Exhibit 10.1

 

EXECUTION VERSION

 

AMENDMENT AGREEMENT

 

AMENDMENT AGREEMENT (the “Agreement”), dated as of November 8, 2005, by and
among Avanex Corporation, a Delaware corporation, with headquarters located at
409l9 Encyclopedia Circle, Fremont, California 94538 (the ”Company”), and
[Steelhead Investments Ltd.] [Kings Road Investments Ltd.] [Gryphon Master Fund,
L.P.] [GSSF Master Fund LP] [Castlerigg Master Investments Ltd.] (the
“Investor”).

 

WHEREAS:

 

A. The Company, the Investor and certain other investors (the “Other Investors”,
and collectively with the Investor, the “Investors”) are parties to that certain
Securities Purchase Agreement, dated as of May 16, 2005 (the “Securities
Purchase Agreement”), pursuant to which, among other things, the Investors
purchased from the Company (i) senior secured convertible notes (the “Existing
Notes”), which are convertible into shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) (the Existing Notes as converted,
the “Existing Conversion Shares”), in accordance with the terms thereof, and
(ii) warrants (the “Existing Warrants”), which are exercisable into shares of
Common Stock (the “Existing Warrant Shares”).

 

B. In connection with the transactions set forth in the Securities Purchase
Agreement, the Company entered into a Security Agreement, a Pledge Agreement and
a Guaranty (collectively, the “Security Documents”), pursuant to which, among
other things, the Existing Notes were secured by a first priority, perfected
security interest, subject to Permitted Liens (as defined in the Existing
Notes), in substantially all of the assets of the Company and the stock and
assets of certain of the Company’s subsidiaries.

 

C. Certain of the Investors have delivered an Event of Default Redemption Notice
(a “Default Notice”), attached hereto as Exhibit A, which, among other things,
purports to set forth certain Events of Default as having occurred pursuant to
the terms of the Existing Notes.

 

D. The Company and the Investor desire to enter into this Agreement, pursuant to
which, among other things, (i) in consideration of the withdrawal of the Default
Notice delivered by the Investor, if any, and not submitting a default notice
relating to the Existing Claims (as defined in Section 7(a) below), and the
releases contained herein, the Company shall pay to the Investor [$1,500,000]
[$1,000,000] [$375,000] [$125,000] [$500,000] (the “Release Amount”); (ii) the
Company and the Investor shall amend and restate all of such Investor’s Existing
Notes for senior secured convertible notes in the form attached hereto as
Exhibit B (the “Amended and Restated Notes”), which shall be convertible into
Common Stock (as converted, the “Amended and Restated Conversion Shares”), in
accordance with the terms thereof; and (iii) the Company and the Investor shall
amend and restate all of such Investor’s Existing Warrants for warrants in the
form attached hereto as Exhibit C (the “Amended and Restated Warrants”) which
shall be exercisable into Common Stock (the “Amended and Restated Warrant
Shares”, and together with Amended and Restated Conversion Shares, the “Amended
and Restated Shares”).

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E. Contemporaneously with the execution and delivery of the Securities Purchase
Agreement, the Company and the Investors entered into a Registration Rights
Agreement, dated as of May 16, 2005 (the “Registration Rights Agreement”),
pursuant to which the Company agreed to provide certain registration rights with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement, the “Existing Registrable Securities”) under the Securities Act of
1933, as amended (the “1933 Act”), and the rules and regulations promulgated
thereunder, and applicable state securities laws.

 

F. The parties hereto desire that the Amended and Restated Shares be covered by
registration rights terms substantially identical to those set forth in the
Registration Rights Agreement.

 

G. The parties hereto desire that the Security Documents shall continue to be in
full force and effect and secure all obligations under the Securities Purchase
Agreement as amended hereby and the Amended and Restated Notes in accordance
with the terms of such Security Document.

 

H. The amendment of the Existing Notes and the Existing Warrants is being made
in reliance upon the exemption from registration provided by Section 4(2) of the
1933 Act.

 

I. Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings ascribed to them in the Securities Purchase Agreement and
the Amended and Restated Notes.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investors hereby agree as
follows:

 

  1. AMENDMENT AND RESTATEMENT OF NOTES AND WARRANTS, WITHDRAWAL AND
NON-SUBMISSION OF DEFAULT NOTICE.

 

(a) Amendment and Restatement. Subject to satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, at the closing contemplated by
this Agreement (the “Closing”), (i) the Investor shall surrender to the Company
its Existing Notes and the Company shall issue and deliver to the Investor the
Amended and Restated Notes in a principal amount equal to that of the Existing
Notes being so amended and restated, (ii) the Investor shall surrender to the
Company at the Closing its Existing Warrants and the Company shall issue and
deliver to the Investor the Amended and Restated Warrants, exercisable for the
same number of shares of Common Stock and (iii) the Company shall pay in cash to
the Investor the Release Amount.

 

(b) Ratifications. Except as otherwise expressly provided herein, (i) the
Securities Purchase Agreement, Registration Rights Agreement, each Security
Document and each other Transaction Documents is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects,
except that on and after the Closing Date (A) all references in the Securities
Purchase Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words
of like import referring to the Securities Purchase Agreement shall mean the
Securities Purchase Agreement as amended by this Agreement, (B) all references
in the Registration Rights Agreement to “this Agreement”, “hereto”, “hereof”,
“hereunder” or words of

 

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like import referring to the Registration Rights Agreement shall mean the
Registration Rights Agreement as amended by this Agreement, (C) all references
in the other Transaction Documents, including without limitation any Security
Document, to the “Securities Purchase Agreement”, “thereto”, “thereof”,
“thereunder” or words of like import referring to the Securities Purchase
Agreement shall mean the Securities Purchase Agreement as amended by this
Agreement, and (D) all references in the other Transaction Documents, including
without limitation any Security Document, to the “Registration Rights
Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring
to the Registration Rights Agreement shall mean the Registration Rights
Agreement as amended by this Agreement, (ii) to the extent that the Securities
Purchase Agreement or any other Transaction Document purports to pledge to HBK
Investments L.P. as collateral agent for the Investors (the “Agent”), or to
grant to the Agent, a security interest in or lien on, any collateral as
security, such pledge or grant of a security interest or lien is hereby ratified
and confirmed in all respects, and (iii) the execution, delivery and
effectiveness of this Agreement shall not operate as an amendment of any right,
power or remedy of the Agent or the Investors under any Transaction Document,
nor constitute an amendment of any provision of any Transaction Document.

 

(c) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York Time, on the second Business Day after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
5 and 6 below (or such other time and date as is mutually agreed to by the
Company and the Investors). The Closing shall occur on the Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

 

(d) Form of Payment. On the Closing Date, (i) the Company (A) shall pay to the
Investor the Release Amount, by wire transfer of immediately available funds in
accordance with the Investor’s written wire instructions provided to the Company
at least two (2) Business Days prior to the Closing, (B) shall issue and deliver
to the Investor, the Investor’s Amended and Restated Notes, duly executed on
behalf of the Company and registered in the name of the Investor, and (C) shall
issue and deliver to the Investor, the Investor’s Amended and Restated Warrants,
duly executed on behalf of the Company and registered in the name of the
Investor, and (ii) the Investor (A) shall deliver to the Company the Investor’s
Existing Notes for cancellation and (B) shall deliver to the Company the
Investor’s Existing Warrants for cancellation.

 

(e) Default Notice. Effective upon the Closing, the Investor hereby withdraws
and cancels the Default Notice delivered to the Company, if any, and agrees not
to deliver a default notice relating to the Existing Claims.

 

  2. AMENDMENTS TO TRANSACTION DOCUMENTS.

 

The Securities Purchase Agreement and the Registration Rights Agreement are
hereby amended as follows:

 

(a) All references to “Notes” shall mean, and are hereby replaced with, the
“Amended and Restated Notes”;

 

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(b) All references to “Conversion Shares” shall mean, and are hereby replaced
with, the “Amended and Restated Conversion Shares”;

 

(c) All references to “Warrants” shall mean, and are hereby replaced with, the
“Amended and Restated Warrants”;

 

(d) All references to “Warrant Shares” shall mean, and are hereby replaced by
“Amended and Restated Warrants”; and

 

(e) The defined term “Transaction Documents” is hereby amended to include this
Agreement, the Amended and Restated Notes and the Amended and Restated Warrants.

 

  3. REPRESENTATIONS AND WARRANTIES

 

(a) Investor Bring Down. The Investor hereby represents and warrants to the
Company with respect to itself only as set forth in Section 2 of the Securities
Purchase Agreement as to this Agreement as if such representations and
warranties were made as of the date hereof and set forth in their entirety in
this Agreement. Such representations and warranties in the Securities Purchase
Agreement to the transactions thereunder and the securities issued thereby are
hereby deemed for purposes of this Agreement to be references to the
transactions hereunder and the issuance of the securities hereby.

 

(b) Company Bring Down. The Company represents and warrants to the Investor as
set forth in Section 3 of the Securities Purchase Agreement as if such
representations and warranties were made as of the date hereof and set forth in
their entirety in this Agreement; provided that the Schedules to the Securities
Purchase Agreement are replaced in their entirety by the Schedules attached to
this Agreement (the “New Schedules”). Such representations and warranties in the
Securities Purchase Agreement to the transactions thereunder and the securities
issued thereby are hereby deemed for purposes of this Agreement to be references
to the transactions hereunder and the issuance of the securities hereby, and
references therein to “Closing Date” being deemed references to the Closing Date
as defined in Section 1(c) above.

 

  4. CERTAIN COVENANTS AND AGREEMENTS; RELEASE

 

(a) Registration Rights. After the Closing Date, the Company shall file a new
registration statement, with the Amended and Restated Shares being treated as
“Registrable Securities” in accordance with, and being governed by, the
Registration Rights Agreement as amended herein, the provisions and terms of
which are applicable hereto mutates mutandis, as if the Company and the
Investors had executed such Registration Rights Agreement as of the Closing
Date; provided, however, that (i) references in the Registration Rights
Agreement to Closing Date shall be deemed amended to refer to the Closing Date
as set forth in this Agreement and (ii) references in the Registration Rights
Agreement to Filing Deadline shall be deemed amended to mean 25 days after the
Closing Date.

 

(b) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York Time, on the first Business Day following the date of this

 

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Agreement, the Company shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by this Agreement 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 Amended and Restated Notes, the form of each of the Amended
and Restated Warrants and any amended Security Documents) (including all
attachments, the “8-K Filing”). Neither the Company, any of its Subsidiaries or
any of its respective officers, directors, employees or agents has provided
material nonpublic information to the Investors other than the information that
will be disclosed in the 8-K Filing or that was disclosed in the Company’s Form
8-K filed with the SEC on May 17, 2005. The Company shall not disclose the
identity of the Investor in any filing with the SEC except as required by the
rules and regulations of the SEC thereunder. 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 the Investor with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing with the SEC without the express written
consent of the Investor. In the event of a breach of the foregoing covenant by
the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, the Investor shall notify the
Company, and if the Company does not make public disclosure of such material
nonpublic information within twenty four (24) hours of such notification, the
Investor shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, nonpublic
information without the prior approval by the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees or agents. The
Investor shall not have any liability to the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents for any such disclosure. Subject to the foregoing, neither the Company
nor the Investor 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 the Investor, to
make any press release or other public disclosure with respect to such
transactions which are (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) required by applicable law and regulations
(provided that in the case of clause (i) the Company shall use reasonable best
efforts to consult with the Investor in connection with any such press release
or other public disclosure prior to its release). Notwithstanding the foregoing,
the Company shall not publicly disclose the name of the Investor, or include the
name of the Investor in any filing with the SEC or any regulatory agency or the
applicable stock exchange, without the prior written consent of the Investor,
except (i) for disclosure thereof in the 8-K Filing or Registration Statement or
similar disclosure as required in future SEC filings or (ii) as required by
applicable law or regulations or applicable stock exchange rules or any order of
any court or other governmental agency, in which case the Company shall use its
reasonable best efforts to provide the Investor with prior notice of such
disclosure.

 

(c) Fees and Expenses. At the Closing, the Company shall reimburse the Investor
for its legal and due diligence fees and expenses in connection with the
preparation and negotiation of this Agreement by paying any such amount to
[Schulte Roth & Zabel LLP] [Latham & Watkins LLP] [Akin, Gump, Strauss, Hauer &
Feld, LLP] (the “Investor Counsel Expense”). Upon execution of this Agreement,
the Company shall pay to [Schulte Roth & Zabel LLP] [Latham & Watkins LLP]
[Akin, Gump, Strauss, Hauer & Feld, LLP] [$            ] toward the Investor
Counsel Expense. Except as otherwise set forth in this Agreement or pursuant to
the

 

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registration rights pursuant to Section 4(a) hereof, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Amended and Restated Notes and Amended and Restated Warrants.

 

(d) Stockholder Approval. The Company shall provide each stockholder entitled to
vote at a special or annual meeting of stockholders of the Company (the
“Subsequent Stockholder Meeting”), which initially shall be promptly called and
held not later than January 31, 2006 (the “Subsequent Stockholder Meeting
Deadline”), a proxy statement, substantially in the form which has been
previously reviewed by the Investors and a counsel of their choice at the
expense of the Company, soliciting each such stockholder’s affirmative vote at
the Subsequent Stockholder Meeting for approval of resolutions (the “Subsequent
Resolutions”) providing for 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 “Subsequent Stockholder Approval” and the date such
approval is obtained, the “Subsequent Stockholder Approval Date”), and the
Company shall use its reasonable best efforts to solicit its stockholders’
approval of the Subsequent Resolutions and to cause the Board to recommend to
the stockholders that they approve the Subsequent Resolutions. The Company shall
be obligated to seek to obtain the Subsequent Stockholder Approval by the
Subsequent Stockholder Meeting Deadline. If, despite the Company’s reasonable
best efforts, the Subsequent Stockholder Approval is not obtained on or prior to
the Subsequent Stockholder Meeting Deadline, the Company shall cause an
additional Subsequent Stockholder Meeting to approve the Subsequent Resolutions
to be called and held at each otherwise convened special or annual meeting of
the stockholders of the Company, which special or annual meetings must be called
and held at least once in each six-month period after the Subsequent Stockholder
Meeting Deadline until such Subsequent Stockholder Approval is obtained,
provided that if the Board does not recommend to the stockholders that they
approve the Subsequent Resolutions at any such Subsequent Stockholder Meeting
and the Subsequent Stockholder Approval is not obtained, the Company shall cause
an additional Subsequent Stockholder Meeting to be held each calendar quarter
after the Subsequent Stockholder Meeting Deadline until such Subsequent
Stockholder Approval is obtained.

 

  5. CONDITIONS TO COMPANY’S OBLIGATIONS HEREUNDER.

 

The obligations of the Company to the Investor hereunder are subject to the
satisfaction 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 the Investor with prior written notice
thereof:

 

(a) The Investor shall have executed this Agreement and delivered the same to
the Company.

 

(b) The Investor shall have delivered to the Company the Investor’s Existing
Notes and Existing Warrants for cancellation.

 

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(c) The representations and warranties of the Investor 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 Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date).

 

  6. CONDITIONS TO INVESTOR’S OBLIGATIONS HEREUNDER.

 

The obligations of the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the
Investor’s sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Company with prior written notice thereof:

 

(a) The Company shall have executed this Agreement and delivered the same to the
Investor.

 

(b) The Company shall have executed and delivered to the Investor the Amended
and Restated Notes and the Amended and Restated Warrants being issued to such
Investor at the Closing.

 

(c) The Company shall have delivered to the Investor such Investors Release
Amount by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Investor.

 

(d) The Amended and Restated Notes and Transaction Documents shall be secured
pursuant to the terms of the Security Documents in the same manner and to the
same extent as the Existing Notes.

 

(e) Each of the Other Investors shall have (i) executed agreements identical to
this Agreement (other than proportional changes in the numbers reflecting the
(x) different principal amount of such Other Investors Existing Notes, (y)
different number of Existing Warrant Shares underlying such Investors Existing
Warrants and (z) different release amounts (the “Proportionate Changes”)), (ii)
satisfied or waived all conditions to the closings contemplated by such
agreements and (iii) surrendered their Existing Notes and Existing Warrants for
Amended and Restated Notes and Amended and Restated Warrants identical to the
Amended and Restated Notes and Amended and Restated Warrants of the Investor
hereunder (other than the Proportionate Changes).

 

(f) The Company shall have delivered to the Company’s transfer agent, with a
copy to the Investors, a letter stating that the Irrevocable Transfer Agent
Instructions dated May 17, 2005 shall also apply to the Amended and Restated
Shares.

 

(g) The Investor shall have received the opinions of Wilson Sonsini Goodrich &
Rosati, P.C., the Company’s outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit D attached hereto.

 

(h) The Company shall have delivered to the Investor a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the

 

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resolutions approving the transactions contemplated hereby as adopted by the
Board in a form reasonably acceptable to the Investor, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect as of the Closing, in the
form attached hereto as Exhibit E.

 

(i) The representations and warranties of the Company under the Securities
Purchase Agreement and each other Transaction Document, including without
limitation, each Security Document, 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 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 Closing Date and no Default or Event of Default (other than
Default or Event of Default relating to Existing Claims) shall have occurred and
be continuing on the date hereof either immediately before or after giving
effect to this Agreement in accordance with its terms. The Investor shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by the Investor in the form attached
hereto as Exhibit F.

 

(j) The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the 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 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, except as set forth in the Current Report on Form 8-K filed by
the Company with the SEC on September 12, 2005.

 

(k) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities,
including, without limitation, any approvals or notifications required by the
Principal Market.

 

  7. MUTUAL RELEASES.

 

(a) For purposes of this Agreement, “Existing Claims” shall mean any purported
events of default contained in any Default Notice delivered to the Company and
attached hereto as Exhibit A or any other claims arising out of the same facts
and circumstances, any claims arising out of any violation as of the date hereof
of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
thereunder that does not result in a Material Adverse Effect upon the Company,
or any claims arising out of or based upon any facts or circumstances known to
the public or the Investor at or prior to the execution hereof by Investor. In
consideration of the releases set forth in Section 7(b), the payment of the
Release Amount and the exchange of the Existing Notes and the Existing Warrants
for the Replacement Notes and Replacement Warrants, effective as of the Closing,
the Investor, only on behalf of itself and, to the extent permitted by law, its
heirs, executors, administrators, devisees, trustees, partners, directors,
officers, shareholders, employees, consultants, representatives, predecessors,
principals, agents, parents, associates, affiliates, subsidiaries, attorneys,
accountants, successors,

 

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successors-in-interest and assignees (collectively, the “Investor Releasing
Persons”), hereby waives and releases, to the fullest extent permitted by law,
any and all claims, rights and causes of action, whether known or unknown, but
solely relating to the Existing Claims (collectively, the “Investor Claims”),
that any of the Investor Releasing Persons had or currently has against (i) the
Company, (ii) any of the Company’s current or former parents, affiliates,
subsidiaries, predecessors, assigns, attorneys or counsel, accountants,
employees, consultants or representatives, or (iii) any of the Company’s or such
other persons’ or entities’ current or former officers, directors, employees,
agents, principals, and signatories (collectively, the “Company Released
Persons”), including, without limitation, any Investor Claims arising out of any
of the Transaction Documents. For the avoidance of doubt, Investor Claims
arising after the Closing that relate to events or circumstances occurring, or
actions taken or failed to be taken, after the Closing are not waived or
released hereby. Except for the Existing Claims, any claims, rights or causes of
cause of action arising out of or based upon events or circumstances that are
not disclosed in the 2005 10-K that may constitute an Event of Default under the
Existing Notes or Amended and Restated Notes are not waived or released hereby.

 

(b) In further consideration of the Investor entering into this Agreement,
effective as of the date of this Agreement, the Company on behalf of itself and,
to the extent permitted by law, its administrators, devisees, trustees,
partners, directors, officers, shareholders, employees, consultants,
representatives, predecessors, principals, agents, parents, associates,
affiliates, subsidiaries, attorneys, accountants, successors,
successors-in-interest and assignees (collectively, the “Company Releasing
Persons”), hereby waives and releases, to the fullest extent permitted by law,
any and all claims, rights and causes of action, whether known or unknown
(collectively, the “Company Claims”), that any of the Company Releasing Persons
had or currently has against (i) the Investor, (ii) any of the Investor’s
current or former parents, members, partners, shareholders, affiliates,
subsidiaries, predecessors or assigns, or (iii) any of the Investor’s or such
other persons’ or entities’ current or former officers, directors, members,
partners, shareholders, employees, agents, principals, investors, signatories,
advisors, consultants, spouses, heirs, estates, executors, attorneys, auditors
and associates and members of their immediate families (collectively, the
“Investor Released Persons”), including, without limitation, any Company Claims
arising out of any of the Transaction Documents or the Default Notice, if any.
Company Claims arising after the Closing that relate to events or circumstances
occurring, or actions taken or failed to be taken, after the Closing are not
waived or released hereby.

 

  8. TERMINATION.

 

In the event that the Closing does not occur by November 8, 2005, due to the
Company’s or the Investors’ failure to satisfy the conditions set forth in
Sections 5 and 6 hereof (and the nonbreaching party’s failure to waive such
unsatisfied conditions(s)), the nonbreaching party shall have the option to
terminate this Agreement 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 by a non-breaching Investor pursuant to this Section 8, the Company
shall remain obligated to reimburse the non-breaching Investor for the expenses
described in Section 4(c) above. Upon such termination, the terms hereof shall
be null and void and the parties shall continue to comply with all terms and
conditions of the Transaction Documents, as in effect prior to the execution of
this Agreement.

 

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  9. MISCELLANEOUS.

 

(a) 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.

 

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

 

(c) 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.

 

(d) 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 Delaware, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Delaware. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the State of Delaware, 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. 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. 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 HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(e) 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.

 

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(f) 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 the 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.

 

(g) 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.

 

(h) Entire Agreement; Effect on Prior Agreements; Amendments. Except for the
Transaction Documents (to the extent any such Transaction Document is not
amended by this Agreement), this Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and
Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein 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 the Investor 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
Investor and to the extent that Other Investors may be affected thereby, by the
Required Holders. No provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought. 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 Amended and Restated Notes or holders of the
Amended and Restated Warrants, as the case may be. The Company has not, directly
or indirectly, made any agreements with any of the Investors relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.

 

(i) 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:

 

Avanex Corporation 409l9 Encyclopedia Circle Fremont, California 94538
Telephone:    (510) 897-4188 Facsimile:    (510) 897-4189 Attention:    Chief
Executive Officer

 

11

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Copy to:

 

Wilson, Sonsini, Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304
Telephone:    (650) 493-9300 Facsimile:    (650) 493-6811 Attention:    Daniel
J. Weiser, Esq. Burke F. Norton, Esq.

 

If to the Investor, to its address and facsimile number set forth in the
Securities Purchase Agreement, with copies to the Investor’s representatives as
set forth on the Securities Purchase Agreement or on the signature page to this
Agreement,

 

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.

 

(j) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns in
accordance with the terms of the Securities Purchase Agreement.

 

(k) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Investor contained herein
and the agreements and covenants set forth herein shall survive the Closing.

 

(l) Remedies. The Investor 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. Any Person having any rights under any provision of this Agreement 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 this
Agreement 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

 

12

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obligations under this Agreement, any remedy at law may prove to be inadequate
relief to the Investor. The Company therefore agrees that the Investor 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.

 

(m) Independent Nature of Investor’s Obligations and Rights. The obligations of
the Investor under any Transaction Document are several and not joint with the
obligations of any Other Investor, and the Investor shall not be responsible in
any way for the performance of the obligations of any Other Investor under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by the Investor pursuant hereto, shall be deemed
to constitute the Investor and Other Investors as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Investor and Other Investors are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. The Company and the Investor confirm that the Investor has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. The Investor 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 Investor to
be joined as an additional party in any proceeding for such purpose.

 

[Signature Page Follows]

 

13

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

 

COMPANY: AVANEX CORPORATION

By:

 

 

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

Name:

   

Title:

   

 

[Signature Page to Amendment and Exchange Agreement]

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

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

 

INVESTORS:

 

[STEELHEAD INVESTMENTS LTD.]

 

[KINGS ROAD INVESTMENTS LTD.]

 

[GRYPHON MASTER FUND, L.P.]

 

[GSSF MASTER FUND, LP]

 

[CASTLERIGG MASTER

INVESTMENTS LTD.]

By:

 

 

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

Name:

   

Title:

   

Copy to:

[insert]

 

[Signature Page to Amendment and Exchange Agreement]