EXHIBIT 10.21
[FORM OF ADDITIONAL INVESTMENT RIGHT]
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, (B) AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (C) REASONABLE ASSURANCE HAVING BEEN PROVIDED TO THE COMPANY
THAT SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER IS BEING MADE PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
VERILINK CORPORATION
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No.: __________
Principal Amount of Additional Notes: __________
Date of Issuance: March 21, 2005 ("ISSUANCE DATE")
Verilink Corporation, a Delaware corporation (the "COMPANY"), hereby certifies
that, for value received, the receipt and sufficiency of which are hereby
acknowledged, [BUYERS], the registered holder hereof or its permitted assigns
(the "HOLDER"), is entitled, subject to the terms set forth below to purchase
from the Company, at the Exercise Price (as defined below) then in effect, at
any time or times on or after the Effective Date (as defined in the Registration
Rights Agreement by and among the Company and the buyers referred to therein
(the "REGISTRATION RIGHTS AGREEMENT")) of the Initial Registration Statement (as
defined in the Registration Rights Agreement), but not after 11:59 P.M., New
York Time, on the Expiration Date (as defined below), up to a total of $
______(1), in principal amount of Additional Notes (as defined in the Securities
Purchase Agreement (as defined below)). Except as otherwise defined herein,
capitalized terms in this Additional Investment Right shall have the meanings
set forth in Section 15 or in that certain Securities Purchase Agreement, dated
as of March 20, 2005, by and among the Company and the buyers referred to
therein, including the Holder (the "SECURITIES PURCHASE AGREEMENT"). This
Additional Investment Right (including all Additional Investment Rights issued
in exchange, transfer or replacement hereof, each an "AIR", such other AIRs, the
"OTHER AIRS" and collectively, the "AIRS") is one of the Additional Investment
Rights (as defined in the
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(1) Insert number set forth opposite such Buyer's name in column 5 of the
Schedule of Buyers set forth in the Securities Purchase Agreement.
Securities Purchase Agreement) issued pursuant to Section 1 of the Securities
Purchase Agreement.
1. EXERCISE OF AIR.
(a) Mechanics of Exercise. Subject to the terms and conditions
hereof, this AIR may be exercised by the Holder hereof on any day beginning on
or after the Effective Date (as defined in the Registration Rights Agreement) of
the Initial Registration Statement (as defined in the Registration Rights
Agreement) and ending on and including the date which is nine months after such
Effective Date (the "EXPIRATION DATE"), in whole or in part, by (i) delivery of
a written notice, in the form attached hereto as Exhibit A (the "EXERCISE
NOTICE"), of such Holder's election to exercise this AIR and (ii) payment to the
Company of an amount equal to $1.00 for each $1.00 of principal amount of
Additional Notes as to which this AIR is being exercised (the "EXERCISE PRICE")
in cash or wire transfer of immediately available funds. The date the Exercise
Notice and the Exercise Price are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an "EXERCISE DATE"; provided,
however, that if the Exercise Notice and the Exercise Price are not delivered to
the Company on the same date, the Exercise Date shall be the date of the later
of the two deliveries. The Holder of this AIR shall not be required to deliver
the original AIR in order to effect an exercise hereunder. Execution and
delivery of the Exercise Notice with respect to less than all of the Additional
Notes shall have the same effect as cancellation of the original AIR and
issuance of a new AIR evidencing the right to purchase the remaining number of
Additional Notes. On or before the first Business Day following the Exercise
Date, the Company shall transmit by facsimile an acknowledgment of receipt of
the Exercise Notice and the Exercise Price to the Holder hereof. On or before
the third Business Day following the Exercise Date, the Company shall issue and
deliver to the address as specified in the Exercise Notice an Additional Note,
registered in the name of the Holder of this AIR or its designee, in the
principal amount as to which the Holder of this AIR is entitled pursuant to such
exercise. On the Exercise Date, the Holder of this AIR shall be deemed for all
corporate purposes to have become the Holder of record of the Additional Note
with respect to which this AIR has been exercised, irrespective of the date of
delivery of such Additional Note. Upon surrender of this AIR to the Company
following one or more partial exercises, the Company shall as soon as
practicable and in no event later than three Business Days after receipt of the
AIR and at its own expense, issue a new AIR (in accordance with Section 5(d))
representing the right to purchase the number of Additional Notes purchasable
immediately prior to such exercise under this AIR, less the principal amount of
Additional Notes with respect to which this AIR is exercised. The Company shall
pay any and all taxes which may be payable with respect to the issuance and
delivery of Additional Notes upon exercise of this AIR; provided that the
Company shall not be required to pay any tax that may be payable in respect of
any issuance and delivery of Additional Notes to any Person other than the
Holder or with respect to any income tax due by the Holder with respect to such
Additional Notes. The ability of the Holder to exercise this AIR shall be
conditioned upon such Holder satisfying the conditions specified in Section 6(b)
that would permit this AIR to be transferred to such Holder on the date of
exercise, and exercise of this AIR shall constitute a representation and
warranty by the Holder to that effect.
(b) Company's Failure to Timely Deliver Additional Notes. If the
Company shall fail for any reason or for no reason to issue to the Holder within
three Business Days of the
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Exercise Date, Additional Notes, the Company shall pay as additional damages in
cash to such Holder on each day after such third Business Day that the issuance
of such Additional Notes is not timely effected an amount equal to 1.0% of the
principal amount of the Additional Notes into which this AIR is exercisable.
(c) Absolute and Unconditional Obligation. The Company's obligations
to issue and deliver Additional Notes in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person. Nothing herein shall limit the Holder's
right to pursue any other remedies available to it hereunder, at law or in
equity, including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
Additional Notes upon exercise of the AIR as required pursuant to the terms
hereof.
2. FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party
to a Fundamental Transaction (as defined in the Notes), unless (i) the Successor
Entity (as defined in the Notes) assumes all the obligations of the Company
under this AIR and the other Transaction Documents (as defined in the Securities
Purchase Agreement) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, and including agreements to
deliver to each holder of AIRs in exchange for such AIRs, a security of the
Successor Entity (if other than the Company) evidenced by a written instrument
substantially similar in form and substance to this AIR, including, without
limitation, a right to exercise for Additional Notes that have been adjusted and
approved as set forth in Sections 5 and 6 of the Additional Notes as if such
Additional Notes were outstanding at the time of such Fundamental Transaction
and (ii) the Company or the Successor Entity is a publicly traded entity whose
common stock or equivalent equity security is quoted on or listed for trading on
an Eligible Market (as defined in the Notes). Upon any Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this AIR
referring to such "Company" shall refer instead to the Successor Entity), and
may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this AIR with the same effect as if the
Successor Entity had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from its obligations under the
Transaction Documents except in the case of a Fundamental Transaction that meets
the requirements of this section. The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions.
3. COMPANY'S RIGHT OF MANDATORY FUNDING.
(a) Mandatory Funding. If at any time from and after the Effective
Date of the Initial Registration Statement until the Expiration Date (the
"MANDATORY FUNDING ELIGIBILITY DATE"), (i) the Weighted Average Price (as
defined in the Notes) of the Common Stock equals or exceeds $4.52(2) (subject to
appropriate adjustments for stock splits, stock dividends, stock
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(2) Insert amount equal to 150% of Conversion Price specified in the Notes.
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combinations and other similar transactions after the Issuance Date) for each of
any twenty (20) consecutive Trading Days (as defined in the Notes) following the
Effective Date (the "MANDATORY FUNDING MEASURING PERIOD") and (ii) the AIR
Equity Conditions (as defined below) shall have been satisfied or waived in
writing by the Holder during the period commencing with the Mandatory Funding
Notice Date and ending with the Mandatory Funding Date (each, as defined below),
the Company shall have the right to require the Holder to exercise all or any
designated portion of the AIR and purchase from the Company, at the Exercise
Price then in effect, all or any designated portion of the Additional Notes in
accordance with Section 1(a) hereof as of the Mandatory Funding Date (a
"MANDATORY FUNDING"). The Company may exercise its right to require purchase of
Additional Notes under this Section 3(a) by delivering within not more than two
Trading Days following the end of any such Mandatory Funding Measuring Period a
written notice thereof by facsimile and overnight courier to all, but not less
than all, of the holders of AIRs (the "MANDATORY FUNDING NOTICE" and the date
all of the holders have received such notice is referred to as the "MANDATORY
FUNDING NOTICE DATE"). The Mandatory Funding Notice shall be irrevocable. The
Mandatory Funding Notice shall state (i) the Trading Day selected for the
Mandatory Funding in accordance with Section 3(a), which Trading Day shall be at
least 20 Business Days but not more than 60 Business Days following the
Mandatory Funding Notice Date (the "MANDATORY FUNDING DATE"), (ii) the aggregate
amount of the Additional Notes to be issued upon mandatory exercise from all of
the holders of the AIRs pursuant to this Section 3 (and analogous provisions
under the Other AIRS) and (iii) the principal amount of Additional Notes to be
issued.
As used herein, "AIR EQUITY CONDITIONS" means each of the following
conditions: (i) on each day during the period beginning one (1) month prior to
the applicable date of determination and ending on and including the applicable
date of determination, the Initial Registration Statement filed pursuant to the
Registration Rights Agreement shall be effective and available for the resale of
all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and there shall not have been any Grace Periods
(as defined in the Registration Rights Agreement) during such period; (ii) on
each day during the period beginning three (3) months prior to the applicable
date of determination and ending on and including the applicable date of
determination (the "AIR EQUITY CONDITIONS MEASURING PERIOD"), the Common Stock
is designated for quotation on the Principal Market and shall not have been
suspended from trading on such exchange or market (other than suspensions of not
more than two (2) days and occurring prior to the applicable date of
determination due to business announcements by the Company) nor shall delisting
or suspension by such exchange or market been threatened or pending either (A)
in writing by such exchange or market or (B) by falling below then effective
minimum listing maintenance requirements of such exchange or market.; (iii)
during the one (1) year period ending on and including the date immediately
preceding the applicable date of determination, the Company shall have delivered
any Additional Notes to be delivered upon exercise of the AIRs, any Conversion
Shares to be delivered upon conversion of the Notes and any Warrant Shares to be
delivered upon exercise of the Warrants to the holders thereof on a timely basis
as set forth in Section 1(a) of the AIRs (and analogous provisions under the
Other AIRs), Section 2(c)(ii) of the Notes and Sections 2(a) of the Warrants,
respectively; (iv) during the AIR Equity Conditions Measuring Period, all shares
of Common Stock issuable pursuant to Additional Notes to be issued in connection
with the proposed Mandatory Funding may be converted in full without violating
Section 3(d) of the Notes or the rules or regulations of the Principal Market;
(v) during the AIR Equity Conditions
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Measuring Period, the Company shall not have failed to make timely any payments
within five (5) Business Days of when such payment is due pursuant to any
Transaction Document; (vi) during the AIR Equity Conditions Measuring Period,
there shall not have occurred either (A) the public announcement of a pending,
proposed or intended Fundamental Transaction which has not been abandoned,
terminated or consummated or (B) an Event of Default or an event that with the
passage of time or giving of notice would constitute an Event of Default; (vii)
on the applicable date of determination, the Company shall have no knowledge of
any fact that would cause the Initial Registration Statement required pursuant
to the Registration Rights Agreement not to be effective and available for the
resale of all remaining Registrable Securities in accordance with the terms of
the Registration Rights Agreement; and (viii) during the AIR Equity Conditions
Measuring Period, the Company otherwise shall have been in material compliance
with and shall not have materially breached any provision, covenant,
representation or warranty of any Transaction Document.
(b) Pro Rata Funding Requirement. If the Company elects to cause an
exercise of this AIR pursuant to Section 3(a), then it must simultaneously take
the same action in the same proportion with respect to the Other AIRs. All AIRs
exercised by the Holder after the Mandatory Funding Notice Date shall reduce the
amount of Additional Notes required to be issued on the Mandatory Funding Date.
If the Company has elected a Mandatory Funding, the mechanics of exercise set
forth in Section 1(a) shall apply, to the extent applicable, as if the Company
had received from the Holder on the Mandatory Funding Date an Exercise Notice
with respect to the Additional Notes being issued pursuant to the Mandatory
Funding.
4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or through
any Fundamental Transaction, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this AIR, and will at all times in good faith carry out all the provisions of
this AIR and take all action as may be required to protect the rights of the
Holder of this AIR.
5. REISSUANCE OF AIRS.
(a) Transfer of AIR. If this AIR is to be transferred, the Holder
shall surrender this AIR to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder of this AIR a new AIR (in
accordance with Section 5(d)), registered as the Holder of this AIR may request,
representing the right to purchase the principal amount of Additional Notes
being transferred by the Holder and, if less then the total number of Additional
Notes then underlying this AIR is being transferred, a new AIR (in accordance
with Section 5(d)) to the Holder of this AIR representing the right to purchase
the principal amount of Additional Notes not being transferred.
(b) Lost, Stolen or Mutilated AIR. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this AIR, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder of this AIR to the Company in
customary form and, in the case of mutilation, upon surrender and cancellation
of this AIR, the Company shall execute and deliver to the Holder a new AIR (in
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accordance with Section 5(d)) representing the right to purchase the principal
amount of Additional Notes then underlying this AIR.
(c) AIR Exchangeable for Multiple AIRs. This AIR is exchangeable,
upon the surrender hereof by the Holder at the principal office of the Company,
for a new AIR or AIR (in accordance with Section 5(d)) representing in the
aggregate the right to purchase the principal amount of Additional Notes then
underlying this AIR, and each such new AIR will represent the right to purchase
such portion of such Additional Notes as is designated by the Holder of this AIR
at the time of such surrender.
(d) Issuance of New AIR. Whenever the Company is required to issue a
new AIR pursuant to the terms of this AIR, such new AIR (i) shall be of like
tenor with this AIR, (ii) shall represent, as indicated on the face of such new
AIR, the right to purchase the principal amount of Additional Notes then
underlying this AIR (or in the case of a new AIR being issued pursuant to
Section 5(a) or Section 5(c), the principal amount of Additional Notes
designated by the Holder of this AIR which, when added to the principal amount
of Additional Notes underlying the other new AIR issued in connection with such
issuance, does not exceed the principal amount of Additional Notes then
underlying this AIR), (iii) shall have an issuance date, as indicated on the
face of such new AIR which is the same as the Issuance Date, and (iv) shall have
the same rights and conditions as this AIR.
6. COVENANTS.
(a) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the second Business Day following each
Exercise Date, the Company shall file a Current Report on Form 8-K, describing
the terms of the transactions contemplated by the exercise of this AIR in the
form required by the 1934 Act.
(b) Transfer or Resale. This AIR may not be sold, transferred or
assigned to any Person other than (i) if the seller, transferor or assignor of
the AIR is a "qualified institutional buyer" as that term is defined in Rule
144A of the Securities Act ("QIB"), to a QIB, and (ii) if the seller, transferor
or assignor is not a QIB, to a QIB or an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D that is an institution.
7. NOTICES. Whenever notice is required to be given under this AIR, unless
otherwise provided herein, such notice shall be given in accordance with Section
9(f) of the Securities Purchase Agreement. The Company shall provide the Holder
of this AIR with prompt written notice of all actions taken pursuant to this
AIR, including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder of this AIR at least fifteen days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any
grants, issues or sales of any Options (as defined in the Additional Notes),
Convertible Securities (as defined in the Additional Notes) or rights to
purchase stock, warrants, securities or other property to Holders of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such Holder.
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8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this AIR may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any AIRs or
decrease the principal amount of Additional Notes obtainable upon exercise of
any AIRs without the written consent of the Holder of this AIR. No such
amendment shall be effective to the extent that it applies to less than all of
the Holders of the AIRs then outstanding.
9. GOVERNING LAW. This AIR shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this AIR shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.
10. CONSTRUCTION; HEADINGS. This AIR shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any person as
the drafter hereof. The headings of this AIR are for convenience of reference
and shall not form part of, or affect the interpretation of, this AIR.
11. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this AIR shall be cumulative and in addition to all other
remedies available under this AIR, the Securities Purchase Agreement and the
other Transaction Documents (as defined in the Securities Purchase Agreement),
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder of
this AIR to pursue actual damages for any failure by the Company to comply with
the terms of this AIR. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder of this AIR and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holder of this AIR shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
12. TRANSFER. (a)This AIR may be offered for sale, sold, transferred or
assigned without the consent of the Company. Each person to whom this AIR is
sold, transferred or assigned shall expressly assume the obligations of the
Holder under Section 3 hereof. Each Person to whom this AIR is sold, assigned or
transferred by the Holder shall provide to the Company true and accurate
information as to such Person comparable to that contained in columns (1), (2)
and (7) of the Schedule of Buyers attached to the Securities Purchase Agreement
and as to the jurisdiction of residence of such Person.
(b) The Company shall be entitled to treat the registered Holder of
this Additional Investment Right as the absolute owner hereof and shall incur no
liability for the issuance of Additional Notes or for other action taken
hereunder in good faith based upon such ownership until such time as a written
assignment of this Additional Investment Right is effected
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by such registered owner, which assignment has been delivered to the Company and
satisfies the requirements of Sections 5(a) and 12(a) hereof.
13. CERTAIN DEFINITIONS. For purposes of this AIR, the following terms
shall have the following meanings:
(a) "BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(b) "COMMON STOCK" means (i) the Company's common stock, par value
$0.01 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(d) "REQUIRED HOLDERS" means the holders of AIRs representing the
right to acquire at least a majority of the principal amount of Additional Notes
underlying the AIRs then outstanding.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this AIR to be duly executed as
of the Issuance Date set out above.
VERILINK CORPORATION
By: _______________________
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
ADDITIONAL INVESTMENT RIGHT
VERILINK CORPORATION
To: Verilink Corporation
The undersigned is the holder of Additional Investment Right No. _____
(the "AIR") issued by Verilink Corporation, a Delaware corporation (the
"COMPANY"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the AIR.
1. The AIR is currently exercisable to purchase a total of $_______
principal amount of Additional Notes.
2. The undersigned holder hereby exercises its right to purchase
$_______ principal amount of Additional Notes pursuant to the AIR.
3. The holder shall pay the sum of $___________________ to the Company
in accordance with the terms of the AIR.
4. Pursuant to this exercise, the Company shall deliver to the holder
$_______ principal amount of Additional Notes in accordance with the terms of
the AIR.
5. Following this exercise, the AIR shall be exercisable to purchase a
total of $_______ principal amount of Additional Notes.
Please issue the Additional Notes in the following name and to the
following address:
Issue to:
________________________________________________________________
________________________________________________________________
________________________________________________________________
Date: _______________ __, ______
________________________________
Name of Registered Holder
By:
_____________________________
Name:
Title:
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of AIR]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within AIR to
purchase $________ principal amount of Additional Notes of Verilink Corporation,
to which the within AIR relates and appoints ________________ attorney to
transfer said right on the books of Verilink Corporation with full power of
substitution in the premises.
Dated:_________________, __________
___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the AIR)
____________________________________
Address of Transferee
____________________________________
____________________________________
In the presence of:
__________________