October 17, 2005 Munich, Germany and Mahwah, NJ -- ADVA Optical Networkingtoday announced the signing of a definitive agreement to acquire all material assets in privately-held Covaro Networks, an Ethernet platforms provider based in Richardson, Texas.

According to a press release, under the terms of the agreement, ADVA will acquire all of Covaro's material assets via a combination of shares and cash. A price component $15 million will be paid in 2,024,190 to-be-issued shares of ADVA common stock via a capital increase. Thirty-five percent of these shares will be tradable immediately upon issuance, and the remaining new shares will be subject to various lock-up provisions. A second price component of approximately $4 million will be paid in cash. Furthermore, an earn-out of up to $5 million may be paid in cash based on achievement of specific sales and gross margin targets in Q4 2005 and FY 2006 for products developed by Covaro.

The acquisition is subject to various standard closing conditions and is anticipated to close in January 2006. A majority of Covaro's more than 50 employees will be fully integrated into ADVA's North American organization; Covaro's Richardson engineering facilities will become an additional ADVA site.

Covaro is a vendor of Ethernet demarcation products for Ethernet WAN applications designed to allow service providers to offer intelligent Ethernet services over fiber, copper, SONET/SDH, DS3/DS1, and E3/E1 media. ADVA says that Covaro will provide a strong complement to the ADVA Fiber Service Platform (FSP), expanding the features and functionalities of the ADVA Ethernet access platform.