covered by this Agreement shall be in U.S.
Dollars.
3.04 Taxes. Distributor's Purchase Price does not include any federal, state or
local taxes that may be applicable to the Products. When Manufacturer has the
legal obligation to collect such taxes, the appropriate amount shall be added to
Distributor's invoice and paid by Distributor unless Distributor provides
Manufacturer with a valid tax exemption certificate authorized by the
appropriate taxing authority.
4. Marketing and Advertising
4.01 Hakuto's Undertaking. Hakuto shall exert best efforts to vigorously promote
the sale of the Products in the Territory during the term of this Agreement and
to develop a market demand for the same in the Territory. Hakuto shall advertise
the Products throughout the Territory in appropriate advertising media and in a
manner insuring proper and adequate publicity for the Products. Hakuto will
ensure the translation into the Japanese language of the following: the
leaflets, catalogues, technical literatures and maintenance manuals. Hakuto
shall participate training program offered by Manufacturer. Hakuto shall
maintain a sales organization which can be best utilized for the promotion of
the sales of the Products and shall have the right, at its own discretion, to
appoint a sub-dealer or sub-dealers to exploit the Products. The prices at which
the Products are resold in the Territory shall be at the sole discretion of
Hakuto. Hakuto shall provide a rolling [*] forecast at [*] basis.
- --------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 3
4.02 Manufacturer's Undertaking. Manufacturer shall, from time to time, make
available to Hakuto free of charge advertising materials for the marketing of
the Products, such as pamphlets, leaflets, calendars, catalogues, posters, and
the like. Manufacturer shall also provide Hakuto free of charge service manuals,
parts lists and any other servicing information as may be currently available to
Manufacturer.
4.03 Fairs and Exhibitions. Hakuto agrees to participate in fairs and
exhibitions to exploit the Products in the Territory. The cost of the fairs or
exhibitions and displays and the responsibility therefor shall be discussed by
the parties prior to the fair or exhibition.
5. [Intentionally Left Blank].
6. Warranty to Distributor's Customers
6.01 Distributor shall pass on to its customers Manufacturer's standard limited
warranty for the Products, including the limitations set forth in 6.02 and 6.03
below. Manufacturer warranty shall state that the Products shall be free from
defects in design, materials and workmanship for a period of twelve (12) months
after the date of customer's acceptance. Manufacturer shall replace free of
charge all Products or parts found to be defective during said period. Hakuto
will supply the manpower to detect the faulty parts, and replace it with the new
one supplied by Manufacturer. Manufacturer further warrants that all the
Products shall meet the technical specifications of applicable governmental
authorities of Japan. Manufacturer shall be responsible for and shall pay all
transportation charges for the return of defective Products or parts thereof,
and all transportation charges for the replacement Products or parts thereof.
Manufacturer shall supply Hakuto free of charge replacement parts necessary for
the after-sale warranty servicing performed by Hakuto and Manufacturer shall
provide to Hakuto for replacement parts necessary for post-warranty servicing at
a reasonable price. This warranty is contingent upon proper use of a Product in
the application for which it was intended and does not cover Products that were
modified without Manufacturer's approval or that were subjected by the customer
to unusual physical or electrical stress.
6.02 No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH ABOVE,
MANUFACTURER GRANTS NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR
OTHERWISE, REGARDING THE PRODUCTS, THEIR FITNESS FOR ANY PURPOSE, THEIR QUALITY,
THEIR MERCHANTABILITY, OR OTHERWISE.
6.03 Limitation of Liability. MANUFACTURER'S LIABILITY UNDER THE WARRANTY SHALL
BE LIMITED TO A REFUND OF THE CUSTOMER'S PURCHASE PRICE. IN NO EVENT SHALL
MANUFACTURER BE LIABLE FOR THE COST OF PROCUREMENT OF SUBSTITUTE GOODS BY THE
CUSTOMER OR FOR ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES FOR BREACH OF
WARRANTY.
7. [Intentionally Left Blank]
<PAGE> 4
8. Report
Hakuto agrees to furnish to Manufacturer quarterly reports regarding sales to
customers or to prospective customers in the Territory.
9. Intellectual Property Rights
9.01 Property Rights. Distributor agrees that Manufacturer owns all right,
title, and interest in the product lines that include the Products and in all of
Manufacturer's patents, trademarks, trade names, inventions, copyrights,
know-how, and trade secrets relating to the design, manufacture, operation or
service of the Products. The use by Distributor of any of these property rights
is authorized only for the purposes herein set forth, and upon termination of
this Agreement for any reason such authorization shall cease.
9.02 Sale Conveys no Right to Manufacture or Copy. The Products are offered for
sale and are sold by Manufacturer subject in every case to the condition that
such sale does not convey any license, expressly or by implication, to
manufacture, duplicate or otherwise copy or reproduce any of the Products.
Distributor shall take appropriate steps with its customers, as Manufacturer may
request, to inform them of and assure compliance with the restrictions.
9.03 Confidentiality. Distributor acknowledges that by reason of its
relationship to Manufacturer hereunder it will have access to certain
information and materials concerning Manufacturer's business, plans, customers,
technology, and products that are confidential and of substantial value to
Manufacturer, which value would be impaired if such information were disclosed
to third parties. Distributor agrees that it will not use in any way for its own
account or the account of any third party, nor disclose to any third party, any
such confidential information revealed to it by Manufacturer. Distributor shall
take every reasonable precaution to protect the confidentiality of such
information. Upon request by Distributor, Manufacturer shall advise whether or
not it considers any particular information or materials to be confidential.
Distributor shall not publish any technical description of the Products beyond
the description published by Manufacturer (except to translate that description
into appropriate languages for the Territory). In the event of termination of
this Agreement, there shall be no use or disclosure by Distributor of any
confidential information of Manufacturer, and Distributor shall not manufacture
or have manufactured any devices, components or assemblies utilizing any of
Manufacturer's confidential information. Distributor expressly consents to
Manufacturer's use of Distributor's name in promotional materials and other
documents delivered to government agencies and otherwise.
9.04 Trademarks and Trade Names.
(a) Use. During the term of this Agreement, Distributor shall
have the right to indicate to the public that it is an authorized distributor of
Manufacturer's Products and to advertise within the Territory such Products
under the trademarks, marks, and trade names that Manufacturer may adopt from
time to time ("Manufacturer's Trademarks"). Distributor shall not alter or
remove any Manufacturer's Trademark applied to the Products at the factory.
Except as set forth in this Section 9.04, nothing contained in this Agreement
shall grant to Distributor any right, title or interest in Manufacturer's
Trademarks. At no time during or after the term of this Agreement shall
Distributor challenge or assist others to challenge Manufacturer's Trademarks or
the registration thereof or attempt to register any trademarks, marks or trade
names confusingly similar to those of Manufacturer.
(b) Approval of Representations. All representations of
Manufacturer's Trademarks that Distributor intends to use shall first be
submitted to Manufacturer for approval (which shall not be unreasonably
withheld) of design, color, and other details or shall be exact copies of those
used by Manufacturer. If any of Manufacturer's Trademarks are to be used in
conjunction with another trademark on or in relation to the Products, then
Manufacturer's mark shall be presented equally legibly, equally prominently, and
of greater size than the other but nevertheless separated from the other so that
each appears to be a mark in its own right, distinct from the other mark.
9.05 Patent, Copyright and Trademark Indemnity.
(a) Indemnification. Distributor agrees that Manufacturer has
the right to defend, or at its option to settle, and Manufacturer agrees, at its
own expense, to defend or at its option to settle, any claim, suit or proceeding
brought against Distributor or its customer on the issue of infringement of any
United States or Japan patent, copyright or trademark by the Products sold
hereunder or the use thereof, subject to the limitations hereinafter set forth.
Manufacturer shall have sole control of any such action or settlement
negotiations, and Manufacturer agrees to pay, subject to the limitations
hereinafter set forth, any final judgment entered against Distributor or its
customer on such issue in any such suit or proceeding defended by Manufacturer.
Distributor agrees that Manufacturer at its sole
<PAGE> 5
option shall be relieved of the foregoing obligations unless Distributor or its
customer notifies Manufacturer promptly in writing of such claim, suit or
proceeding and gives Manufacturer authority to proceed as contemplated herein,
and, at Manufacturer's expense, gives Manufacturer proper and full information
and assistance to settle and/or defend any such claim, suit or proceeding. If
the Products, or any part thereof, are, or in the opinion of Manufacturer may
become, the subject of any claim, suit or proceeding for infringement of any
United States or Japan patent, copyright or trademark, or if it is
adjudicatively determined that the Products, or any part thereof, infringe any
United States or Japan patent, copyright or trademark, or if the sale or use of
the Products, or any part thereof, is, as a result, enjoined, then Manufacturer
may, at its option and expense either: (i) procure for Distributor and its
customers the right under such patent, copyright or trademark to sell or use, as
appropriate, the Products or such part thereof; or (ii) replace the Products, or
part thereof, with other suitable Products or parts; or (iii) suitably modify
the Products, or part thereof; or (iv) if the use of the Products, or part
thereof, is prevented by injunction, remove the Products, or part thereof, and
refund the aggregate payments paid therefor by Distributor, less a reasonable
sum for use and damage. Manufacturer shall not be liable for any costs or
expenses incurred without its prior written authorization.
(b) Limitation. Notwithstanding the provisions of Subsection
9.05(a) above, Manufacturer assumes no liability for (i) infringements covering
completed equipment or any assembly, circuit, combination, method or process in
which any of the Products may be used but not covering the Products when used
alone; (ii) trademark infringements involving any marking or branding not
applied by Manufacturer or involving any marking or branding applied at the
request of Distributor; or (iii) infringements involving the modification or
servicing of the Products, or any part thereof, unless such modification or
servicing was done by Manufacturer.
(c) Entire Liability. The foregoing provisions of this Section
9.05 state the entire liability and obligations of Manufacturer and the
exclusive remedy of Distributor and its customers, with respect to any alleged
infringement of patents, copyrights, trademarks or other intellectual property
rights by the Products or any part thereof.
10. Relationship of Parties
The relationship between Manufacturer and Hakuto shall not be that of a
principal and an agent, but shall be that of a seller and purchaser, each acting
as an independent contractor. Hakuto shall have no right or authority to incur,
assume or create, in writing or otherwise, any warranty, liability, or
obligation of any kind, express or implied, in the name of or on behalf of
Manufacturer.
11. Assignment
Neither party shall assign, transfer or otherwise dispose of this Agreement or
any of its rights or obligations hereunder in whole or in part to any
individual, firm or corporation without the prior written consent of the other
party.
12. Term of Agreement
12.01 Term and Renewal This Agreement shall become effective on the date
mentioned above, remain effective for a period of [*] and shall thereafter be
automatically renewed [*] unless terminated by either party giving to the other
ninety (90) days' written notice prior to the expiration of the term or renewal
term of this Agreement.
13. Events of Termination
13.01 Cancellation In addition to the right of termination set forth in
paragraph 12.01, either party may cancel this Agreement as follows:
(a) Termination for Convenience. This Agreement may be cancelled
by either party for any reason or no reason, whether or not extended beyond the
first year, by giving the other party written notice [*] in advance. If
Manufacturer terminates this Agreement under the provisions of this Subsection
13.01(a) and 12.01, then Manufacturer shall, at Distributor's option, repurchase
Distributor's then-current inventory at the lower of the current Purchase Price
or Distributor's original Purchase Price and shall bear all shipping costs for
the return to Manufacturer of that inventory.
- --------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 6
(b) Bankruptcy etc. By either party immediately and without
prior written notice to the other party in the event that proceedings in
bankruptcy or insolvency are instituted by or against the other party, or a
receiver is appointed, or if any substantial part of the assets of the other
party is the object of attachment, sequestration or other type of comparable
proceeding, and such proceeding is not vacated or terminated within thirty (30)
days after its commencement or institution;
(c) Default. By either party immediately if one party defaults
in the performance of any of the provisions of this Agreement and does not cure
the default within thirty (30) days after receipt of written notice given by the
other party; or
(d) Licenses. By either party immediately if either party is
unable to obtain or renew any permit, license, patent or other governmental
approval necessary to carry on the business contemplated under this Agreement.
13.02 Fulfillment of Orders upon Termination. Upon termination of this Agreement
for other than Distributor's breach, Manufacturer shall continue to fulfill,
subject to the terms of Sections 2 and 3 above, all orders accepted by
Manufacturer prior to the date of termination.
13.03 Return of Materials. All trademarks, trade names, patents, copyrights,
designs, drawings, formulas or other data, photographs, samples, literature, and
sales aids of every kind shall remain the property of Manufacturer. Within
thirty (30) days after the termination of this Agreement, Distributor shall
prepare all such items in its possession for shipment, as Manufacturer may
direct, at Manufacturer's expense. Distributor shall not make, use, dispose of
or retain any copies of any confidential items or information which may have
been entrusted to it. Effective upon the termination of this Agreement,
Distributor shall cease to use all trademarks, marks, and trade names of
Manufacturer. Notwithstanding the foregoing, Distributor may use all trade
marks, marks, and tradename of Manufacturer in connection with the sales of
Distributor's remaining inventory of Manufacturer's products within 90 days from
the date of termination.
13.04 Limitation on Liability. In the event of termination by either party in
accordance with any of the provisions of this Agreement, neither party shall be
liable to the other, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales or on account of expenditures, inventory, investments, leases
or commitments in connection with the business or goodwill of Manufacturer or
Distributor. Termination shall not, however, relieve either party of obligations
incurred prior to the termination.
13.05 Survival of Certain Terms. The provisions of Sections 2.02, 2.04, 3.02, 6,
9, 10, 13, 14, 15, 16, 17, 18, 19 and 20 shall survive the termination of this
Agreement for any reason. All other rights and obligations of the parties shall
cease upon termination of this Agreement.
<PAGE> 7
14. LIMITATION ON LIABILITY.
MANUFACTURER'S LIABILITY ARISING OUT OF THIS AGREEMENT AND/OR SALE OF THE
PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY THE CUSTOMER FOR THE PRODUCTS.
IN NO EVENT SHALL MANUFACTURER BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS. IN NO EVENT SHALL MANUFACTURER BE LIABLE TO DISTRIBUTOR OR ANY OTHER
ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER
CAUSED, ON ANY THEORY OF LIABILITY.
15. Entire Agreement
This Agreement, the exhibits and duly executed addenda thereto constitute the
entire agreement between the parties hereto and supersede all previous
negotiations, agreements and commitments in respect thereto, and shall not be
released, discharged, changed or modified in any manner, except by instruments
signed by duly authorized officers or representatives of each of the parties
hereto.
16. Governing Law
The validity and interpretation of this Agreement and each clause and part
thereof shall be governed by the laws of California without regards to conflict
or laws principles.
17. Arbitration
All disputes, controversies or differences arising between the parties hereto,
out of or in relation to or in connection with this Agreement, or the breach
thereof, which cannot be amicably settled by the parties, shall be referred to
arbitration in accordance with the Commercial Arbitration Rules of the Japan
Commercial Arbitration Association and the decision of such arbitration
proceeding shall be binding and conclusive upon the parties hereto. Arbitration
shall be conducted in Tokyo, Japan. The expense of any such arbitration shall be
borne equally by the parties.
18. Separability of Provisions
A judicial or administrative declaration in any jurisdiction on the invalidity
of any one or more of the provisions hereof shall not invalidate the remaining
provisions of this Agreement in that jurisdiction, nor shall such declaration
have any effect on the validity or interpretation of this Agreement outside of
that jurisdiction.
19. Waiver of Compliance
Any failure by any party hereto to enforce at any time, any term or condition
under this Agreement shall not be considered a waiver of that party's right
thereafter to enforce each and every term and condition of this Agreement.
20. Notices
All notices and other communications in connection with this Agreement shall be
in writing and shall be sent to the respective parties at the following
addresses, or to such other addresses as may be designated by the parties in
writing from time to time by postage prepaid registered or certified mail or
electronic mail, facsimile or other reliable method of transmission:
To Manufacturer: Avanex Corporation
40919 Encyclopedia Circle
Fremont, California 94538
U.S.A.
Attention: Jessy Chao
Phone: (510) 897-4188
Fax: (510) 897-0189
To Hakuto: Hakuto Co. Ltd.
<PAGE> 8
C.P.O. Box 25
Tokyo 100-8691
Japan
Attention:
Phone:
Fax:
21. Force Majeure. Nonperformance of either party shall be excused to the extent
that performance is rendered impossible by strike, fire, flood, governmental
acts or orders or restrictions, failure of suppliers, or any other reason where
failure to perform is beyond the reasonable control of and is not caused by the
negligence of the nonperforming party.
22. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives.
Avanex Corporation Hakuto Co., Ltd.
By: /s/ WALTER ALESSANDRINI By: /s/ SHIGEO TAKAYAMA
--------------------------------- ---------------------------------
Walter Alessandrini Shigeo Takayama
Title: President and CEO Title: President
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
<PAGE> 10
EXHIBITS
EXHIBIT A HOUSE ACCOUNTS
[*]
EXHIBIT B PRODUCTS
All current Avanex products offered by Avanex as of the date of this
Agreement; provided however, that Avanex has the right, upon [*] days'
prior written notice, to exclude all products that perform [*].
EXHIBIT C TERRITORY
[*]
- --------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.32
ARISTASOFT CORPORATION PROFESSIONAL SERVICES AGREEMENT
ARISTASOFT CORPORATION
PROFESSIONAL SERVICES AGREEMENT
This PROFESSIONAL SERVICES AGREEMENT (this "AGREEMENT") is made and
entered into as of this 7th day of July, 1999 (the "EFFECTIVE DATE") by and
between; ARISTASOFT CORPORATION, a California corporation having its principal
place of business at 800 West El Camino Real, Suite 280, Mt. View, California
94040 ("ARISTASOFT"), and Avanex Corporation, a California Corporation having an
address at 42501 Albrae Street Fremont, CA 94538 ("CUSTOMER") with each of
ARISTASOFT and CUSTOMER being a "PARTY" and collectively, the "PARTIES").
WHEREAS, CUSTOMER desires that ARISTASOFT perform certain services and
ARISTASOFT is willing to perform such services.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ARISTASOFT and CUSTOMER hereby
agree as follows:
1. Services. Acting as an independent contractor, ARISTASOFT shall
perform for CUSTOMER the professional services (the "SERVICES") set forth in the
WORK PLAN (the "WORK PLAN") attached hereto as Exhibit A and incorporated herein
by reference.
2. Fees. Fees and fee payment schedules are set forth in the WORK PLAN,
and fees shall be paid by CUSTOMER to ARISTASOFT when due in accordance
therewith. Overdue fees shall be subject to a one and one half percent (1.5%)
per month finance charge plus any related collection and legal costs actually
incurred by ARISTASOFT. Fees shall be paid in U.S. dollars, and may be subject
to local, state, and federal taxes which shall be the responsibility of
CUSTOMER, except as to taxes based upon the income of ARISTASOFT.
3. Changes in Work Plan. If CUSTOMER should request any changes to the
WORK PLAN before or after ARISTASOFT begins work under such WORK PLAN, CUSTOMER
agrees that ARISTASOFT shall accordingly have the right to revise, at
ARISTASOFT'S reasonable discretion, the fee payment schedule and amount or other
items on such WORK PLAN.
4. Representations & Warranties; Limitation. Each of ARISTASOFT and
CUSTOMER represents and warrants to the other that: (i) it has all requisite
power and authority to execute and deliver this AGREEMENT and to perform its
obligations hereunder; and (ii) the execution, delivery, and performance of this
AGREEMENT shall not conflict with its charter or bylaws, or any agreement,
order, or judgment to which it is bound. ARISTASOFT warrants to CUSTOMER that
the SERVICES will be performed in a workmanlike manner. The immediately
foregoing warranty is a limited warranty and is the only warranty made by
ARISTASOFT hereunder. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
ARISTASOFT HEREBY DISCLAIMS ALL OTHER WARRANTIES WITH RESPECT TO THE SERVICES,
INCLUDING WITHOUT LIMITATION ALL IMPLIED
<PAGE> 2
ARISTASOFT CORPORATION PROFESSIONAL SERVICES AGREEMENT
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT.
5. Confidentiality. "CONFIDENTIAL INFORMATION" means this Agreement and
all its Exhibits, any addenda hereto signed by both parties, all information,
data, drawings, benchmark tests, specifications, trade secrets and any other
proprietary information supplied to CUSTOMER by ARISTASOFT, or by CUSTOMER to
ARISTASOFT and clearly marked as "confidential information", including all items
defined as "confidential information" in any other agreement between CUSTOMER
and ARISTASOFT whether executed prior to or after the date of this Agreement.
Each Party acknowledges that the CONFIDENTIAL INFORMATION constitutes valuable
trade secrets and each Party agrees that it shall use the CONFIDENTIAL
INFORMATION of the other Party solely in accordance with the provisions of this
Agreement and will not disclose, or permit to be disclosed, the same, directly
or indirectly, to any third party without the other Party's prior written
consent. Each Party agrees to exercise due care in protecting the CONFIDENTIAL
INFORMATION from unauthorized use and disclosure. However, the foregoing
limitations do not apply to information that (i) is publicly available, (ii)
obtained by the other Party from third parties without restrictions on
disclosure, (iii) independently developed by the other Party without reference
to CONFIDENTIAL INFORMATION, or (iv) required to be disclosed by order of a
court or other governmental entity.
6. Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
HEREUNDER FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR SPECIAL
DAMAGES OR FOR COST OF COVER ARISING HEREFROM OR RELATED HERETO IN ANY CAUSES OF
ACTION OF ANY KIND, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARISTASOFT'S TOTAL LIABILITY TO CUSTOMER FOR ANY AND ALL CLAIMS OR DAMAGES
HEREUNDER SHALL BE LIMITED TO THE AGGREGATE AMOUNT OF FEES ACTUALLY PAID BY,
CUSTOMER TO ARISTASOFT HEREUNDER.
7. Term & Termination. The TERM hereof shall commence upon the EFFECTIVE
DATE and shall continue in full force and effect until the later of (i)
ARISTASOFT'S completion of performance of SERVICES for CUSTOMER; and (ii) all
fees that at any time become due and payable hereunder have been paid in full by
CUSTOMER. This AGREEMENT may be terminated at any time during the term hereof
at the mutual, written agreement of ARISTASOFT and CUSTOMER. In the event that
CUSTOMER or ARISTASOFT breaches any of its material obligations hereunder and
fails to cure such breach within thirty (30) days of written notice of such
breach, the other PARTY shall have the right to terminate this Agreement
unilaterally at the end of such thirty (30) day period. Upon the termination
hereof for any reason: (a) ARISTASOFT shall be relieved of its obligation to
perform any further SERVICES FOR Customer; (b) ARISTASOFT shall have the right
to retain all fees then having been paid by CUSTOMER pursuant hereto; and (c)
unless ARISTASOFT is in breach, CUSTOMER shall promptly pay to ARISTASOFT on a
pro rata basis, a reasonable fee for all work-in-progress and other SERVICES
performed by ARISTASOFT hereunder for which ARISTASOFT has not then been
compensated. The respective rights and obligations of ARISTASOFT and CUSTOMER
under the provisions of Sections 2, 4, 5, 6 and 8 and this sentence of Section 7
shall survive termination hereof.
2
<PAGE> 3
ARISTASOFT CORPORATION PROFESSIONAL SERVICES AGREEMENT
9. General Provisions. The sole relationship between ARISTASOFT and
CUSTOMER shall be that of independent contractors with no rights of partnership,
agency, or representation. Nothing express or implied herein shall confer upon
any third party any rights, remedies, obligations, or liabilities. This
AGREEMENT (including the SPECIFICATION, which is incorporated herein by
reference) constitutes the entire agreement between ARISTASOFT and CUSTOMER with
respect to the subject matter hereof and supersedes all prior understandings,
communications, and agreements between them, written or oral, regarding such
subject matter. References herein to "Section" are to the applicable Section
hereof Subject to the provisions of Section 3, this AGREEMENT shall not be
modified, nor shall any provision hereof be waived or amended, except by a
written amendment duly executed by ARISTASOFT and Customer. A waiver of an
provision hereof with respect to one event shall not be construed as continuing,
OR as a bar to or waiver of any right or remedy as to subsequent events. If any
provision hereof as applied to any particular facts or circumstances shall be
held to be invalid or unenforceable, then: (i) without further action by
ARISTASOFT or CUSTOMER, such provision shall be reformed to the extent,
necessary TO make such provision valid and enforceable when so applied, and (ii)
the validity and enforceability of such provision as applied to any other facts
or circumstances, and the validity and enforceability of the other provisions
hereof, shall in no way be affected or impaired thereby. This AGREEMENT shall be
construed in accordance with the laws of the State of California applicable to
contracts entered into and wholly to be performed therein, without regard to
that body of law relating to conflict of laws. Any written notices to be given
hereunder shall be delivered via U.S. Mail, express courier, confirmed
facsimile, or confirmed email, to such locations, telephone numbers, and
addresses as each of ARISTASOFT and CUSTOMER shall notify the other from time to
time. A facsimile copy hereof shall be deemed to be an original.
3
<PAGE> 4
ARISTASOFT CORPORATION PROFESSIONAL SERVICES AGREEMENT
IN WITNESS WHEREOF, ARISTASOFT and CUSTOMER have caused this
PROFESSIONAL SERVICES AGREEMENT to be executed as of the EFFECTIVE DATE.
ARISTASOFT CORPORATION CUSTOMER
/s/ WILLIAM POLLAK /s/ JESSY CHAO
- ---------------------------------- ------------------------------------
Authorized Signature Authorized Signature
WILLIAM POLLAK, VICE PRESIDENT JESSY CHAO
- ---------------------------------- ------------------------------------
Printed Name Printed Name
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries of the Registrant
--------------------------------------
Avanex Cayman incorporated in the Cayman Islands
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 2, 1999, included in Amendment No. 1 to the
Registration Statement (Form S-1 No. 333-92097), and related prospectus of
Avanex Corporation for the registration of shares of its common stock.
Our audits also included the financial statement schedule of Avanex
Corporation listed in Schedule II. The schedule is the responsibility of the
Company's management. Our responsibility is to express our opinion based on our
audits. In our opinion, the financial statement schedule referenced to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth herein.
/s/ Ernst & Young LLP
San Jose, California
December 20, 1999
