Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 9, 2004 by
and among Corvis Corporation, a Delaware corporation, with headquarters located
at 7015 Albert Einstein Drive, Columbia, Maryland 21046 (the “Company”), and the
investors listed on the Schedule of Buyers attached hereto (individually, a
“Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A. The Company and each Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.

 

B. The Company has authorized a new series of senior convertible notes of the
Company in the form attached hereto as Exhibit A (together with any senior
convertible notes issued in replacement thereof in accordance with the terms
thereof, the “Initial Notes”), which Initial Notes shall be convertible into
shares of the Company’s common stock, par value $0.01 per share (the “Common
Stock”) (as converted, the “Initial Conversion Shares”), in accordance with the
Initial Notes.

 

C. The Company has authorized a new series of senior convertible notes of the
Company in the form attached hereto as Exhibit B (together with any senior
convertible notes issued in replacement thereof in accordance with the terms
thereof, the “Additional Notes”), which Additional Notes shall be convertible
into shares of the Common Stock (as converted, the “Additional Conversion
Shares” and, collectively with the Initial Conversion Shares and any Common
Stock issued upon any redemption or amortization of, or other payment (other
than interest) under, any of the Notes (as defined below), the “Conversion
Shares”) in accordance with the terms of the Additional Notes.

 

D. The Initial Notes and the Additional Notes collectively are referred to in
this Agreement as the “Notes”.

 

E. The Notes bear interest, which at the option of the Company, subject to
certain conditions, may be paid in shares of Common Stock (the “Interest
Shares”).

 

F. Each Buyer wishes to purchase, severally but not jointly, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate principal amount of Initial Notes set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers (which aggregate principal amount for
all Buyers shall be $225,000,000) and (ii) warrants, in substantially the form
attached hereto as Exhibit C (the “Initial Warrants”), to acquire that number of
shares of Common Stock for each $1,000 of principal amount of Initial Notes
purchased (as exercised, collectively, the “Initial Warrant Shares”) equal to
the quotient of (i) $250 divided by (ii) the lesser of (x) $2.55 and (y) the
arithmetic average of the Weighted Average Price (as defined in the Notes) of
the Common Stock on each of the three (3) consecutive Trading Days (as defined
in the Notes) immediately preceding the Initial Closing Date (as defined
below)(the “Initial Valuation Price”).

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G. Subject to the terms and conditions set forth in this Agreement, each Buyer
may be required to purchase, and the Company may have the right or each Buyer
may elect to purchase and the Company may be required to sell (i) up to that
aggregate principal amount of Additional Notes set forth opposite such Buyer’s
name in column (4) on the Schedule of Buyers (which aggregate principal amount
for all Buyers shall be up to $75,000,000) and (ii) warrants, in substantially
the form attached hereto as Exhibit D (the “Additional Warrants” and,
collectively with the Initial Warrants, the “Warrants”), to acquire that number
of shares of Common Stock for each $1,000 of principal amount of Additional
Notes purchased (as exercised, collectively, the “Additional Warrant Shares”)
equal to the quotient of (i) $150 divided by (ii) the arithmetic average of the
Weighted Average Price (as defined in the Notes) of the Common Stock on each of
the five (5) consecutive Trading Days immediately preceding the Additional
Closing Date (as defined below) (the “Additional Valuation Price”).

 

H. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit E (the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Conversion Shares, the Warrant Shares
and the Interest Shares under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.

 

I. The Notes, the Conversion Shares, the Interest Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the “Securities”.

 

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

 

1. PURCHASE AND SALE OF NOTES AND WARRANTS.

 

(a) Purchase of Notes and Warrants.

 

(i) Initial Notes and Initial Warrants. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 6(a) and 7(a) below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Initial Closing Date (as defined below), a
principal amount of Initial Notes as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, along with Initial Warrants to acquire
that number of Initial Warrant Shares for each $1,000 principal amount of
Initial Notes purchased equal to the quotient of (A) $250 divided by (B) the
Initial Valuation Price.

 

(ii) Additional Notes and Additional Warrants. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b) below, the
Company may elect to issue and sell (or may be required by any Buyer to issue
and sell), and each Buyer severally, but not jointly, if so elected by the
Company (or if so required by such Buyer), shall be required to purchase on the
applicable Additional Closing Date a principal amount of Additional Notes not to
exceed such principal amount of Additional Notes as is set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers, along with Additional
Warrants to

 

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acquire that number of Additional Warrant Shares for each $1,000 principal
amount of Additional Notes purchased equal to the quotient of (A) $150 divided
by (B) the Additional Valuation Price.

 

(iii) Closings. The closing of the purchase of the Initial Notes and Initial
Warrants (the “Initial Closing”) shall occur on the Initial Closing Date and the
closing of the purchase of any Additional Notes and any Additional Warrants
(each, an “Additional Closing”) shall occur on the applicable Additional Closing
Date at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
York 10022. The Initial Closing and the Additional Closings collectively are
referred to in this Agreement as the “Closings.” The Initial Closing Date and
the Additional Closing Dates collectively are referred to in this Agreement as
the “Closing Date.”

 

(iv) Purchase Price. The purchase price for each Buyer (the “Purchase Price”) of
the Notes and related Warrants to be purchased by each such Buyer at each
Closing shall be equal to $1.00 for each $1.00 of principal amount of Notes
being purchased by such Buyer at such Closing.

 

(b) Initial Closing Date. The date and time of the Initial Closing (the “Initial
Closing Date”) shall be 10:00 a.m., New York City Time, on the fourth Trading
Day following, but not including the Trading Day of, the public announcement by
the Company of its earnings for the fourth quarter of 2003 (the “2003
Earnings”), subject to notification of satisfaction (or waiver) of the
conditions to the Initial Closing set forth in Sections 6(a) and 7(a) below (or
such other time or date as is mutually agreed to by the Company and each Buyer).

 

(c) Additional Closing Date.

 

(i) Subject to timely delivery by the Company to the Buyers of a valid Company
Additional Note Notice (as defined below) or by any Buyer to the Company of a
Buyer’s Additional Note Notice (as defined below), the date and time of each
Additional Closing (each, an “Additional Closing Date”) shall be 10:00 a.m., New
York Time, on the date specified in the applicable Company Additional Note
Notice or Buyer’s Additional Note Notice, as applicable, subject to satisfaction
(or waiver) of the conditions to the Additional Closing set forth in Sections
6(b) and 7(b) below and the conditions set forth in this Section 1(c) (or such
other date or time as is mutually agreed to by the Company and the Buyers).
Subject to the requirements of Sections 6(b) and 7(b) below and the conditions
contained in this Section 1(c), the Company on one occasion may require each
Buyer severally, but not jointly, to purchase up to such principal amount of
Additional Notes as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers on the Additional Closing Date by delivering written notice
(the “Company Additional Note Notice”) to each Buyer on any date from and after
the nine-month anniversary of the Initial Closing Date and prior to the
twenty-two month anniversary of the Initial Closing Date (the “Additional Note
Notice Period”; and the date of receipt of the Company Additional Note Notice,
the “Additional Note Notice Date”). The Company Additional Note Notice shall be
irrevocable and must be delivered to each Buyer. The Company Additional Note
Notice shall set forth (i) each Buyer’s pro rata allocation (based on the
principal amount of Additional Notes as is set forth opposite each such Buyer’s
name in column (4) on the Schedule of Buyers in relation to $75,000,000) of the
aggregate principal amount of Additional Notes (which aggregate principal amount
shall not exceed $75,000,000) and related

 

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Additional Warrants which the Company is requiring all of the Buyers to purchase
at the Additional Closing, (ii) the aggregate Purchase Price for each such
Buyer’s Additional Notes and related Additional Warrants and (iii) the
Additional Closing Date, which Additional Closing Date shall be on the sixth
(6th) Trading Day after the Additional Note Notice Date. Notwithstanding
anything in this Agreement to the contrary, the Company shall not be entitled to
require the Buyers to purchase the Additional Notes unless, in addition to the
requirements of Sections 6(b) and 7(b) below, the following Conditions to
Company Additional Note Notice are satisfied.

 

(ii) “Conditions to Company Additional Note Notice” means: (i) on the Additional
Note Notice Date, the Registration Statement (as defined in the Registration
Rights Agreement) covering the Initial Registrable Securities (as defined in the
Registration Rights Agreement) (the “Initial Registration Statement”) shall be
effective and available for the sale of at least all of the Registrable
Securities (as defined in the Registration Rights Agreement) required to be
included in such Registration Statement; (ii) during the ninety (90) Trading
Days immediately preceding each of the Additional Note Notice Date and the
Additional Closing Date, the Initial Registration Statement shall be effective
and available for the sale of at least all of the Registrable Securities
required to be included in such Registration Statement; (iii) the Company shall
have no knowledge of any fact that would cause the Initial Registration
Statement not to continue to be effective and available for the sale of at least
all of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement; (iv) on each day during the period beginning on
the date hereof and ending on and including the Additional Closing Date, the
Common Stock is designated for quotation on an Eligible Market (as defined in
the Notes) and delisting or suspension by such market or exchange shall not have
been threatened or pending either (A) in writing by such market or exchange or
(B) by falling below for at least the requisite period the applicable minimum
listing maintenance requirements of such market or exchange; (v) during the
ninety (90) Trading Days immediately preceding each of the Additional Note
Notice Date and the Additional Closing Date, (A) the Common Stock shall not have
been suspended from trading on the applicable Eligible Market (other than
suspensions of not more than one day and occurring prior to the first day of the
Measuring Period (as defined below) due to business announcements by the
Company) and (B) the Common Stock shall not have fallen below, on any day during
such period, the minimum listing maintenance requirements of such market or
exchange and (vi) during the forty-five (45) Trading Days immediately preceding
each of the Additional Note Notice Date and the Additional Closing Date there
shall not have been any Grace Periods (as defined in the Registration Rights
Agreement); (vii) during the period beginning on the date hereof and ending on
and including the Additional Closing Date, there shall not have occurred (A) an
Event of Default (as defined in the Notes) other than an Event of Default that
is capable of being cured that has been so cured, or (B) the public announcement
of a pending, proposed or intended Change of Control (as defined in the Notes),
unless such pending, proposed or intended Change of Control has been terminated,
abandoned or consummated and the Company has publicly announced such
termination, abandonment or consummation of such Change of Control prior to the
beginning of the Measuring Period; (viii) during the ninety (90) Trading Days
immediately preceding each of the Additional Note Notice Date and the Additional
Closing Date there shall not have been an event that with the passage of time
and without being cured would be reasonably likely to constitute an Event of
Default; (ix) during the period beginning on the Initial Closing Date and ending
on and including the Additional Closing Date, the Company shall have delivered
Initial Conversion

 

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Shares upon conversion, redemption or amortization, if applicable, of the
Initial Notes and Initial Warrant Shares upon exercise of the Initial Warrants
on a timely basis as set forth in the Initial Notes and the Initial Warrants,
respectively; (x) on or before delivery of the Company Additional Note Notice,
the Company shall have received the Stockholder Approval (as defined in Section
4(n) below); (xi) 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 (as defined in Section
3(b) below) or any document governing any Indebtedness (as defined in Section
3(k) below); and (xii) the Weighted Average Price (as defined in the Additional
Notes) of the Common Stock exceeds $1.35 (as appropriately adjusted for any
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock which occur after the date of this Agreement) on each of the
20 consecutive Trading Days immediately prior to the Additional Note Notice Date
(the “Measuring Period”).

 

(iii) In addition to the foregoing, any Buyer shall be allowed to deliver to the
Company a notice of such Buyer’s election (the “Buyer’s Additional Note Notice”)
at any time during the Additional Note Notice Period to purchase at an
Additional Closing all, but not less than all, of the principal amount of
Additional Notes as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers (or such lesser amount remaining as a result of an exercise
by the Company of its rights pursuant to Section 3(c)(i)), along with Additional
Warrants to acquire that number of Additional Warrant Shares for each $1,000
principal amount of Additional Notes purchased equal to the quotient of (A) $150
divided by (B) the Additional Valuation Price; provided, however, that in order
to deliver a Buyer’s Additional Note Notice, the Weighted Average Price of the
Common Stock must exceed 200% of the Initial Valuation Price (as appropriately
adjusted for any stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock which occur after the date of this
Agreement) on each of not less than ten (10) Trading Days in the twenty (20)
consecutive Trading Day period immediately preceding delivery of the Buyer’s
Additional Note Notice. The Buyers’ Additional Note Notice shall set forth the
applicable Additional Closing Date, which Additional Closing Date shall be on
the sixth (6th) Trading Day after delivery of the Buyer’s Additional Note
Notice. Promptly, and in any event within one Trading Day, after receipt of a
Buyer’s Additional Note Notice, the Company shall deliver a copy of such notice
to all of the Buyers.

 

(d) Form of Payment. On each Closing Date, (i) each Buyer shall pay its Purchase
Price to the Company for the Notes and Warrants to be issued and sold to such
Buyer at such Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions, and (ii) the Company
shall deliver to each Buyer the Notes (in the principal amounts as such Buyer
shall request) which such Buyer is then purchasing along with the Warrants (in
the amounts as such Buyer shall request) such Buyer is purchasing, duly executed
on behalf of the Company and registered in the name of such Buyer or its
designee.

 

2. BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer represents and warrants with respect to only itself that:

 

(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Notes and
the Warrants, and (ii) upon conversion of the Notes and exercise of the Warrants
will acquire the Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants, for its own account and
not with a view towards, or for resale in

 

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connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer presently does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.

 

(b) Accredited Investor Status. Such Buyer is an “accredited investor” (as that
term is defined in Rule 501(a) of Regulation D).

 

(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.

 

(d) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

(e) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

 

(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel reasonably acceptable to the Company, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, (C) transferred to an Affiliate (as defined in
Rule 144, an “Affiliate”) of such Buyer that certifies that it is an accredited
investor or (D) such Buyer provides the Company with reasonable assurance,
including any reasonably requested opinion of counsel, that such Securities can
be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended

 

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(or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person (as defined in
Section 3(e)) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.

 

(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of
the Conversion Shares and the Warrant Shares have been registered under the 1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the “blue sky” laws of any state and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):

 

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD 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.

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) upon
transfer such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel reasonably acceptable to the Company, in a
form reasonably acceptable to the Company, to the effect that such legend is not
required under the applicable requirements of the 1933 Act, or (iii) such holder
provides the Company with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144(k).

 

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(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered on behalf of such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer, enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies and except that the indemnification
provisions under the Transaction Documents may further be limited by principles
of public policy.

 

(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company hereby represents and warrants to each of the Buyers as follows
(which representations and warranties shall be deemed to apply, where
appropriate, to each Subsidiary of the Company):

 

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in the SEC Report on Form 10-K for the year ended December 28, 2002
(the “2002 Form 10-K”) or Schedule 3(a). Except as disclosed in the 2002 Form
10-K or in Schedule 3(a), the Company owns, directly or indirectly, the capital
stock or comparable equity interests of each Subsidiary free and clear of any
Lien (as defined in Section 3(f) below) and all the issued and outstanding
shares of capital stock or comparable equity interest of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights. For purposes of this Agreement, “Subsidiary” means a direct or
indirect Significant Subsidiary (as defined in Rule 1-02(w) of Regulation S-X
promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the “1934 Act”)) of the Company.

 

(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter

 

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documents. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (i) adversely affect the legality, validity or enforceability
of any Transaction Document, (ii) reasonably be expected to have or result in a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the Company’s ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”). For purposes
of this Agreement, “Transaction Documents” means, collectively, this Agreement,
the Notes, the Warrants, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), the Voting Agreement
(as defined in Section 4(s)) and each of the other documents entered into or
delivered by the parties hereto in connection with the transactions contemplated
by this Agreement.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents to which it is a party and otherwise to carry
out its obligations hereunder and thereunder. Except for the Stockholder
Approval (as defined below), the execution and delivery of each of the
Transaction Documents to which it is a party by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Notes and Warrants and the reservation for
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion, redemption, amortization, other payment or exercise thereof, have
been duly authorized by all necessary action on the part of the Company and no
further consent or action is required by the Company, its Board of Directors or
its stockholders. Each of the Transaction Documents has been (or, if executed
after the date hereof, upon delivery will be) duly executed by the Company and
is, or when delivered in accordance with the terms hereof, will constitute, the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies and except that the indemnification provisions under the Transaction
Documents may further be limited by principles of public policy.

 

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Notes and Warrants and the reservation for issuance of the Conversion Shares
and the Warrant Shares issuable upon conversion, redemption, amortization, other
payment or exercise thereof, do not and will not (i) conflict with or violate
any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a debt of the Company or a Subsidiary or otherwise) or
other

 

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understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, except
to the extent that such conflict, default or termination right could not
reasonably be expected to have a Material Adverse Effect, or (iii) except as set
forth on Schedule 3(d), result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations and the rules and
regulations of the Nasdaq National Market (the “Principal Market”) or any other
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected, except to the extent that such violation could not reasonably
be expected to have a Material Adverse Effect.

 

(e) Consents. Except as disclosed in Schedule 3(e), the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the applicable Closing Date. The Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the foregoing. For purposes of this
Agreement, “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

 

(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all liens,
charges, claims, security interests, encumbrances, rights of first refusal or
other restrictions (“Liens”) and shall not be subject to preemptive rights or
similar rights of stockholders. As of the applicable Closing, the Company shall
have reserved from its duly authorized capital stock not less than the sum of
(i) 175% of the maximum number of shares of Common Stock issuable upon
conversion of the Notes (assuming for purposes hereof, that the Notes are
convertible at the Initial Valuation Price and without taking into account any
limitations on the conversion of the Notes set forth in the Notes) and (ii) 125%
of the maximum number of shares of Common Stock issuable upon exercise of the
Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants).

 

(g) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion, redemption or amortization of the
Notes and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. Subject to obtaining the Stockholder Approval
(as defined in Section 4(n) below), the Company further acknowledges that its
obligation to issue Conversion Shares upon conversion, redemption or
amortization of the Notes in accordance with this Agreement and the Notes and
its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders

 

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of the Company. Furthermore, the Company understands and acknowledges that the
Transaction Documents do not in any manner preclude any Buyer from trading or
otherwise transacting in the Common Stock or any other security of the Company
at any time from and after the Initial 8-K Filing (as defined in Section 4(i)
below) with the SEC and the public announcement of the 2003 Earnings, including
during any Measuring Period (as defined in the Notes), and that the Measuring
Periods permit each Buyer to realize a return on its investment in the Notes.

 

(h) Capitalization. As of January 31, 2004, the capital stock of the Company
consists of 2,100,000,000 shares, 1,900,000,000 shares of which are Common
Stock, and 200,000,000 shares of which are preferred stock, $0.01 par value per
share. As of January 31, 2004, there were approximately 503,116,102 shares of
Common Stock issued and approximately 490,834,302 shares of Common Stock
outstanding. There were no shares of preferred stock outstanding on the date
hereof. The Company shall provide the exact number of shares issued and the
exact number of shares outstanding as of January 31, 2004 by no later than
February 10, 2004, which number shall not be materially different the
aforementioned numbers. There has been no material change in the Company’s
capitalization since January 31, 2004. All outstanding shares of capital stock
are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable securities laws. Except as disclosed in
Schedule 3(h), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the Securities
(including the Conversion Shares and the Warrant Shares) will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Buyers) and will not result in a right of any holder of securities of
the Company to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in the proxy statement for the Company’s annual meeting of
stockholders held on May 9, 2003, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the 1934 Act), or
has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.

 

(i) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the 1934 Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof, or in
connection with any Closing subsequent to the date hereof, filed two years
preceding the date of such Closing, (the foregoing materials (together with any
materials filed by the Company under the 1934 Act, whether or not required)
being collectively referred to herein as the “SEC Reports” and, together with
this Agreement and the Schedules to this Agreement, the “Disclosure Materials”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension.
The Company has informed each Buyer prior to the date hereof of any filing by
the Company of any SEC Reports within the 10 days preceding the date hereof. The
Company has delivered to each Buyer or their respective representatives true,

 

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correct and complete copies of the SEC Reports not available on the EDGAR
system. Except as set forth on Schedule 3(i), as of their respective dates, the
SEC Reports complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except as
set forth on Schedule 3(i), the financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Except as set forth on Schedule 3(i), such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. All material agreements to which the
Company or any Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary are subject are included as part of or specifically
identified in the SEC Reports to the extent required by the rules and
regulations of the SEC as in effect at the time of filing.

 

(j) Material Changes. Since the date of the audited financial statements
included in the 2002 Form 10-K, except as specifically disclosed in the
Company’s Quarterly Report on Form 10-Q for the period ended March 29, 2003, the
Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2003, the
Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2003
(the “Third Quarter Form 10-Q”) or any of the other Disclosure Materials, (i)
there has been no event, occurrence or development that, individually or in the
aggregate, has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting or the identity of its auditors, except
as disclosed in its SEC Reports, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (v) the Company has not sold any assets, individually or in
the aggregate, in excess of $5,000,000 outside of the ordinary course of
business and (vi) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans.

 

(k) Indebtedness. Except as disclosed in Schedule 3(k), neither the Company nor
any of its Subsidiaries has any outstanding Indebtedness in excess of $100,000
in the aggregate (as defined below). Except as disclosed in Schedule 3(k), no
Indebtedness of the Company individually in excess of $50,000 is senior to or
ranks pari passu with the Notes in right of payment, whether with respect of
payment of redemptions, interest, damages or upon liquidation or dissolution or
otherwise. For purposes of this Agreement: (i) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all

 

12

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obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in accordance with GAAP, is classified as
a capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; and (ii) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

 

(l) Absence of Litigation. Except as disclosed in the Third Quarter Form 10-Q,
there is no action, suit, claim, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries that could, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(m) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received written
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect.

 

(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in
all personal property

 

13

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owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens that do
not materially affect the value of such property, do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries and could not, individually or in the aggregate, have or result
in a Material Adverse Effect. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance
except, in each case, as could not reasonably be expected to result in a
Material Adverse Effect.

 

(o) Certain Fees. Other than fees payable to Banc of America Securities LLC as
placement agent (the “Agent”), no brokerage or finder’s fees or commissions or
any other payment, whether in the form of cash, securities or other
consideration, or any combination of the foregoing, are or will be payable,
directly or indirectly, by the Company, any Subsidiary or any Affiliate thereof
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person directly or indirectly with respect to
the transactions contemplated by this Agreement or any of the other Transaction
Documents, and the Company has not taken any action that would cause any Buyer
to be liable for any such fees or commissions pursuant to any agreement or
arrangement to which the Company is a party. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney’s fees and out-of-pocket expenses) arising in connection
with any claim against any Buyer relating thereto.

 

(p) Private Placement. Neither the Company nor any Person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor any person acting on the Company’s
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D in connection with the offer and
sale by the Company of the Securities as contemplated hereby or (ii) cause the
offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their Affiliates and any
Person acting on their behalf will take any action or steps referred to in the
preceding sentence that would require the registration of any of the Securities
under the 1933 Act or cause the offering to be integrated with the other
offerings for purposes of any applicable law, regulation or stockholder approval
provisions. The Company is not, and is not an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980. No consent,
license, permit, waiver approval or authorization of, or designation,
declaration, registration or filing with, the SEC or any state securities
regulatory authority is required in connection with the offer, sale, issuance or
delivery of the Securities, other than the possible filing of a Form D with the
SEC.

 

14

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(q) Form S-3 Eligibility. The Company is eligible to register the Conversion
Shares, the Warrant Shares and the Interest Shares for resale by the Buyers
using Form S-3 promulgated under the 1933 Act.

 

(r) Listing and Maintenance Requirements. Since January 1, 2003, the Company has
been in compliance with all listing and maintenance requirements for the
Principal Market except, in each case, as could not reasonably be expected to
result in a Material Adverse Effect. The Company has no knowledge of any facts
or circumstances which would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Since January 1,
2003, the Company has not received any communication, written or oral, from the
SEC or the Principal Market regarding the suspension or delisting of the Common
Stock from the Principal Market.

 

(s) Registration Rights. The Company has not granted or agreed to grant to any
Person any rights (including “piggy-back” registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied.

 

(t) Application of Takeover Protections. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s charter
documents or the laws of its state of incorporation that is or could become
applicable to any of the Buyers solely as a result of the Buyers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, as a result of the Company’s issuance
of the Securities and the Buyers’ ownership of the Securities.

 

(u) Disclosure. Except as disclosed in Schedule 3(u), the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Buyers or their agents or counsel with any information that constitutes or might
constitute material, nonpublic information. The Company understands and confirms
that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company taken as a whole is true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed. The Company acknowledges and agrees that no
Buyer makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 2.

 

(v) Acknowledgment Regarding Buyers’ Purchase of Company Securities. The Company
acknowledges and agrees that each of the Buyers is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that no Buyer is acting

 

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as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyers’
purchase of the Securities. The Company further represents to each Buyer that
the Company’s decision to enter into the Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby and
thereby by the Company and its representatives.

 

(w) Patents and Trademarks. Except as disclosed in the Third Quarter Form 10-Q,
to the knowledge of the Company, the Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the 2002 Form 10-K and which the failure
to so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person except as may be
described in the Third Quarter Form 10-Q or as could not reasonably be expected
to result in a Material Adverse Effect. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights, in
each case except as may be described in the Third Quarter Form 10-Q or as could
not reasonably be expected to result in a Material Adverse Effect.

 

(x) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect (“Material Permits”), and neither the
Company nor any Subsidiary has received any written notice of proceedings
relating to the revocation or modification of any Material Permit except as
described in the SEC Reports or as could not reasonably be expected to result in
a Material Adverse Effect.

 

(y) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors) exceeding $60,000, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

 

(z) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business.

 

16

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(aa) Solvency. Based on the financial condition of the Company as of the
appropriate Closing Date, both prior to and after giving effect to the
transactions contemplated by this Agreement to occur on such Closing Date, (i)
the Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

 

(bb) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

 

(cc) Tax Status. The Company and each of the Subsidiaries (i) has made or filed
all federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.

 

(dd) Employee Relations. Neither the Company nor any of the Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company and the Subsidiaries believe that their relations with their
employees are good. No executive officer of the Company (as defined in Rule
501(f) of the 1933 Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer’s employment with the
Company. No executive officer of the Company, to the knowledge of the Company,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.

 

17

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(ee) Foreign Corrupt Practices Act. Neither the Company, nor any Subsidiaries,
nor any director, officer, agent, employee or, to the Company’s knowledge, other
Person acting on behalf of the Company or any Subsidiaries has, in the course of
its actions for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee, except in each case
where such noncompliance would not have, individually or in the aggregate, a
Material Adverse Effect.

 

(ff) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 and any and all
applicable rules and regulations promulgated by the SEC thereunder, in each case
which are currently applicable to it, except where such noncompliance would not
have, individually or in the aggregate, a Material Adverse Effect.

 

(gg) Financial Position. None of the Company, its Subsidiaries nor any of their
Affiliates has received any communication, written or oral, from the Company’s
independent auditors that such auditors intend to include a “going concern” or
other qualification in their opinion with respect to Company’s financial
statements for the year ended December 31, 2003, nor does the Company have any
knowledge of any facts or circumstances which would reasonably require their
auditors in include such a “going concern” or other qualification in such
opinion.

 

4. COVENANTS.

 

(a) Reasonable Best Efforts. Each party shall use its reasonable best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.

 

(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before each Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Securities for sale to the
Buyers at each Closing pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to each Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following each Closing Date.

 

(c) Reporting Status. Except in accordance with the applicable provisions of the
Notes, until the date on which the Investors (as defined in the Registration
Rights

 

18

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Agreement) shall have sold all the Conversion Shares, Interest Shares and
Warrant Shares and none of the Notes or the Warrants is outstanding (the
“Reporting Period”), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.

 

(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for working capital purposes and not for the (i) repayment of any
outstanding Indebtedness of the Company or any of its Subsidiaries or (ii)
redemption or repurchase of any of its equity securities.

 

(e) Financial Information. Unless the following are filed with the SEC through
EDGAR and are available to the public through the EDGAR system, the Company
agrees to send the following to each Investor during the Reporting Period (i)
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. As used herein, “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.

 

(f) Listing. The Company shall use its reasonable best efforts to promptly
secure the listing of all of the Registrable Securities (as defined in the
Registration Rights Agreement) upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall use its reasonable
best efforts to maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents. The Company shall use its
reasonable best efforts to maintain the Common Stock’s authorization for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).

 

(g) Fees. Subject to Section 8 below, at the Initial Closing upon submission of
evidence of expenditure thereof, the Company shall pay an expense allowance not
to exceed $75,000 (in addition to any amounts previously paid) to Smithfield
Fiduciary LLC (a Buyer) or its designee(s) for reimbursement of reasonable legal
and due diligence expenses incurred in connection with the transactions
contemplated by the Transaction Documents, which amount shall be withheld by
such Buyer from its Purchase Price at the Initial Closing. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or broker’s commissions relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any

 

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claim relating to any such payment. Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.

 

(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) of this
Agreement; provided that an Investor and its pledgee shall be required to comply
with the provisions of Section 2(f) hereof in order to effect a sale, transfer
or assignment of Securities to such pledgee. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.

 

(i) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City Time, on the second Trading Day following the date of this
Agreement (but in no event later than the public announcement of the 2003
Earnings), the Company shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act, and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of each of the Notes, the form of each of the Warrants, the
Registration Rights Agreement and the Voting Agreement) as exhibits to such Form
8-K (including all attachments, the “Initial 8-K Filing”). On or before 8:30
a.m., New York City Time, on the first Trading Day following each Additional
Closing Date, the Company shall file a Current Report on Form 8-K with the SEC
describing the transaction consummated on such date (the “Additional 8-K
Filing,” and together with the Initial 8-K Filing, the “8-K Filings”). As of the
Initial 8-K Filing with the SEC and the public announcement of the 2003
Earnings, no Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its or their
respective officers, directors, employees or agents, that is not disclosed in
the Initial 8-K Filing or in the public announcement of the 2003 Earnings. From
and after the Initial 8-K Filing with the SEC and the public announcement of the
2003 Earnings, the Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents,
not to, provide any Buyer with, and no Buyer shall request, any material,
nonpublic information regarding the Company or any of its Subsidiaries without
the express written consent of such Buyer. Subject to the foregoing, neither the
Company nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filings and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

 

20

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(j) Restriction on Redemption and Cash Dividends. So long as any Notes are
outstanding, the Company shall not, directly or indirectly, redeem (other than
pursuant to the terms of any employee benefit plan that does not relate to an
officer or director or an Affiliate of an officer or director beneficially
owning more than 5% of the Common Stock, which has been approved by the Board of
Directors of the Company), or declare or pay any cash dividend or distribution
on, the Common Stock without the prior express written consent of the holders of
Notes representing not less than a majority of the aggregate principal amount of
the then outstanding Notes.

 

(k) Additional Notes. For so long as any Buyer owns any Notes or Warrants or may
be required to purchase any Additional Notes, the Company will not issue any
additional Notes (other than the Additional Notes) and the Company shall not
issue any other securities that would cause a breach or default under the Notes.

 

(l) Conduct of Business. So long as any Buyer owns any Notes or Warrants or may
be required to purchase any Additional Notes, the business of the Company and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.

 

(m) Variable Securities. So long as any Buyer owns any Notes or Warrants or may
be required to purchase any Additional Notes, the Company shall not, in any
manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) and the then applicable Exercise Price (as defined in the Warrants)
with respect to the Common Stock under any Note or any Warrant.

 

(n) Proxy Statement. The Company shall provide each stockholder entitled to vote
at the next meeting of stockholders of the Company, which shall not be later
than May 15, 2004 (the “Stockholder Meeting Deadline”), a proxy statement, which
has been previously reviewed by the Buyers and a counsel of their choice,
soliciting each such stockholder’s affirmative vote at such stockholder meeting
for approval of the Company’s issuance of all of the Securities as described in
the Transaction Documents in accordance with applicable law and the rules and
regulations of the Principal Market (such affirmative approval being referred to
herein as the “Stockholder Approval”), and the Company shall use its reasonable
best efforts to solicit its stockholders’ approval of such issuance of the
Securities and to cause the Board of Directors of the Company to recommend to
the stockholders that they approve such proposal. The Company shall be obligated
to seek the Stockholder Approval by the Stockholder Meeting Deadline and if it
fails to obtain such Stockholder Approval by the Stockholder Meeting Deadline to
continue to seek such Stockholder Approval at no less than four (4) successive
meetings of stockholders of the Company held every four (4) months thereafter.

 

(o) Corporate Existence. So long as any Buyer beneficially owns any Notes or
Warrants or may be required to purchase any Additional Notes, the Company shall
maintain its corporate existence and shall not sell all or substantially all of
the Company’s assets, except in

 

21

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the event of a merger or consolidation or sale of all or substantially all of
the Company’s assets, where the surviving or successor entity in such
transaction (i) assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock or equivalent security is quoted
on or listed for trading on an Eligible Market, the American Stock Exchange or a
recognized foreign trading market or exchange with trading facilities and rules
akin to those of an Eligible Market.

 

(p) Incurrence of Liens. Except in accordance with the applicable provisions of
the Notes, so long as any Notes are outstanding, the Company shall not, directly
or indirectly, allow or suffer to exist any Lien, other than Permitted Liens (as
defined in the Note), upon any property or assets (including accounts and
contract rights) owned by the Company.

 

(q) Reservation of Shares. So long as any Buyer owns any Notes or Warrants or
may be required to purchase any Additional Notes, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than the sum of (i) 175% of the number of shares of Common
Stock issuable upon conversion of, or as payment for interest on, the Notes
(assuming for purposes hereof, that the Notes are convertible at the Initial
Valuation Price and without taking into account any limitations on the
conversion of the Notes set forth in the Notes) and (ii) 125% of the number of
shares of Common Stock issuable upon exercise of the Warrants (without taking
into account any limitations on the exercise of the Warrants set forth in the
Warrants).

 

(r) Incurrence of Indebtedness. During the period commencing on the date of this
Agreement until the later of (i) ninety (90) days after the Initial Closing Date
and (ii)thirty (30) days after the effective date of the Registration Statement
registering the Initial Registrable Securities, the Company shall not, and the
Company shall not permit any Subsidiary to, directly or indirectly, other than
in the ordinary course of business consistent with past practice, incur or
guarantee, assume or suffer to exist any Indebtedness, other than the
Indebtedness evidenced by the Notes.

 

(s) Voting Agreement. The Company shall use its reasonable best efforts to
effectuate the transactions contemplated by the Voting Agreement, substantially
in the form attached hereto as Exhibit F, executed by the Company and the
parties set forth therein (the “Voting Agreement”), and to have the Voting
Agreement executed and delivered by all the parties thereto to the Buyers by no
later than February 11, 2004.

 

5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

 

(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Notes or Warrants), a register for the Notes and the Warrants, in
which the Company shall record the name and address of the Person in whose name
the Notes and the Warrants have been issued (including the name and address of
each transferee), the principal amount of Notes held by such Person and the
number of Warrant Shares issuable upon exercise of the Warrants held by such
Person. The Company shall keep the register open and available at all times
during business hours for inspection by any Buyer or its legal representatives.

 

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(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the name of each Buyer or its
respective nominee(s), for the Conversion Shares, the Interest Shares, if any,
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Notes or exercise of the Warrants in
the form of Exhibit G attached hereto (the “Irrevocable Transfer Agent
Instructions”). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and
stop transfer instructions to give effect to Section 2(g) hereof, will be given
by the Company to its transfer agent, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Conversion Shares,
Interest Shares or Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or pursuant to Rule 144, the transfer agent
shall issue such Securities to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5(b) will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

 

6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

(a) Initial Closing Date. The obligation of the Company hereunder to issue and
sell the Initial Notes and the related Initial Warrants to each Buyer at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:

 

(i) Such Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.

 

(ii) Such Buyer shall have delivered to the Company the Purchase Price (less, in
the case of Smithfield Fiduciary LLC, the amounts withheld pursuant to Section
4(g)) for the Initial Notes and the related Initial Warrants being purchased by
such Buyer at the Initial Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.

 

(iii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the Initial Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific

 

23

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date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Initial Closing Date.

 

(b) Additional Closing Date. The obligation of the Company hereunder to issue
and sell the Additional Notes and the related Additional Warrants to each Buyer
at an Additional Closing is subject to the satisfaction, at or before the
applicable Additional Closing Date, of each of the following conditions,
provided that these conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion by providing each Buyer
with prior written notice thereof:

 

(i) Such Buyer shall have delivered to the Company the Purchase Price for the
Additional Notes and the related Additional Warrants being purchased by such
Buyer at the applicable Additional Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.

 

(ii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the applicable
Additional Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the applicable Additional Closing
Date.

 

7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

(a) Initial Closing Date. The obligation of each Buyer hereunder to purchase the
Initial Notes and the related Initial Warrants at the Initial Closing is subject
to the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

(i) The Company shall have executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Initial Notes (in such principal amounts as
such Buyer shall request) and the related Initial Warrants (in such amounts as
such Buyer shall request), in each case which are being purchased by such Buyer
at the Initial Closing pursuant to this Agreement.

 

(ii) Such Buyer shall have received the opinion of (x) Mayer, Brown, Rowe & Maw
LLP, the Company’s counsel, dated as of the Initial Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in substantially the
form of Exhibit H-1 attached hereto, and (y) the General Counsel to the Company,
dated as of the Initial Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit H-2 attached
hereto.

 

(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit G attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.

 

24

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(iv) The Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary in such
corporation’s state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within 10 days of the Initial Closing Date.

 

(v) The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the
Secretary of State of Maryland as of a date within 10 days of the Initial
Closing Date.

 

(vi) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Delaware within 10 days of the Initial Closing Date.

 

(vii) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company and dated as of the Initial Closing Date, as to (i)
the resolutions consistent with Section 3(c) as adopted by the Company’s Board
of Directors in a form reasonably acceptable to such Buyer (the “Resolutions”),
(ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect at
the Initial Closing, in the form attached hereto as Exhibit I.

 

(viii) The representations and warranties of the Company shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Initial Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Initial Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Initial Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer in the form attached hereto as Exhibit J.

 

(ix) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Initial Closing Date.

 

(x) The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended by the SEC, as of the
Initial Closing Date, or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been
threatened, as of the Initial Closing Date, either (A) in writing by the SEC or
the Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.

 

25

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(xi) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Initial Notes and
the Initial Warrants.

 

(xii) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.

 

(xiii) The Voting Agreement shall have been executed and delivered to the Buyers
by the parties thereto no later than February 11, 2004, and shall be in full
force and effect as of the Initial Closing Date.

 

(b) Additional Closing Date. The obligation of each Buyer hereunder to purchase
the Additional Notes and the related Additional Warrants at an Additional
Closing is subject to the satisfaction, at or before the applicable Additional
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

 

(i) The Company shall have executed and delivered to such Buyer the Additional
Notes (in such principal amounts as such Buyer shall request) and related
Additional Warrants (in such amounts as such Buyer shall request), in each case
which are being purchased by such Buyer at the applicable Additional Closing
pursuant to this Agreement.

 

(ii) Such Buyer shall have received the opinion of (x) Mayer, Brown, Rowe & Maw
LLP, the Company’s counsel, dated as of the applicable Additional Closing Date,
in form, scope and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibit H-1 attached hereto, and (y) the General
Counsel to the Company, dated as of the applicable Additional Closing Date, in
form, scope and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibit H-2 attached hereto.

 

(iii) The Irrevocable Transfer Agent Instructions shall remain in effect as of
the applicable Additional Closing Date and the Company shall cause its transfer
agent to deliver a letter to such Buyer to that effect.

 

(iv) The Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary in such
corporation’s state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within 10 days of the applicable Additional
Closing Date.

 

(v) The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the
Secretary of State of the State of Maryland as of a date within 10 days of the
applicable Additional Closing Date.

 

(vi) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Delaware within 10 days of the applicable Additional Closing Date.

 

26

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(vii) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company dated as of the applicable Additional Closing Date,
as to (i) the Resolutions, (ii) the Certificate of Incorporation and (iii) the
Bylaws, each as in effect at the applicable Additional Closing, in the form
attached hereto as Exhibit I.

 

(viii) The representations and warranties of the Company shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the applicable Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
applicable Additional Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the applicable Additional Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form attached
hereto as Exhibit J.

 

(ix) In the event that the Company is requiring the purchase of Additional Notes
pursuant to a Company Additional Note Notice, such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the applicable Additional Closing Date, stating that the Conditions to Company
Additional Note Notice set forth in Section 1.3(c)(i) have been satisfied.

 

(x) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the applicable Additional Closing Date.

 

(xi) The Common Stock (I) shall be designated for quotation or listed on the
Principal Market, (II) shall not have been suspended, as of the applicable
Additional Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the applicable Additional Closing Date, either (A) in
writing by the SEC or the Principal Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Market for the requisite
period and (III) during any day during the ninety (90) Trading Days prior to the
applicable Additional Closing Date, shall not have fallen below the minimum
listing maintenance requirements of the Principal Market.

 

(xii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the applicable
Additional Notes and the applicable Additional Warrants.

 

(xiii) During the period beginning on the Initial Closing Date and ending on and
including the applicable Additional Closing Date, neither the Company nor any of
its Subsidiaries shall have been in material default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any of its Subsidiaries.

 

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(xiv) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.

 

8. TERMINATION. In the event that the Initial Closing shall not have occurred
with respect to a Buyer (i) on or before February 24, 2004, due to the Company’s
or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above or (ii) on or before February 19, 2004, due to the Company’s failure to
announce the 2003 Earnings (and the nonbreaching party’s failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.

 

9. MISCELLANEOUS.

 

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement 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. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

 

(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

 

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(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

(e) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Buyers, the Company, their Affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
holders of Initial Notes representing at least a majority of the aggregate
principal amount of the Initial Notes, or, if prior to the Initial Closing Date,
the Company and the Buyers listed on the Schedule of Buyers as being obligated
to purchase at least a majority of the aggregate principal amount of the Initial
Notes. No provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Notes then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents, holders of Notes or holders of
the Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.

 

(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

Corvis Corporation

7015 Albert Einstein Drive

Columbia, Maryland 21046

Telephone:    (443) 259-4000

Facsimile:      (443) 259-4417

Attention:     General Counsel

 

29

--------------------------------------------------------------------------------

with a copy to:

 

Mayer, Brown, Rowe & Maw LLP

190 S. LaSalle Street

Chicago, Illinois 60603

Telephone:    (312) 701-7843

Facsimile:     (312) 701-7711

Attention:     Philip J. Niehoff, Esq.

 

If to the Transfer Agent:

 

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Telephone:    (212) 509-4000

Facsimile:     (212) 616-7616

Attention:     Roger Bernhammer

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

 

with a copy (for informational purposes only) to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone:    (212) 756-2000

Facsimile:     (212) 593-5955

Attention:     Eleazer N. Klein, Esq.

 

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding, including by merger or
consolidation, except in accordance with the applicable provisions of the Notes
and the Warrants with respect to which the Company is in compliance with such
provisions of the Notes and the Warrants. A Buyer may assign, without the
consent of the Company, some or all of its rights hereunder to any Person to
whom such Buyer assigns or transfers Securities, or the right to acquire
Securities, in accordance herewith, provided such transferee agrees in writing
to be bound with respect to the transferred Securities to the provisions hereof
that apply to the transferring Buyer, in which event such assignee shall be
deemed to be a Buyer hereunder with respect to such assigned rights.

 

30

--------------------------------------------------------------------------------

(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

 

(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 shall survive each Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

 

(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

(k) Indemnification. In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities hereunder and thereunder
and in addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) other than those
arising from or resulting from a misrepresentation or breach of any
representation or warranty made by such Indemnitee contained in the Transaction
Documents or a breach of any covenant, agreement or obligation by such
Indemnitee contained in the Transaction Documents or from the gross negligence,
willful misconduct or bad faith of such Indemnitee, the execution, delivery,
performance or enforcement of the Transaction Documents, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, or (iii) other than those arising
from or resulting from a misrepresentation or breach of any representation or
warranty made by such Indemnitee contained in the Transaction Documents or a
breach of any covenant, agreement or obligation by such Indemnitee contained in
the Transaction Documents or from the gross negligence, willful misconduct or
bad faith of such Indemnitee, the status of such Buyer or holder of the
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company

 

31

--------------------------------------------------------------------------------

may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.

 

(l) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

(m) Remedies. Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Other than
in connection with Sections 4(a), (c), (d), (e), (l), (n) and (o), any Person
having any rights under any provision of any of the Transaction Documents shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of any of
the Transaction Documents and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under any of the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security.

 

(n) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

 

(o) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Buyer confirms that
it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

 

[Signature Pages Follow]

 

32

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

COMPANY:

By:

 

    /s/ KIM D LARSEN

--------------------------------------------------------------------------------

   

Name: Kim D. Larsen

   

Title:   SVP, Bus. Dev. & General Counsel

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: SMITHFIELD FIDUCIARY LLC

By:

 

    /s/ ADAM J. CHILL

--------------------------------------------------------------------------------

   

Name: Adam J. Chill

   

Title:   Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: MAINFIELD ENTERPRISES INC.

By:

 

    /s/ AWI VIGDER

--------------------------------------------------------------------------------

   

Name: Awi Vigder

   

Title:   Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: THE RIVERVIEW GROUP LLC

By:

 

    /s/ TERRY FEENEY

--------------------------------------------------------------------------------

   

Name: Terry Feeney

   

Title:   Chief Operating Officer

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS:

PORTSIDE GROWTH AND

OPPORTUNITY FUND

By:

 

    /s/ JEFF SMITH

--------------------------------------------------------------------------------

   

Name: Jeff Smith

   

Title:   Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: ELLIOTT ASSOCIATES, L.P. By:    Elliott Capital Advisors, L.P., as
general partner

By:    Braxton Associates, Inc., as general

partner

By:

 

    /s/ ELLIOTT GREENBERG

--------------------------------------------------------------------------------

   

Name:     Elliot Greenberg

   

Title:       Vice President

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: ELLIOTT INTERNATIONAL, L.P.

By:    Elliott International Capital Advisors Inc.,

as Attorney-in-Fact

By:

 

    /s/ ELLIOT GREENBERG

--------------------------------------------------------------------------------

   

Name:     Elliot Greenberg

   

Title:       Vice President

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: HEIMDALL INVESTMENTS LTD.

By:

 

    /s/ KEVIN O’NEAL

--------------------------------------------------------------------------------

   

Name:    Kevin O’Neal

   

Title:      Authorized Signatory

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: CEDRIC, LLC

By:

 

    /s/ JOSEPH R. WEKSELBLATT

--------------------------------------------------------------------------------

   

Name:    Joseph R. Wekselblatt

   

Title:     Chief Financial Officer, Angelo,

    Gordon & Co., L.P. Manager

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company has caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS: AMARANTH PARTNERS L.L.C. By Amaranth Advisors L.L.C., Manager

By:

 

/s/ KARL J. WACHTER

--------------------------------------------------------------------------------

   

Name:    Karl J. Wachter

   

Title:      Authorized Signatory

--------------------------------------------------------------------------------

SCHEDULE OF BUYERS

 

(1)    (2)    (3)    (4)    (5)

Buyer

--------------------------------------------------------------------------------

  

Address and Facsimile Number

--------------------------------------------------------------------------------

  

Aggregate
Principal
Amount of
Initial Notes

--------------------------------------------------------------------------------

  

Maximum
Aggregate
Principal
Amount of
Additional
Notes

--------------------------------------------------------------------------------

  

Legal Representative’s

Address and Facsimile Number

--------------------------------------------------------------------------------

Smithfield Fiduciary LLC

  

c/o Highbridge Capital

Management, LLC

9 West 57th Street, 27th Floor

New York, New York 10019

Attention: Ari J. Storch

                   Adam J. Chill

Facsimile: (212) 751-0755

Telephone: (212) 287-4720

Residence: Cayman Islands

   $45,000,000    $15,000,000   

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Eleazer Klein, Esq.

Facsimile: (212) 593-5955

Telephone: (212) 756-2376

Mainfield Enterprises Inc.

  

c/o Sage Capital Growth, Inc.

660 Madison Avenue, 18th Floor

New York, New York 10021

Attention: Eldad Gal

Facsimile: (212) 651-9010

Telephone: (212) 651-9008

Residence: British Virgin Islands

   $40,500,000    $13,500,000   

Proskauer Rose LLP

1585 Broadway

New York, New York 10036

Attention: Adam J. Kansler, Esq.

Facsimile: (212) 969-2900

Telephone: (212) 969-3000

The Riverview Group LLC

  

666 Fifth Avenue, 8th Floor

New York, New York 10103

Attention: Daniel Cardella

Facsimile: (212) 977-1667

Telephone: (212) 841-4100

Residence: Delaware

   $10,000,000    $3,333,333     

Portside Growth and

Opportunity Fund

  

c/o Ramius Capital Group, L.L.C.

666 Third Avenue, 26th Floor

New York, New York 10017

Attention: Jeffrey Smith

                   Roger Anscher

Facsimile: (212) 845-7999

Telephone: (212) 845-7955

Residence: Cayman Islands

   $15,000,000    $5,000,000     

Elliott Associates, L.P.

  

c/o Elliott Management Corporation

712 Fifth Avenue, 35th Floor

New York, New York 10019

Attention: Elliot Greenberg

                   Brett Cohen

Nadav Manham

Facsimile: (212) 974-2092

Telephone: (212) 506-2999

Residence: Delaware

   $10,000,000    $3,333,333     

--------------------------------------------------------------------------------

Elliott International, L.P.

  

c/o Elliott Management Corporation

712 Fifth Avenue, 35th Floor

New York, New York 10019

Attention: Elliot Greenberg

                   Brett Cohen

Nadav Manham

Facsimile:    (212) 974-2092

Telephone: (212) 506-2999

Residence: Cayman Islands

     $15,000,000    $5,000,000       

Heimdall Investments Ltd.

  

c/o HBK Investments Ltd.

300 Crescent Court, Suite 700

Dallas, Texas 75201

Attention: General Counsel

Facsimile:    (214) 758-1207

Telephone: (214) 758-6107

Residence: Cayman Islands

     $27,500,000    $9,166,667       

Cedric, LLC

  

c/o Angelo, Gordon & Co.

245 Park Avenue

New York, New York 10167-0094

Attention: Gary I. Wolf

Facsimile:    (212) 867-6449

Telephone: (212) 692-2058

Residence: Delaware

     $42,500,000    $14,166,667     

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Attention: Douglas A. Cifu, Esq.

Facsimile: (212) 757-3990

Telephone: (212) 373-3000

Amaranth Partners L.L.C.

  

One American Lane

Greenwich, Connecticut 06831

Attention: General Counsel

Facsimile:    (203) 422-3500

Telephone: (203) 422-3300

Residence: Delaware

     $19,500,000    $6,500,000       

--------------------------------------------------------------------------------

Schedule 3(a)

 

ADDITIONAL SIGNIFICANT SUBSIDIARIES

 

C III Communications LLC (100% voting; approximately 97% economic ownership)

Broadwing Communications LLC

Broadwing Communications IRU LLC

Broadwing Communications Assets LLC

Broadwing Communications Employees LLC

Broadwing Communications Real Estate Services LLC

Broadwing Communications Real Estate LLC

--------------------------------------------------------------------------------

Schedule 3(d)

 

NO CONFLICTS

 

The Company and Buyers currently intend to close before the 15-day period has
run with respect to the Nasdaq Notification: Listing of Additional Shares.

--------------------------------------------------------------------------------

Schedule 3(e)

 

CONSENTS

 

1) Registration and other obligations as contemplated by the Registration Rights
Agreement.

 

2) Possible filing of Form D

 

3) The Stockholder Approval

 

4) See also Schedule 3(d)

--------------------------------------------------------------------------------

Schedule 3(h)

 

OPTIONS/WARRANTS

 

1) Additional Investment Rights issued in connection with the August 28, 2003
PIPES transaction.

 

2) Options issued in connection with the Company’s employee benefit plans.

 

3) Warrant for the purchase of 7,250,000 Common Shares issued to Cequel III,
together with a covenant to issue up to 2,750,000 Common Shares if the Common
Shares are not trading at a minimum price at the time the related resale
registration rights agreement becomes effective.

--------------------------------------------------------------------------------

Schedule 3(i)

 

SEC REPORTS/FINANCIAL STATEMENTS

 

On June 13, 2003, Corvis Corporation acquired the assets of Broadwing, Inc.
(“Broadwing”) from Cincinnati Bell Inc. (“Cincinnati Bell”). We then completed a
PIPE’s offering in August 2003 wherein we agreed, pursuant to a registration
rights agreement, to file and make effective a registration statement relating
to the shares of common stock sold in the PIPEs offering. In order to register
those securities, we need to include certain historical financial statements of
Broadwing. In that regard, we previously sought and obtained the consent of
PricewaterhouseCoopers LLP (“PwC”) to incorporate these historical financial
statements by reference. Recently, PwC indicated that it was not willing to
provide this consent because of allegations contained in an amended lawsuit
filed against Cincinnati Bell, Broadwing and certain of its former officers in
December 2003.

 

As has been publicly disclosed, Cincinnati Bell is conducting an investigation
into these claims, including plaintiffs’ allegations regarding recognition of
revenue from network construction agreements in 2000 and 2001. Broadwing
announced its intention to exit the network construction business in late 2001
and no revenues were received in connection with this business in 2002 and 2003.
We did not acquire this line of business as part of our asset purchase of
Broadwing in June 2003. Since the acquisition, we have not applied the revenue
recognition practices alleged to have been applied to IRU revenue prior to the
acquisition. We do no believe that there will be a material impact on our
financial statements, results of operations or conduct of our business for the
periods since we acquired the Broadwing assets. As soon as PwC consents to the
incorporation by reference of the required historical financial statements, we
hope to proceed with the registration of the securities issued in the PIPEs
transaction.

--------------------------------------------------------------------------------

Schedule 3(k)

 

INDEBTEDNESS

 

The Company has no Indebtedness individually or in the aggregate in excess of
$15 million. This Indebtedness includes Corvis notes to landlords in the
approximate amount of $2.3 million, approximately $4.5 million of capital leases
at the Broadwing level and cash collateralized letters of credit in an
approximate amount of $7 million.

--------------------------------------------------------------------------------

Schedule 3(u)

 

FINANCIAL STATEMENTS

 

See disclosure on Schedule 3(i)