-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOYYyKWGFCHqGoUgrtOeeZ2hyV5ZNbcyBh4/EWLV3CrwRAqbC59fenQ7YL1ny8aD C91c+d6K/ITs2nmhuRcAKQ== 0000950109-98-003321.txt : 19980518 0000950109-98-003321.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950109-98-003321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETRIX CORP CENTRAL INDEX KEY: 0000889237 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 541345159 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20512 FILM NUMBER: 98625520 BUSINESS ADDRESS: STREET 1: 13595 DULLES TECHNOLOGY DR CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7037426000 MAIL ADDRESS: STREET 2: 13595 DULLES TECHNOLOGY DRIVE CITY: HERNDON STATE: VA ZIP: 22071 10-Q 1 QUARTERLY REPORT NETRIX CORPORATION ------------------ FORM 10-Q --------- MARCH 31, 1998 -------------- INDEX ----- Page No. --------- PART I -- FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations for the three months ended March 31, 1998 and 1997 2 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Cash Flows 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 PART II -- OTHER INFORMATION ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K 11 SIGNATURE 12 1 PART I -- FINANCIAL INFORMATION Item 1. Financial Statements NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Amounts) Three Months Ended March 31, --------------------- 1998 1997 ---- ---- Revenues: Product................................................ $ 4,995 $ 5,937 Service................................................ 2,246 2,485 ------- ------- Total revenues..................................... 7,241 8,422 ------- ------- Cost of revenues: Product................................................ 2,109 2,700 Service................................................ 1,414 1,995 ------- ------- Total cost of revenues............................. 3,523 4,695 ------- ------- Gross profit............................................. 3,718 3,727 Operating Expenses: Sales and marketing.................................... 2,049 3,216 Research and development............................... 1,568 2,772 General and administrative............................. 1,094 1,097 Restructuring reserve.................................. -- 1,350 ------- ------- Loss from operations..................................... (993) (4,708) Interest and other income, net........................... (12) 109 Foreign currency exchange gain (loss).................... 53 44 ------- ------- Loss before income taxes................................. (952) (4,555) Provision for income taxes............................... -- 20 ------- ------- Net loss................................................. (952) (4,575) Other comprehensive income (losses), net of income tax:.. (71) (16) ------- ------- Comprehensive loss....................................... $(1,023) $(4,591) ======= ======= Basic and diluted net loss per share..................... $(0.10) $(0.48) Weighted average number of shares outstanding............ 9,643 9,516 See notes to unaudited condensed consolidated financial statements. 2 NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Amounts) March 31, December 31, ASSETS 1998 1997 ------ ----------- ------------ (Unaudited) Current assets: Cash and cash equivalents..................... $ 1,768 $ 2,758 Accounts receivable, net of allowance for doubtful accounts of $1,161 and $1,505, respectively................................. 7,119 6,212 Inventories................................... 8,263 8,035 Other current assets.......................... 351 713 -------- -------- Total current assets................ 17,501 17,718 Property and equipment, net of accumulated depreciation of $18,550 and $18,016, respectively.................................. 4,769 4,969 Deposits and other assets.......................... 339 543 Goodwill, net of accumulated amortization of $1,514 and $1,447, respectively...................... 727 794 -------- -------- $ 23,336 $ 24,024 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Line of credit................................ $ 1,733 $ 1,147 Accounts payable.............................. 3,275 3,002 Accrued liabilities........................... 2,771 3,298 -------- -------- Total current liabilities........... 7,779 7,447 Other liabilities.................................. 24 97 -------- -------- 7,803 7,544 -------- -------- Stockholders' equity: Preferred stock, $0.05 par value; 1,000,000 shares authorized; none issued and outstanding.................................. -- -- Common stock, $0.05 par value; 15,000,000 shares authorized; 9,643,240 and 9,593,253 shares issued and outstanding, respectively 482 480 Additional paid-in capital.................... 55,816 55,774 Accumulated other comprehensive income........ (56) (17) Accumulated deficit........................... (40,709) (39,757) -------- -------- Total stockholders' equity.................... 15,533 16,480 -------- -------- $ 23,336 $ 24,024 ======== ======== See notes to unaudited condensed consolidated financial statements. 3 NETRIX CORPORATION ------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended March 31, ------------------------------------- 1998 1997 ------------ -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $ (952) $(4,575) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization..................... 601 852 Changes in assets and liabilities - Accounts receivable............................. (907) 1,900 Inventories..................................... (228) (696) Other current assets............................ 362 (939) Deposits and other assets....................... 204 6 Other liabilities............................... (73) 1,066 Accounts payable................................ 273 1,422 Accrued liabilities............................. (527) 774 ------- ------- Net cash used in operating activities........... (1,247) (190) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment............... (334) (326) Purchases of short-term investments............... -- (1,498) Sales of short-term investments................... -- 1,902 ------- ------- Net cash (used in) provided by investing activities.................................... (334) 78 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit. 586 -- Proceeds from exercise of stock options........... -- 30 Proceeds from employee stock purchase plan........ 45 30 Payments on long-term debt........................ -- (60) ------- ------- Net cash provided by (used in) financing activities.................................... 631 (30) ------- ------- Effect of foreign currency exchange rate changes on cash and cash equivalents......................... (40) (6) Net decrease in cash and cash equivalents............ (990) (148) Cash and cash equivalents, beginning of period....... 2,758 687 ------- ------- Cash and cash equivalents, end of period............. $ 1,768 $ 539 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for interest.......... $ 45 $ 16 Cash paid during the period for income taxes...... -- 11
See notes to unaudited condensed consolidated financial statements. 4 NETRIX CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation: ---------------------- Netrix Corporation ("Netrix" or the "Company") is a worldwide provider of voice and data networking products. Netrix develops, manufactures, markets, and supports networking equipment for voice, data, and image networks. Netrix products are designed to transport voice over data networks to enable its customers to realize significant cost savings. Netrix was incorporated in 1985. The Company maintains operations in the United Kingdom through its wholly-owned subsidiary, Netrix International Corporation (a Delaware corporation), and in Germany and Italy through its wholly-owned subsidiaries Netrix GmbH and Netrix S.r.l., respectively. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. The unaudited condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. The results for such interim periods are not necessarily indicative of results to be expected for the full year. Certain reclassifications have been made to the prior year financial statements to conform with current year presentation. Risks and Other Important Factors For the quarter ended March 31, 1998, the Company experienced declining revenues and a net loss of $1.0 million due to declining sales of the Company's mature products. The success of the Company is dependent on its ability to generate adequate cash for operations and capital needs. Its ability to generate adequate cash for such needs is in part dependent on its success in increasing sales of its products. The Company has developed a plan to increase revenues through sales of its Network Exchange product line; however, due to market conditions and other factors beyond its control, there can be no assurance the Company will be able to adequately increase product sales. Therefore, the Company may have to generate additional cash through the sales of assets including technologies or the sale of debt or equity securities. Although the Company believes it has the ability to generate additional cash through such sales, such sales may be dilutive and there can be no assurances that adequate funds will be available or available on terms that are reasonable or acceptable to the Company. If the Company is unable to generate adequate cash, there could be a material and adverse effect on the business and financial condition of the Company. Therefore, the Company has also developed a plan to implement certain cost control measures to mitigate its liquidity risk. Future operating results may be affected by a number of other factors including the timing of new products in the market place, competitive pricing pressures and economic conditions. As the market for the Company's products is characterized by rapidly changing technology, the development and introduction of competitive products may require a significant investment of financial resources. Additionally, the Company relies on reseller channels which are not under its control for a significant portion of its revenues, particularly in its international regions. Also, while the Company has generally been able to obtain adequate supplies of components to date, the interruption or termination of the Company's current manufacturing relationships could have an adverse effect on the Company's operating results. 5 2. New Accounting Pronouncements: ------------------------------ In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in- capital in the equity section of a statement of financial position. The Company implemented SFAS No. 130 in the first quarter of 1998, and it did not have a material impact on the financial statements. SFAS No. 131 requires the Company to report financial and descriptive information about its reportable operating segments. The Company will adopt SFAS No. 131 at its year-end December 31, 1998. The Company is currently evaluating the impact of SFAS No. 131 on its financial statements. 3. Cash Equivalents: ----------------- Cash equivalents are primarily bank deposits, commercial paper, and government agency securities with original maturities of three months or less. These investments are carried at cost which approximates market value. 4. Inventories: ------------ Inventories consisted of the following (in thousands): March 31, 1998 December 31, 1997 -------------- ----------------- Raw materials...... $ 450 $ 462 Work in process.... 812 772 Finished goods..... 7,001 6,801 ------ ------ Total inventories.. $8,263 $8,035 ====== ====== 5. Commitments and Contingencies: ------------------------------ Line of Credit In November 1997, the Company negotiated a $3 million line of credit agreement with a lending institution to be used for working capital. This agreement provides for interest at a per annum rate equal to the lender's prime rate plus 2%. The line of credit agreement includes a covenant that requires the Company to maintain tangible net worth of at least $13.5 million. At March 31, 1998, tangible net worth was approximately $14.8 million. The facility, which matures on November 30, 1999, is collateralized by the Company's assets. Borrowings under the line are based on qualified accounts receivable. At March 31, 1998, the Company had approximately $2.0 million available under the line of credit. At March 31, 1998 and December 31, 1997, the Company had $1.7 million and $1.1 million, respectively, outstanding under the line of credit. 6 6. Product Revenues: ----------------- The Company's product revenues were generated in the following geographic regions: Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- Domestic........................ $1,765 $2,419 Europe, Middle East and Africa.. 2,510 2,057 Pacific Rim, Latin America and South America................. 720 1,461 ------ ------ Total........................... $4,995 $5,937 ====== ====== Sales are primarily denominated in US dollars. 7. Restructuring Charge: --------------------- In March 1997, the Company recorded a restructuring charge of approximately $1,350,000 before income taxes, which was reduced in May 1997 to a net restructuring charge of 875,000. The net charge included anticipated costs associated with an overall reduction in work force and the discontinuance of the Company's micro.pop product. 8. Foreign Currency Exchange Gain: ------------------------------- Generally, assets and liabilities denominated in foreign currencies are translated into US dollars at current exchange rates. Operating results are translated into US dollars using the average rates of exchange prevailing during the period. Gains or losses resulting from translation of assets and liabilities are included in the cumulative translation adjustment account in stockholders' equity, except for the translation effect of intercompany balances that are anticipated to be settled in the foreseeable future. Included in the condensed consolidated statements of operations for the quarter ended March 31, 1998 and 1997 is approximately $53,000 and $44,000 in translation gains, respectively. 9. Basic and Diluted Earnings (Loss) Per Share: -------------------------------------------- Basic earnings (loss) per share amounts are computed using the weighted average number of common shares. Diluted earnings (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares having a dilutive effect during the periods; however, for the three months ended March 31, 1998 and 1997, the effect of common stock equivalents has not been considered as they would have been antidilutive. 10. Subsequent Event: ----------------- In April 1998, the Company completed a private placement by issuing and selling 1,750,000 shares of common stock at a price of $1.25 per share and by issuing warrants to purchase an additional 140,000 shares of common stock at an exercise price of $1.75 per share. In connection with the private placement, the Company received net proceeds of approximately $2.1 million. 7 NETRIX CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Recent Developments. In January 1998, the Company announced its Vodex Voice Gateway software for its Network Exchange 2210, a voice/data/fax-over-IP gateway switch. Vodex is one of the industry's first voice gateways to simultaneously deliver high quality voice over IP and voice over Frame Relay with the ability to gateway between the two. Background. The results for first quarter of 1998 reflect an overall decrease in the revenues and expenses of the Company from the comparable period in 1997. During the first quarter of 1998, Netrix continued to experience a decline in revenues in the product line it acquired from Republic Telcom and an increase in its new products, the 2210, which combines the Republic technology with Netrix switching capability, and the 2550, Netrix' enhanced switching platform. In April 1997, the Company implemented a restructuring of operations to reduce and economize its work force. The restructuring resulted in the overall reduction of compensation and travel expenses and other operating costs of the Company, which it has been able to maintain through the first quarter of 1998. Revenues. Total revenues decreased by $1.2 million, or 14%, from the three months ended March 31, 1997 to the three months ended March 31, 1998. The decrease in revenues was due primarily to a decrease in product volume, as the mix of products sold continued to transition from the older Republic products to the 2210 and 2550. Product revenues decreased by $0.9 million, or 16%, from the first quarter of 1997 to the first quarter of 1998. Service revenues decreased by approximately $0.2 million, or 10%, over the same period. Service revenue is primarily the result of the renewal of existing maintenance contracts as well as the negotiation of new equipment contracts. As such, it has remained fairly consistent due to the elimination of older product servicing offset by new product and customer arrangements. Gross Profit. Gross profit remained flat from the first quarter of 1997 to the comparable period of 1998, and increased as a percentage of total revenues from 44% to 51%. Product gross profit increased from 55% in the first quarter of 1997 to 58% in the first quarter of 1998. This increase primarily resulted from the combination of a higher proportion of products sold through channels with lower discounts along with a higher margin product mix of shipments. The gross profit in any particular quarter is dependent upon the mix of products sold and the channels of distribution. As a result, the gross profit on a quarter to quarter basis can vary within a wide range. The gross profit for service revenues increased from 20% in the first quarter of 1997 to 37% in the first quarter of 1998. The higher service margin is a result of generally consistent levels of service revenue combined with lower service costs due to the restructuring discussed above. Sales and Marketing. Sales and marketing expenses decreased by $1.2 million, or 36%, from the first quarter of 1997 to the first quarter of 1998. The decreases are mainly attributed to the restructuring of operations as discussed above. Research and Development. Research and development expenses decreased by $1.2 million, or 43%, from the first quarter of 1997 to the comparable period of 1998. As a percentage of revenues, R&D expenses decreased from 33% of revenues in the first quarter of 1997 to 22% of revenues in the first quarter of 1998. The decrease in R&D expenses is due mainly to the restructuring plan discussed above. Currently, all of the Company's research and development costs are charged to operations as incurred. General and Administrative. General and administrative expenses were unchanged from the first quarter of 1997 to the first quarter of 1998. 8 Restructuring Charge. In March 1997, the Company recorded a restructuring charge of approximately $1,350,000 before income taxes. The charge included anticipated costs associated with an overall reduction in work force, the discontinuance of its micro.pop product, and the discontinuance of its direct operation in Germany. Interest and Other Income, Net. The Company generated net interest and other income of approximately ($12,000) in the first quarter of 1998 compared to approximately $109,000 in the same period in 1997. The decrease in net interest income is due primarily to debt levels maintained under the line of credit. Foreign Exchange Gain. Included in foreign exchange income for the first quarter of 1998 is approximately $53,000 of translation gains as compared to $44,000 of translation gains in the first quarter of 1997. Net Loss. For the first quarter of 1998 the Company had a net loss of approximately $1.0 million, an improvement from a net loss of approximately $4.6 million in the same period of 1997, due primarily to the restructuring plan and the other factors discussed above. Liquidity and Capital Resources - ------------------------------- At March 31, 1998, the Company had approximately $1.8 million of cash and cash equivalents on hand and net working capital of $9.7 million. For the three months ended March 31, 1998 and 1997, the Company used approximately $1.2 million and $0.2 million of cash from operating activities, respectively. In the first quarter of 1998, the cash used by operations was primarily due to the negative cash flow from operations and the increase in accounts receivable and the decrease in accrued liabilities over the December 31, 1997 balances. In the first quarter of 1997, the cash used by operations was primarily due to the negative cash flow from operations and the increase in inventory levels over the December 31, 1996 balances. Capital acquisitions during the first quarter of 1998 were $334,000 compared to $326,000 in the first quarter of 1997. These acquisitions were primarily equipment used for research and development purposes along with some computer and test equipment. In November 1997, the Company negotiated a $3 million line of credit agreement with a lending institution to be used for working capital. This agreement provides for interest at a per annum rate equal to the lender's prime rate plus 2%. The line of credit agreement includes a covenant that requires the Company to maintain tangible net worth of at least $13.5 million. At March 31, 1998, tangible net worth was approximately $14.8 million. The facility, which matures on November 30, 1999, is collateralized by the Company's assets. Borrowings under the line are based on qualified accounts receivable. At March 31, 1998, the Company had $2.0 million available under the line of credit, of which $1.7 million was outstanding, and was in compliance with the tangible net worth covenant. In April 1998, the Company completed a private placement by issuing and selling 1,750,000 shares of common stock at a price of $1.25 per share and by issuing warrants to purchase an additional 140,000 shares of common stock at an exercise price of $1.75 per share. In connection with the private placement, the Company received net proceeds of approximately $2.1 million that will be used for working capital and other general corporate purposes and agreed to file a Registration Statement on Form S-3 with the Securities Exchange Commission within 45 days to cover the resale of such securities. 9 The success of the Company is dependent on its ability to generate adequate cash for operations and capital needs. Its ability to generate adequate cash for such needs is in part dependent on its success in increasing sales of its products. The Company has developed a plan to increase revenues through sales of its Network Exchange product line; however, due to market conditions and other factors beyond its control, there can be no assurance the Company will be able to adequately increase product sales. Therefore, the Company may have to generate additional cash through the sales of assets including technologies or the sale of debt or equity securities. Although the Company believes it has the ability to generate additional cash through such sales, such sales may be dilutive and there can be no assurances that adequate funds will be available or available on terms that are reasonable or acceptable to the Company. If the Company is unable to generate adequate cash, there could be a material and adverse effect on the business and financial condition of the Company. Therefore, the Company has also developed a plan to implement certain cost control measures to mitigate its liquidity risk. 10 PART II -- OTHER INFORMATION ---------------------------- Items 1 through 5 are not applicable. Item 6. Exhibits and Reports of Form 8-K -------------------------------- (a) Exhibits Exhibit No. Description ----------- ----------- 10.18 Common Stock Purchase Agreement dated April 21, 1998 10.19 Common Stock Purchase Agreement dated April 24, 1998 10.20 Common Stock Warrant dated April 24, 1998 (b) Reports on Form 8-K No report on Form 8-K was filed during the quarter ended March 31, 1998. 11 SIGNATURE --------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NETRIX CORPORATION Date: May 14, 1998 By: /s/ Lynn C. Chapman --------------------------------------- Lynn C. Chapman President and Chief Executive Officer 12 EXHIBIT INDEX ------------- Exhibit No. Description - -------- ----------- 10.18 Common Stock Purchase Agreement dated April 21, 1998 10.19 Common Stock Purchase Agreement dated April 24, 1998 10.20 Common Stock Warrant dated April 24, 1998 13 EX-10.18 2 COMMON STOCK PURCHASE AGREEMENT Exhibit 10.18 COMMON STOCK PURCHASE AGREEMENT ------------------------------- This Agreement dated as of April 21, 1998, is entered into by and among Netrix Corporation, a Delaware corporation (the "Company"), and the individuals ------- and entities listed on Exhibit A hereto (the "Purchasers"). --------- ---------- In consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. Authorization and Sale of Shares. -------------------------------- 1.1 Authorization. The Company has, or before the Closing (as ------------- defined in Section 2) will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of 1,520,000 shares of its Common Stock, $0.05 par value per share (the "Common Stock"). ------------ 1.2 Sale of Shares. Subject to the terms and conditions of this -------------- Agreement, at the Closing the Company will sell and issue to each of the Purchasers, and each of the Purchasers will purchase from the Company, the number of shares of Common Stock set forth opposite such Purchaser's name on Exhibit A for the purchase price of $1.25 per share. The shares of Common Stock - --------- being sold under this Agreement are referred to as the "Shares." The Purchasers ------ are severally liable under this Agreement. This Agreement shall be deemed to be separate agreements between the Company and each of the Purchasers, involving separate sales of Shares from the Company to each of the Purchasers. 1.3 Use of Proceeds. The Company will use the proceeds from the sale --------------- of the Shares for working capital purposes. 2. The Closing. The closing ("Closing") of the sale and purchase of the ----------- ------- Shares under this Agreement shall take place at the offices of Hale and Dorr LLP, 1455 Pennsylvania Avenue, N.W., Suite 1000, Washington, D.C. 20004 at 10:00 a.m. on April 21, 1998, or at such other time, date and place as are mutually agreeable to the Company and the Purchasers. At the Closing, the Company shall deliver to each of the Purchasers a certificate for the number of Shares being purchased by such Purchaser, registered in the name of such Purchaser, against payment to the Company of the purchase price therefor, by wire transfer, check, or other method acceptable to the Company. The date of the Closing is hereinafter referred to as the "Closing Date." If at ------------ the Closing any of the conditions specified in Section 5 shall not have been fulfilled, each of the Purchasers shall, at his or its election, be relieved of all of his or its respective obligations under this Agreement without thereby waiving any other rights he or it may have by reason of such failure or such non-fulfillment. 3. Representations of the Company. Subject to and except as disclosed by ------------------------------ the Company in Exhibit B hereto, the Company hereby represents and warrants to --------- each of the Purchasers as follows: 3.1 Organization and Standing. The Company is a corporation duly ------------------------- organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as presently conducted and as proposed to be conducted by it, to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement, and to own, lease and operate its properties and assets and to carry on its business as now being conducted. The Company has furnished to the Purchaser true and complete copies of its Certificate of Incorporation and By- ---------------------------- --- Laws, each as amended and restated to date and presently in effect. The Company - ---- and the subsidiaries of the Company (the "Subsidiaries"), as set forth in the ------------ Company Reports (as defined in Section 3.5), are duly qualified and licensed to do business and are in good standing in each jurisdiction in which the conduct of their business requires such qualification, except for jurisdictions in which the failure to be so qualified, licensed or in good standing, individually or in the aggregate, are not reasonably likely to have a material adverse effect on the Company and the Subsidiaries taken as a whole or adversely affect the Company's ability to perform its obligations hereunder or under any other instrument or documents contemplated hereby. 3.2 Capitalization. The authorized capital stock of the Company -------------- (immediately prior to the Closing) consists of 15,000,000 shares of Common Stock, of which 9,643,240 shares were issued and outstanding as of April 13, 1998, and 1,000,000 shares of Preferred Stock, $0.05 par value per share, none of which shares are issued and outstanding. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. 3.3 Issuance of Shares. The issuance, sale and delivery of the ------------------ Shares in accordance with this Agreement have been, or will be on or prior to the Closing, duly authorized by all necessary corporate action on the part of the Company, and all such shares have been duly reserved for issuance. The Shares when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement will be duly and validly issued, fully paid and non-assessable. -2- 3.4 Authority for Agreement. The execution, delivery and performance ----------------------- by the Company of this Agreement, and the consummation by the Company of the transactions contemplated hereby, have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable in accordance with its terms. The execution of and performance of the transactions contemplated by this Agreement and compliance with its provisions by the Company will not violate any order, writ, injunction, decree, law, statute, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or require a consent or waiver under, its Certificate of Incorporation or By-Laws (each as amended and restated to date) or any indenture, note, bond, mortgage, lease, agreement or other instrument to which the Company or a Subsidiary is a party or by which it or any of their respective properties are bound. 3.5 Reports, Financial Statements and Private Placement Memorandum. -------------------------------------------------------------- The Company has previously furnished or made available to the Purchasers complete and accurate copies, as amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the SEC, (b) all other reports filed by the Company under Section 13 of the Exchange Act with the SEC since January 1, 1998 (such reports are collectively referred to herein as the "Company Reports") and (c) the Company's Confidential --------------- Private Placement Memorandum, dated April 14, 1998, containing interim financial information and disclosures for the period since December 31, 1997 (the "Memorandum"). The Company Reports constitute all of the documents required to - ----------- be filed by the Company under Section 13 of the Exchange Act with the SEC since January 1, 1998. As of their respective dates, each of the Company Reports and the Memorandum did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements of the Company included in the Company Reports and the Memorandum (i) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by form 10-Q under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) ------------ fairly present the consolidated financial condition, results of operations and cash flows of the Company as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent with the books and records of the Company. Except as and to the extent set forth in the -3- Company Reports or the Memorandum, the Company and its Subsidiaries have no liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) other than liabilities and obligations that, individually and in the aggregate, are not reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole or adversely affect the Company's ability to perform its obligations hereunder, or any other instrument or document contemplated hereby. The Company is eligible to use Form S-3 to effect the registration under the Securities Act (as defined below) of outstanding shares of its Common Stock for resale. 3.6 Governmental Consents. No consent, approval, order or --------------------- authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority is required on the part of the Company in connection with the execution and delivery of this Agreement or the offer, issuance, sale and delivery of the Shares as contemplated by this Agreement, except such filings as shall have been made prior to and shall be effective on and as of the Closing. Based on the representations made by the Purchasers in Section 4 of this Agreement, the offer and sale of the Shares to the Purchasers will be in compliance with applicable Federal and state securities laws. 3.7 Absence of Certain Changes or Events. Since the date of the ------------------------------------- Memorandum, there has not been, occurred or arisen any change in, or any event (including any damage, destruction or loss whether or not covered by insurance), condition or state of facts of any character that, individually or in the aggregate, have or are reasonably likely to have a material adverse effect on the Company or the Company's ability to perform its obligations hereunder, or under any other instrument or document contemplated hereby. 3.8 Intellectual Property Matters. The Company and its Subsidiaries ------------------------------ own or possess adequate licenses or other valid rights to use all material patents, trademarks, service marks trade names, copyrights, trade secrets, applications for trademarks and service marks, know-how and information and other proprietary and intellectual property rights used or held for use in connection with the business of the Company and its Subsidiaries as presently conducted (including in connection with services provided by the Company and its Subsidiaries to third parties). To the Company's knowledge, there is no proceeding challenging the validity of any of the foregoing rights that, individually or in the aggregate, is reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole. To the best of the Company's knowledge, there are no infringements of any proprietary or intellectual property rights owned by or licensed by or to the Company or any Subsidiary of the Company that, individually or in the aggregate, are reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole. -4- 4. Representations of the Purchasers. Each of the Purchasers severally --------------------------------- represents and warrants to the Company as follows: 4.1 Investment. Such Purchaser is acquiring the Shares for his or ---------- its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated by this Agreement and the Exhibits hereto, Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof. 4.2 Authority. Such Purchaser has full power and authority to enter --------- into and to perform this Agreement in accordance with its terms. Any Purchaser that is a corporation, partnership or trust represents that it has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Company. 4.3 Experience. Such Purchaser has carefully reviewed the ---------- representations and other information concerning the Company contained in this Agreement, the Company Reports (including, without limitation, the risk factors contained therein) and the Memorandum and has made such detailed inquiry concerning the Company, its business and its personnel as he or it saw fit; the officers of the Company have made available to such Purchaser any and all written information which he or it has requested and have answered to such Purchaser's satisfaction all inquiries made by such Purchaser; and such Purchaser has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of his or its investment in the Company and is able financially to bear the risks thereof. 4.4 Accredited Investor. Such Purchaser is an Accredited Investor ------------------- within the definition set forth in Rule 501(a) of the Securities Act of 1933, as amended (the "Securities Act"). -------------- 5. Conditions to the Obligations of the Purchasers. The obligation of ----------------------------------------------- each of the Purchasers to purchase Shares at the Closing is subject to the fulfillment, or the waiver by such Purchaser, of each of the following conditions on or before the Closing: 5.1 Accuracy of Representations and Warranties. Each representation ------------------------------------------ and warranty contained in Section 3 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. -5- 5.2 Performance. The Company shall have performed and complied with ----------- all agreements and conditions contained in this Agreement required to be performed or complied with by the Company prior to or at the Closing. 5.3 Certificates and Documents. The Company shall have delivered to -------------------------- the Purchasers: (a) The Certificate of Incorporation of the Company, as amended and in effect as of the Closing Date (including the Certificate of Designation), certified by the Secretary of State of the State of Delaware; (b) Certificates, as of the most recent practicable dates, as to the corporate good standing of the Company issued by the Secretary of State of the State of Delaware; (c) By-laws of the Company, as amended and in effect as of the Closing Date, certified by its Secretary or Assistant Secretary as of the Closing Date; and (d) Resolutions of the Board of Directors of the Company, authorizing and approving all matters in connection with this Agreement and the transactions contemplated hereby, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date. 5.4 Compliance Certificate. The Company shall have delivered to the ---------------------- Purchasers a certificate, executed by the President and Chief Executive Officer of the Company, dated the Closing Date, certifying to the fulfillment of the conditions specified in Sections 5.1, 5.2 and 5.3 of this Agreement. 5.5 Opinion of Counsel. The Company shall have furnished to the ------------------- Purchasers the opinion, dated as of the Closing Date, of its counsel addressed to the Purchasers, that: (a) The Company is a corporation validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to own and operate its properties and to conduct its business as set forth in the Memorandum. To the knowledge of such counsel, the Company's authorized capital stock is as set forth in the Memorandum and the issued and outstanding capital stock as of the date of the Memorandum is as set forth in the Memorandum. (b) The Shares have been duly and validly authorized and issued and are fully paid and nonassessable, and no holders of any outstanding shares of capital stock have any preemptive rights. -6- (c) The Warrant Shares (as defined below), when sold and issued pursuant to the terms and conditions set forth in the Warrant (as defined below) will have been duly and validly authorized and issued and will be fully paid and nonassessable and no holder of any outstanding shares of capital stock will have any preemption rights. 5.6 Minimum Investment. Purchasers shall have tendered at the ------------------ Closing aggregate consideration not less than $1,000,000.00 for the purchase of Shares. 6. Condition to the Obligations of the Company. The obligations of the ------------------------------------------- Company under Section 1.2 of this Agreement are subject to fulfillment, or the waiver, of the following conditions on or before the Closing: 6.1 Accuracy of Representations and Warranties. The representations ------------------------------------------ and warranties of the Purchasers contained in Section 4 shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of that date. 6.2 Minimum Investment. Purchasers shall have tendered at the ------------------ Closing aggregate consideration of not less than $1,00,000.00 for the purchase of Shares. 6.3 Questionnaire. Each of the Purchasers shall have completed, -------------- executed and delivered to the Company or Qualified Purchaser Questionnaire in the form attached hereto as Exhibit C. --------- 7. Registration Rights. ------------------- The Purchasers and Flomenhaft (as defined below) shall have the following registration rights with respect to the Shares issued to them hereunder: 7.1 Registration Rights. The Company shall utilize reasonable ------------------- efforts to cause, within forty five (45) days following the Closing Date, a registration statement on Form S-3 to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933 (the "Securities ---------- ---------- Act") or an existing registration statement on Form S-3 (the "Registration - --- ------------ Statement") to be amended for the purpose of registering the Shares, any shares - --------- of Common Stock ("Warrant Shares") issued upon exercise of the Common Stock -------------- Purchase Warrant (the "Warrant") to be distributed to L. Flomenhaft & Co., ------- Incorporated ("Flomenhaft") upon the Closing and the shares of Common Stock, if ---------- any, issued pursuant to the last two sentences of this Section 7.1 (the "Additional Shares"). Flomenhaft shall be a direct and intended beneficiary of - ------------------ the covenants and provisions of this Article 7 with respect to the Warrant Shares, for resale on a continuous basis from time to time by a Holder thereof. For purposes of this Article 7, a person is deemed to be a "Holder" of Shares or Warrant -7- Shares whenever such person or entity is the record owner of Shares or Warrant Shares and the term "Shares" shall include any Additional Shares. Thereafter, the Company will use commercially reasonable best efforts to have the Registration Statement become effective and cause the Shares and Warrant Shares to be registered under the Securities Act, and registered, qualified or exempted under the state securities laws of such jurisdictions as any Holder reasonably requests, as soon as is reasonably practicable. If the Company fails to file such Registration Statement within sixty (60) days following the Closing Date, subject to compliance by the Company with any applicable stockholder approval requirements imposed by law or any securities exchange or listing organization then the Company shall issue and deliver (i) to each of the Purchasers a number of shares of Common Stock equal to ten percent (10%) of the number of Shares originally issued to such Purchaser pursuant to this Agreement and (ii) to Flomenhaft a number of warrants equal to ten percent (10%) of the number of warrants originally issued to Flomenhaft pursuant to this Agreement and the Placement Agent Agreement (the "Placement Agent Agreement"), dated as of ------------------------- April 21, 1998, by and between the Company and Flomenhaft. If the Company fails to file the Registration Statement within 120 days of the Closing Date, and within each subsequent sixty (60) day period thereafter, subject to compliance by the Company with any applicable stockholder approval requirements imposed by law or any securities exchange or listing organization then the Company shall issue and deliver upon the expiration of each such period (y) to each of the Purchasers a number of shares of Common Stock equal to ten percent (10%) of the number of Shares originally purchased by such Purchaser pursuant to this Agreement and (z) to Flomenhaft a number of warrants equal to ten percent (10%) of the number of warrants originally issued to Flomenhaft pursuant to this Agreement and the Placement Agent Agreement. 7.2 Expenses of Registration. All expenses incident to the Company's ------------------------ performance of or compliance with this Section 7, including, without limitation, all registration and filing fees (including all expenses incident to filing with Nasdaq or any other exchange), fees and expenses of complying with securities and blue sky laws, printing and copying expenses, fees and expenses of the Company's counsel and accountants, and the fees and disbursements of all independent public accountants, and the fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) shall be paid by the Company. 7.3 Furnishing of Documents. The Company shall furnish to the ----------------------- Holders such reasonable number of copies of the Registration Statement, such prospectuses as are contained in the Registration Statement and such other documents as the Holders may reasonable request in order to facilitate the offering of the Shares. 7.4 Amendments and Supplements. The Company shall prepare and -------------------------- promptly file with the Commission, and promptly notify the Holders of the filing of -8- such amendments or supplements to the Registration Statement or prospectuses contained therein, as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to the Shares or Warrants are required to be delivered under the Securities Act, any event shall have occurred as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company shall also advise the Holders promptly after it shall receive notice of the issuance of any stop order by the Commission suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. If, after a Registration Statement becomes effective, the Holders desire that the Registration Statement be amended or the Company advises the Holders that the Company considers it appropriate that the Registration Statement (and all other registration statements of the Company then effective and outstanding) be amended, the Holders shall suspend any further sales of the Shares until the Company advises the Holders that the Registration Statement has been amended. 7.5 Duration. The Company shall maintain the effectiveness of the -------- Registration Statement until such time as the Company reasonably determines that the Holders will be eligible to sell all of the Shares then owned by the Holders without the need for continued registration of the shares, in three month periods immediately preceding the termination of the effectiveness of the Registration Statement. The Company's obligations contained in Sections 7.2, 7.3 and 7.4 shall terminate on the second anniversary of the Closing Date. Notwithstanding the foregoing, (a) the Company may delay filing a Registration Statement, and may withhold efforts to cause the Registration Statement to become effective, if the Board of Directors of the Company in its good faith judgment, determines that any registration of Shares should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction or activity involving the Company or any of its subsidiaries (a "Valid Business -------------- Reason"), (b) the Company may postpone filing a Registration Statement until - ------ such Valid Business Reason no longer exists, but in no event for more than sixty (60) days and (c) in case a Registration Statement has been filed, the Company may cause such Registration Statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than sixty (60) days (such period of postponement or withdrawal under sub clause (b) or (c) above, the "Postponement Period"); and the Company shall give written ------------------- notice of its determination to postpone or withdraw a Registration Statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case promptly after the -9- occurrence thereof; provided, however, the Company shall not be permitted to postpone or withdraw a Registration Statement within seventy five (75) days after the expiration of any Postponement Period. The Holder agree that, upon receipt of any notice from the Company that the Company has determined to postpone or withdraw any Registration Statement, the Holder will discontinue any disposition of Shares pursuant to such Registration Statement and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Shares that was in effect at the time of receipt of such notice. If the Company shall give any notice of withdrawal or postponement of a registration statement, the Company shall, at such time as the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event later than three months after the date of the postponement or withdrawal), use its reasonable efforts to effect the registration under the Securities Act of Shares covered by the withdrawn or postponed registration statement in accordance with Section 7.1. 7.6 Further Information. If the Shares owned by a Holder are ------------------- included in any registration, such Holder shall furnish the Company such information regarding itself as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 7.7 Indemnification. --------------- (i) The Company will indemnify and hold harmless the Holders and each person, if any, who controls a Holder within the meaning of the Securities Act, from and against any and all losses, damages, liabilities, costs and expenses to which the Holders or any such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities, costs or expenses are caused by any untrue statement of any material fact contained in the Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that, the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability, cost or expense arises out of or is based upon an untrue statement or omission so made in conformity with information furnished by or on behalf of any Holder or such controlling person in writing specifically for use in the preparation thereof. (ii) Each of the Holders will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any and all losses, damages, liabilities, costs and -10- expenses to which the Buyer or any such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement of any material fact contained in the Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, to the extent and only to the extent that such untrue statement or omission was so made in reliance upon and in strict conformity with written information furnished by or on behalf of such Holder specifically for use in the preparation thereof. 8. Transfer of Shares. ------------------ 8.1 Restricted Shares. "Restricted Shares" means (i) the Shares and ----------------- ----------------- (ii) any other shares of capital stock of the Company issued in respect of such shares (as a result of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common -------- ------- Stock which are Restricted Shares shall cease to be Restricted Shares (i) upon any sale pursuant to the Registration Rights Agreement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act or (ii) at such time as they become eligible for sale under Rule 144(k) under the Securities Act. 8.2 Requirements for Transfer. ------------------------- (a) Restricted Shares shall not be sold, pledged, hypothecated or otherwise disposed of or transferred unless either (i) they first shall have been registered under the Securities Act, or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Purchaser which is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner, if the transferee agrees in writing to be subject to the terms of this Section 8 to the same extent as if he were an original Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under the Securities Act. -11- 8.3 Legend. Each certificate representing Restricted Shares shall ------ bear a legend substantially in the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such shares are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required." The foregoing legend shall be removed from the certificates representing any Restricted Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Securities Act. 9. Miscellaneous. ------------- 9.1 Successors and Assigns; Assignment. The provisions of this ---------------------------------- Agreement shall be binding upon, and inure to the benefit of, the respective successors, assigns, and heirs, executed and minus of the parties hereto. This Agreement, and the rights and obligations of a Purchaser hereunder, may not be assigned by such Purchaser to any person or entity without the prior written permission of the Company. 9.2 Confidentiality. Each of the Purchasers agrees that he or it --------------- will keep confidential and will not use, disclose or divulge any confidential, proprietary or secret information which such Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to the Purchaser pursuant to this Agreement, unless such information is known, or until such information becomes known, to the public; provided, however, that such Purchaser may disclose such information to his or its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with the Purchaser's investment in the Company provided that such persons agree to maintain the confidentiality of such information. 9.3 Notices. All notices, requests, consents, and other ------- communications under this Agreement shall be in writing and shall be delivered by hand or mailed by first class certified or registered mail, return receipt requested, postage prepaid: If to the Company, at 13595 Dulles Technology Drive, Herndon, Virginia 22071, Attention: President, or at such other address or addresses as may have been furnished in writing by the Company to the Purchasers, with a copy to David Sylvester, Esq., Hale -12- and Dorr LLP, The Willard Office Building, 1455 Pennsylvania Avenue, N.W., Suite 1000, Washington, D.C. 20004; If to a Purchaser, at his or its address set forth on Exhibit A, or at such --------- other address or addresses as may have been furnished to the Company in writing by such Purchaser; or If to Flomenhaft, at 225 West 34th Street, Suite 2008, New York, New York 10122, Attention: Ted Flomenhaft or at such other address or addresses as may have been furnished in writing by Flomenhaft to the Company or the Purchasers, with a copy to Eric Simonson, Esq., Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the America, New York, New York 10036. Notices provided in accordance with this Section 9.3 shall be deemed delivered upon personal delivery or two business days after deposit in the mail. 9.4 Brokers. Each of the Company and the Purchaser (i) represents ------- and warrants to the other parties hereto that other than Flomenhaft he or it has retained no finder or broker in connection with the transactions contemplated by this Agreement, and (ii) will indemnify and save the other parties harmless from and against any and all claims, liabilities or obligations with respect to brokerage or finders' fees or commissions, or consulting fees incurred by such party in connection with the transactions contemplated by this Agreement except for such fees payable to Flomenhaft asserted by any person on the basis of any statement or representation alleged to have been made by such indemnifying party. 9.5 Entire Agreement. This Agreement embodies the entire agreement ---------------- and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. 9.6 Amendments and Waivers. Except as otherwise expressly set forth ---------------------- in this Agreement, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 9.6 shall be binding upon each holder of any Shares (including shares of Common Stock into which such Shares have been converted) and each future holder of all such securities and the Company. No failure or delay of any party to this Agreement in exercising any power or right under this Agreement will operate as a waiver thereof, and no waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. -13- 9.7 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed to be an original, but all of which together shall be one and the same document. 9.8 Section Headings. The section headings are for the convenience ---------------- of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the parties. 9.9 Severability. The invalidity or unenforceability of any ------------ provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 9.10 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Delaware. -14- [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] THE COMPANY: NETRIX CORPORATION By: -------------------------------- -------------------------------------- THE PURCHASERS: UT TECHNOLOGY PARTNERS LDC By: --------------------------------- Name: --------------------------------- Title: --------------------------------- SPECIAL SITUATION FUND PRIVATE EQUITY FUND, L.P. By: --------------------------------- Name: --------------------------------- Title: --------------------------------- SPECIAL SITUATION FUND TECHNOLOGY FUND, L.P. By: --------------------------------- Name: --------------------------------- Title: --------------------------------- SPEER, LEEDS & KELLOGG By: --------------------------------- Name: --------------------------------- Title: --------------------------------- RL CAPITAL PARTNERS By: --------------------------------- Name: --------------------------------- Title: --------------------------------- --------------------------------------- Jack Polak DOMACO VENTURE CAPITAL FUND By: --------------------------------- Name: --------------------------------- Title: --------------------------------- -15- EXHIBIT A --------- Name and Address No. of Shares of Aggregate of the Purchasers Common Stock Purchase Price - ----------------- ------------ -------------- UT Technology Partners LDC 320,000 $400,000 600 Third Avenue, 17th Floor New York, NY 10158 Attn: Jim Weil Special Situation Fund Private Equity Fund, L.P. 240,000 $300,000 Special Situation Fund Technology Fund, L.P. 240,000 $300,000 153 E. 53rd Street, 51st Floor New York, NY 10022 Attn: Austin Marks Spear, Leeds & Kellogg 600,000 $750,000 120 Broadway New York, NY 10271 Attn: Kevin Eilian RL Capital Partners 49,600 $ 62,000 575 Fifth Avenue, 36th Floor New York, NY 10017 Attn: Ron Lazar Jack Polak 40,000 $ 50,000 90 Park Avenue, 16th Floor New York, NY 10022 Attn: Jack Polak Domaco Venture Capital Fund 30,400 $ 38,000 90 Park Avenue, 16th Floor New York, NY 10022 Attn; Jack Polak -16- EX-10.19 3 COMMON STOCK PURCHASE AGREEMENT Exhibit 10.19 COMMON STOCK PURCHASE AGREEMENT ------------------------------- This Agreement dated as of April 24, 1998, is entered into by and among Netrix Corporation, a Delaware corporation (the "Company"), and the individuals ------- and entities listed on Exhibit A hereto (the "Purchasers"). --------- ---------- In consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. Authorization and Sale of Shares. -------------------------------- 1.1 Authorization. The Company has, or before the Closing (as ------------- defined in Section 2) will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of 230,000 shares of its Common Stock, $0.05 par value per share (the "Common Stock"). ------------ 1.2 Sale of Shares. Subject to the terms and conditions of this -------------- Agreement, at the Closing the Company will sell and issue to each of the Purchasers, and each of the Purchasers will purchase from the Company, the number of shares of Common Stock set forth opposite such Purchaser's name on Exhibit A for the purchase price of $1.25 per share. The shares of Common Stock - --------- being sold under this Agreement are referred to as the "Shares." The Purchasers ------ are severally liable under this Agreement. This Agreement shall be deemed to be separate agreements between the Company and each of the Purchasers, involving separate sales of Shares from the Company to each of the Purchasers. 1.3 Use of Proceeds. The Company will use the proceeds from the sale --------------- of the Shares for working capital purposes. 2. The Closing. The closing ("Closing") of the sale and purchase of the ----------- ------- Shares under this Agreement shall take place at the offices of Hale and Dorr LLP, 1455 Pennsylvania Avenue, N.W., Suite 1000, Washington, D.C. 20004 at 10:00 a.m. on April 24, 1998, or at such other time, date and place as are mutually agreeable to the Company and the Purchasers. At the Closing, the Company shall deliver to each of the Purchasers a certificate for the number of Shares being purchased by such Purchaser, registered in the name of such Purchaser, against payment to the Company of the purchase price therefor, by wire transfer, check, or other method acceptable to the Company. The date of the Closing is hereinafter referred to as the "Closing Date." If at ------------ the Closing any of the conditions specified in Section 5 shall not have been fulfilled, each of the Purchasers shall, at his or its election, be relieved of all of his or its respective obligations under this Agreement without thereby waiving any other rights he or it may have by reason of such failure or such non-fulfillment. 3. Representations of the Company. Subject to and except as disclosed by ------------------------------ the Company in Exhibit B hereto, the Company hereby represents and warrants to --------- each of the Purchasers as follows: 3.1 Organization and Standing. The Company is a corporation duly ------------------------- organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as presently conducted and as proposed to be conducted by it, to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement, and to own, lease and operate its properties and assets and to carry on its business as now being conducted. The Company has furnished to the Purchaser true and complete copies of its Certificate of Incorporation and By- ---------------------------- -- Laws, each as amended and restated to date and presently in effect. The Company - ---- and the subsidiaries of the Company (the "Subsidiaries"), as set forth in the ------------ Company Reports (as defined in Section 3.5), are duly qualified and licensed to do business and are in good standing in each jurisdiction in which the conduct of their business requires such qualification, except for jurisdictions in which the failure to be so qualified, licensed or in good standing, individually or in the aggregate, are not reasonably likely to have a material adverse effect on the Company and the Subsidiaries taken as a whole or adversely affect the Company's ability to perform its obligations hereunder or under any other instrument or documents contemplated hereby. 3.2 Capitalization. The authorized capital stock of the Company -------------- (immediately prior to the Closing) consists of 15,000,000 shares of Common Stock, of which 9,643,240 shares were issued and outstanding as of April 13, 1998, and 1,000,000 shares of Preferred Stock, $0.05 par value per share, none of which shares are issued and outstanding. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. 3.3 Issuance of Shares. The issuance, sale and delivery of the ------------------ Shares in accordance with this Agreement have been, or will be on or prior to the Closing, duly authorized by all necessary corporate action on the part of the Company, and all such shares have been duly reserved for issuance. The Shares when so issued, sold and delivered against payment therefor in accordance with the provisions of this Agreement will be duly and validly issued, fully paid and non-assessable. -2- 3.4 Authority for Agreement. The execution, delivery and performance ----------------------- by the Company of this Agreement, and the consummation by the Company of the transactions contemplated hereby, have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable in accordance with its terms. The execution of and performance of the transactions contemplated by this Agreement and compliance with its provisions by the Company will not violate any order, writ, injunction, decree, law, statute, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or require a consent or waiver under, its Certificate of Incorporation or By-Laws (each as amended and restated to date) or any indenture, note, bond, mortgage, lease, agreement or other instrument to which the Company or a Subsidiary is a party or by which it or any of their respective properties are bound. 3.5 Reports, Financial Statements and Private Placement Memorandum. -------------------------------------------------------------- The Company has previously furnished or made available to the Purchasers complete and accurate copies, as amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the SEC, (b) all other reports filed by the Company under Section 13 of the Exchange Act with the SEC since January 1, 1998 (such reports are collectively referred to herein as the "Company Reports") and (c) the Company's Confidential --------------- Private Placement Memorandum, dated April 14, 1998, containing interim financial information and disclosures for the period since December 31, 1997 (the "Memorandum"). The Company Reports constitute all of the documents required to ---------- be filed by the Company under Section 13 of the Exchange Act with the SEC since January 1, 1998. As of their respective dates, each of the Company Reports and the Memorandum did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements of the Company included in the Company Reports and the Memorandum (i) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by form 10-Q under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) ------------ fairly present the consolidated financial condition, results of operations and cash flows of the Company as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent with the books and records of the Company. Except as and to the extent set forth in the -3- Company Reports or the Memorandum, the Company and its Subsidiaries have no liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) other than liabilities and obligations that, individually and in the aggregate, are not reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole or adversely affect the Company's ability to perform its obligations hereunder, or any other instrument or document contemplated hereby. The Company is eligible to use Form S-3 to effect the registration under the Securities Act (as defined below) of outstanding shares of its Common Stock for resale. 3.6 Governmental Consents. No consent, approval, order or --------------------- authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority is required on the part of the Company in connection with the execution and delivery of this Agreement or the offer, issuance, sale and delivery of the Shares as contemplated by this Agreement, except such filings as shall have been made prior to and shall be effective on and as of the Closing. Based on the representations made by the Purchasers in Section 4 of this Agreement, the offer and sale of the Shares to the Purchasers will be in compliance with applicable Federal and state securities laws. 3.7 Absence of Certain Changes or Events. Since the date of the ------------------------------------- Memorandum, there has not been, occurred or arisen any change in, or any event (including any damage, destruction or loss whether or not covered by insurance), condition or state of facts of any character that, individually or in the aggregate, have or are reasonably likely to have a material adverse effect on the Company or the Company's ability to perform its obligations hereunder, or under any other instrument or document contemplated hereby. 3.8 Intellectual Property Matters. The Company and its Subsidiaries ------------------------------ own or possess adequate licenses or other valid rights to use all material patents, trademarks, service marks trade names, copyrights, trade secrets, applications for trademarks and service marks, know-how and information and other proprietary and intellectual property rights used or held for use in connection with the business of the Company and its Subsidiaries as presently conducted (including in connection with services provided by the Company and its Subsidiaries to third parties). To the Company's knowledge, there is no proceeding challenging the validity of any of the foregoing rights that, individually or in the aggregate, is reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole. To the best of the Company's knowledge, there are no infringements of any proprietary or intellectual property rights owned by or licensed by or to the Company or any Subsidiary of the Company that, individually or in the aggregate, are reasonably likely to have a material adverse effect on the Company and its Subsidiaries taken as a whole. -4- 4. Representations of the Purchasers. Each of the Purchasers severally --------------------------------- represents and warrants to the Company as follows: 4.1 Investment. Such Purchaser is acquiring the Shares for his or ---------- its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated by this Agreement and the Exhibits hereto, Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof. 4.2 Authority. Such Purchaser has full power and authority to enter --------- into and to perform this Agreement in accordance with its terms. Any Purchaser that is a corporation, partnership or trust represents that it has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Company. 4.3 Experience. Such Purchaser has carefully reviewed the ---------- representations and other information concerning the Company contained in this Agreement, the Company Reports (including, without limitation, the risk factors contained therein) and the Memorandum and has made such detailed inquiry concerning the Company, its business and its personnel as he or it saw fit; the officers of the Company have made available to such Purchaser any and all written information which he or it has requested and have answered to such Purchaser's satisfaction all inquiries made by such Purchaser; and such Purchaser has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of his or its investment in the Company and is able financially to bear the risks thereof. 4.4 Accredited Investor. Such Purchaser is an Accredited Investor ------------------- within the definition set forth in Rule 501(a) of the Securities Act of 1933, as amended (the "Securities Act"). -------------- 5. Conditions to the Obligations of the Purchasers. The obligation of ----------------------------------------------- each of the Purchasers to purchase Shares at the Closing is subject to the fulfillment, or the waiver by such Purchaser, of each of the following conditions on or before the Closing: 5.1 Accuracy of Representations and Warranties. Each representation ------------------------------------------ and warranty contained in Section 3 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. -5- 5.2 Performance. The Company shall have performed and complied with ----------- all agreements and conditions contained in this Agreement required to be performed or complied with by the Company prior to or at the Closing. 5.3 Certificates and Documents. The Company shall have delivered to -------------------------- the Purchasers: (a) The Certificate of Incorporation of the Company, as amended and in effect as of the Closing Date (including the Certificate of Designation), certified by the Secretary of State of the State of Delaware; (b) Certificates, as of the most recent practicable dates, as to the corporate good standing of the Company issued by the Secretary of State of the State of Delaware; (c) By-laws of the Company, as amended and in effect as of the Closing Date, certified by its Secretary or Assistant Secretary as of the Closing Date; and (d) Resolutions of the Board of Directors of the Company, authorizing and approving all matters in connection with this Agreement and the transactions contemplated hereby, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date. 5.4 Compliance Certificate. The Company shall have delivered to the ---------------------- Purchasers a certificate, executed by the President and Chief Executive Officer of the Company, dated the Closing Date, certifying to the fulfillment of the conditions specified in Sections 5.1, 5.2 and 5.3 of this Agreement. 5.5 Opinion of Counsel. The Company shall have furnished to the ------------------- Purchasers the opinion, dated as of the Closing Date, of its counsel addressed to the Purchasers, that: (a) The Company is a corporation validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to own and operate its properties and to conduct its business as set forth in the Memorandum. To the knowledge of such counsel, the Company's authorized capital stock is as set forth in the Memorandum and the issued and outstanding capital stock as of the date of the Memorandum is as set forth in the Memorandum. (b) The Shares have been duly and validly authorized and issued and are fully paid and nonassessable, and no holders of any outstanding shares of capital stock have any preemptive rights. -6- (c) The Warrant Shares (as defined below), when sold and issued pursuant to the terms and conditions set forth in the Warrant (as defined below) will have been duly and validly authorized and issued and will be fully paid and nonassessable and no holder of any outstanding shares of capital stock will have any preemption rights. 5.6 Minimum Investment. Purchasers shall have tendered at the ------------------ Closing aggregate consideration not less than $50,000.00 for the purchase of Shares. 6. Condition to the Obligations of the Company. The obligations of the ------------------------------------------- Company under Section 1.2 of this Agreement are subject to fulfillment, or the waiver, of the following conditions on or before the Closing: 6.1 Accuracy of Representations and Warranties. The representations ------------------------------------------ and warranties of the Purchasers contained in Section 4 shall be true on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of that date. 6.2 Minimum Investment. Purchasers shall have tendered at the ------------------ Closing aggregate consideration of not less than $50,000.00 for the purchase of Shares. 6.3 Questionnaire. Each of the Purchasers shall have completed, -------------- executed and delivered to the Company or Qualified Purchaser Questionnaire in the form attached hereto as Exhibit C. --------- 7. Registration Rights. ------------------- The Purchasers and Flomenhaft (as defined below) shall have the following registration rights with respect to the Shares issued to them hereunder: 7.1 Registration Rights. The Company shall utilize reasonable ------------------- efforts to cause, within forty five (45) days following the Closing Date, a registration statement on Form S-3 to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933 (the "Securities ---------- ---------- Act") or an existing registration statement on Form S-3 (the "Registration - --- ------------ Statement") to be amended for the purpose of registering the Shares, any shares - --------- of Common Stock ("Warrant Shares") issued upon exercise of the Common Stock -------------- Purchase Warrant (the "Warrant") to be distributed to L. Flomenhaft & Co., ------- Incorporated ("Flomenhaft") upon the Closing and the shares of Common Stock, if ---------- any, issued pursuant to the last two sentences of this Section 7.1 (the "Additional Shares"). Flomenhaft shall be a direct and intended beneficiary of - ------------------ the covenants and provisions of this Article 7 with respect to the Warrant Shares, for resale on a continuous basis from time to time by a Holder thereof. For purposes of this Article 7, a person is deemed to be a "Holder" of Shares or Warrant -7- Shares whenever such person or entity is the record owner of Shares or Warrant Shares and the term "Shares" shall include any Additional Shares. Thereafter, the Company will use commercially reasonable best efforts to have the Registration Statement become effective and cause the Shares and Warrant Shares to be registered under the Securities Act, and registered, qualified or exempted under the state securities laws of such jurisdictions as any Holder reasonably requests, as soon as is reasonably practicable. If the Company fails to file such Registration Statement within sixty (60) days following the Closing Date, subject to compliance by the Company with any applicable stockholder approval requirements imposed by law or any securities exchange or listing organization then the Company shall issue and deliver (i) to each of the Purchasers a number of shares of Common Stock equal to ten percent (10%) of the number of Shares originally issued to such Purchaser pursuant to this Agreement and (ii) to Flomenhaft a number of warrants equal to ten percent (10%) of the number of warrants originally issued to Flomenhaft pursuant to this Agreement and the Placement Agent Agreement (the "Placement Agent Agreement"), dated as of April ------------------------- 21, 1998, by and between the Company and Flomenhaft. If the Company fails to file the Registration Statement within 120 days of the Closing Date, and within each subsequent sixty (60) day period thereafter, subject to compliance by the Company with any applicable stockholder approval requirements imposed by law or any securities exchange or listing organization then the Company shall issue and deliver upon the expiration of each such period (y) to each of the Purchasers a number of shares of Common Stock equal to ten percent (10%) of the number of Shares originally purchased by such Purchaser pursuant to this Agreement and (z) to Flomenhaft a number of warrants equal to ten percent (10%) of the number of warrants originally issued to Flomenhaft pursuant to this Agreement and the Placement Agent Agreement. 7.2 Expenses of Registration. All expenses incident to the Company's ------------------------ performance of or compliance with this Section 7, including, without limitation, all registration and filing fees (including all expenses incident to filing with Nasdaq or any other exchange), fees and expenses of complying with securities and blue sky laws, printing and copying expenses, fees and expenses of the Company's counsel and accountants, and the fees and disbursements of all independent public accountants, and the fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) shall be paid by the Company. 7.3 Furnishing of Documents. The Company shall furnish to the ----------------------- Holders such reasonable number of copies of the Registration Statement, such prospectuses as are contained in the Registration Statement and such other documents as the Holders may reasonable request in order to facilitate the offering of the Shares. 7.4 Amendments and Supplements. The Company shall prepare and -------------------------- promptly file with the Commission, and promptly notify the Holders of the filing of -8- such amendments or supplements to the Registration Statement or prospectuses contained therein, as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to the Shares or Warrants are required to be delivered under the Securities Act, any event shall have occurred as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company shall also advise the Holders promptly after it shall receive notice of the issuance of any stop order by the Commission suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. If, after a Registration Statement becomes effective, the Holders desire that the Registration Statement be amended or the Company advises the Holders that the Company considers it appropriate that the Registration Statement (and all other registration statements of the Company then effective and outstanding) be amended, the Holders shall suspend any further sales of the Shares until the Company advises the Holders that the Registration Statement has been amended. 7.5 Duration. The Company shall maintain the effectiveness of the -------- Registration Statement until such time as the Company reasonably determines that the Holders will be eligible to sell all of the Shares then owned by the Holders without the need for continued registration of the shares, in three month periods immediately preceding the termination of the effectiveness of the Registration Statement. The Company's obligations contained in Sections 7.2, 7.3 and 7.4 shall terminate on the second anniversary of the Closing Date. Notwithstanding the foregoing, (a) the Company may delay filing a Registration Statement, and may withhold efforts to cause the Registration Statement to become effective, if the Board of Directors of the Company in its good faith judgment, determines that any registration of Shares should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction or activity involving the Company or any of its subsidiaries (a "Valid Business -------------- Reason"), (b) the Company may postpone filing a Registration Statement until - ------ such Valid Business Reason no longer exists, but in no event for more than sixty (60) days and (c) in case a Registration Statement has been filed, the Company may cause such Registration Statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than sixty (60) days (such period of postponement or withdrawal under sub clause (b) or (c) above, the "Postponement Period"); and the Company shall give written ------------------- notice of its determination to postpone or withdraw a Registration Statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case promptly after the -9- occurrence thereof; provided, however, the Company shall not be permitted to postpone or withdraw a Registration Statement within seventy five (75) days after the expiration of any Postponement Period. The Holder agree that, upon receipt of any notice from the Company that the Company has determined to postpone or withdraw any Registration Statement, the Holder will discontinue any disposition of Shares pursuant to such Registration Statement and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus covering such Shares that was in effect at the time of receipt of such notice. If the Company shall give any notice of withdrawal or postponement of a registration statement, the Company shall, at such time as the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event later than three months after the date of the postponement or withdrawal), use its reasonable efforts to effect the registration under the Securities Act of Shares covered by the withdrawn or postponed registration statement in accordance with Section 7.1. 7.6 Further Information. If the Shares owned by a Holder are ------------------- included in any registration, such Holder shall furnish the Company such information regarding itself as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 7.7 Indemnification. --------------- (i) The Company will indemnify and hold harmless the Holders and each person, if any, who controls a Holder within the meaning of the Securities Act, from and against any and all losses, damages, liabilities, costs and expenses to which the Holders or any such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities, costs or expenses are caused by any untrue statement of any material fact contained in the Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that, the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability, cost or expense arises out of or is based upon an untrue statement or omission so made in conformity with information furnished by or on behalf of any Holder or such controlling person in writing specifically for use in the preparation thereof. (ii) Each of the Holders will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any and all losses, damages, liabilities, costs and -10- expenses to which the Buyer or any such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement of any material fact contained in the Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, to the extent and only to the extent that such untrue statement or omission was so made in reliance upon and in strict conformity with written information furnished by or on behalf of such Holder specifically for use in the preparation thereof. 8. Transfer of Shares. ------------------ 8.1 Restricted Shares. "Restricted Shares" means (i) the Shares and ----------------- ----------------- (ii) any other shares of capital stock of the Company issued in respect of such shares (as a result of stock splits, stock dividends, reclassifications, recapitalizations, or similar events); provided, however, that shares of Common -------- ------- Stock which are Restricted Shares shall cease to be Restricted Shares (i) upon any sale pursuant to the Registration Rights Agreement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act or (ii) at such time as they become eligible for sale under Rule 144(k) under the Securities Act. 8.2 Requirements for Transfer. ------------------------- (a) Restricted Shares shall not be sold, pledged, hypothecated or otherwise disposed of or transferred unless either (i) they first shall have been registered under the Securities Act, or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Purchaser which is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner, if the transferee agrees in writing to be subject to the terms of this Section 8 to the same extent as if he were an original Purchaser hereunder, or (ii) a transfer made in accordance with Rule 144 under the Securities Act. -11- 8.3 Legend. Each certificate representing Restricted Shares shall ------ bear a legend substantially in the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such shares are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such registration is not required." The foregoing legend shall be removed from the certificates representing any Restricted Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Securities Act. 9. Miscellaneous. ------------- 9.1 Successors and Assigns; Assignment. The provisions of this ---------------------------------- Agreement shall be binding upon, and inure to the benefit of, the respective successors, assigns, and heirs, executed and minus of the parties hereto. This Agreement, and the rights and obligations of a Purchaser hereunder, may not be assigned by such Purchaser to any person or entity without the prior written permission of the Company. 9.2 Confidentiality. Each of the Purchasers agrees that he or it --------------- will keep confidential and will not use, disclose or divulge any confidential, proprietary or secret information which such Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to the Purchaser pursuant to this Agreement, unless such information is known, or until such information becomes known, to the public; provided, however, that such Purchaser may disclose such information to his or its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with the Purchaser's investment in the Company provided that such persons agree to maintain the confidentiality of such information. 9.3 Notices. All notices, requests, consents, and other ------- communications under this Agreement shall be in writing and shall be delivered by hand or mailed by first class certified or registered mail, return receipt requested, postage prepaid: If to the Company, at 13595 Dulles Technology Drive, Herndon, Virginia 22071, Attention: President, or at such other address or addresses as may have been furnished in writing by the Company to the Purchasers, with a copy to David Sylvester, Esq., Hale -12- and Dorr LLP, The Willard Office Building, 1455 Pennsylvania Avenue, N.W., Suite 1000, Washington, D.C. 20004; If to a Purchaser, at his or its address set forth on Exhibit A, or at such --------- other address or addresses as may have been furnished to the Company in writing by such Purchaser; or If to Flomenhaft, at 225 West 34th Street, Suite 2008, New York, New York 10122, Attention: Ted Flomenhaft or at such other address or addresses as may have been furnished in writing by Flomenhaft to the Company or the Purchasers, with a copy to Eric Simonson, Esq., Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the America, New York, New York 10036. Notices provided in accordance with this Section 9.3 shall be deemed delivered upon personal delivery or two business days after deposit in the mail. 9.4 Brokers. Each of the Company and the Purchaser (i) represents ------- and warrants to the other parties hereto that other than Flomenhaft he or it has retained no finder or broker in connection with the transactions contemplated by this Agreement, and (ii) will indemnify and save the other parties harmless from and against any and all claims, liabilities or obligations with respect to brokerage or finders' fees or commissions, or consulting fees incurred by such party in connection with the transactions contemplated by this Agreement except for such fees payable to Flomenhaft asserted by any person on the basis of any statement or representation alleged to have been made by such indemnifying party. 9.5 Entire Agreement. This Agreement embodies the entire agreement ---------------- and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. 9.6 Amendments and Waivers. Except as otherwise expressly set forth ---------------------- in this Agreement, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 9.6 shall be binding upon each holder of any Shares (including shares of Common Stock into which such Shares have been converted) and each future holder of all such securities and the Company. No failure or delay of any party to this Agreement in exercising any power or right under this Agreement will operate as a waiver thereof, and no waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. -13- 9.7 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed to be an original, but all of which together shall be one and the same document. 9.8 Section Headings. The section headings are for the convenience ---------------- of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the parties. 9.9 Severability. The invalidity or unenforceability of any ------------ provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 9.10 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Delaware. -14- [SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT] THE COMPANY: NETRIX CORPORATION By: -------------------------------- -------------------------------------- THE PURCHASERS: -------------------------------------- Jonathan Eilian -------------------------------------- Steven Nodvin -------------------------------------- Edelpraud Elper-Nodvin -------------------------------------- Kasper Terhorst GALT FINANCIAL, LTD. By: -------------------------------- Name: -------------------------------- Title: -------------------------------- -------------------------------------- John Theodoracopules G-V CAPITAL CORP. By: -------------------------------- Name: -------------------------------- Title: -------------------------------- -------------------------------------- Kevin Muzin -------------------------------------- Adam Hershey -------------------------------------- Jonathan Rothschild -------------------------------------- Leonard Flomenhaft -15- EXHIBIT A --------- Name and Address No. of Shares of Aggregate of the Purchasers Common Stock Purchase Price - ----------------- ---------------- -------------- Jonathan Eilian 32,000 $ 40,000 c/o Starwood Capital 3 Pickwick Plaza (250) Greenwich, CT 06830 Stephen Nodvin and Edelpraud Elper-Nodvin 40,000 $500,000 TeleVideo Global, inc. 448 North Cedar Bluff Road, #350 Knoxville, TN 37923-9906 Kasper Terhorst 12,000 $ 15,000 4477 F Shadow Hills Blvd. Santa Barbara, CA 93105 Galt Financial, Ltd. 40,000 $ 50,000 125 West Shore Road Huntington, NY 11743 John Theodoracopules 20,000 $ 25,000 National Shipping 545 Madison Avenue, 6th Floor New York, NY 10022 G-V Capital Corp. 40,000 $ 50,000 Stanley Kaplan 150 Vanderbilt Motor Parkway Suite 311 Hauppage, NY 11788 Kevin Muzin 4,000 $ 5,000 181 Housatonic Avenue Stratford, CT 06497 Adam Hershey 8,000 $ 10,000 2025 Broadway 2G New York, NY 20023 Jonathan Rothschild 20,000 $ 25,000 300 Mercer Street, #28F New York, NY 10003-6742 Leonard Flomenhaft 14,000 $ 17,500 L. Flomenhaft & Company, Inc. 225 West 34th Street (2008) New York, NY 10122 -16- EX-10.20 4 COMMON STOCK PURCHASE WARRANT Exhibit 10.20 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT --------------------------------------------------- Warrant No. PP1 Number of Shares: 140,000 (subject to adjustment) Date of Issuance: April 24, 1998 NETRIX CORPORATION Common Stock Purchase Warrant ----------------------------- (Void after April 23, 2003) Netrix Corporation, a Delaware corporation (the "Company"), for value ------- received, hereby certifies that L. Flomenhaft & Co., Incorporated, or its registered assigns (the "Registered Holder"), is entitled, subject to the terms ----------------- set forth below, to purchase from the Company, at any time or from time to time on or before April 23, 2003 at not later than 5:00 p.m. (Washington, D.C. time), 140,000 shares of Common Stock, $0.05 par value per share, of the Company, at a purchase price of $1.75 per share. The shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the "Warrant Shares" and the "Purchase Price," respectively. - --------------- -------------- 1. Exercise. -------- (a) This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly executed by such Registered Holder or by such Registered --------- Holder's duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. (b) The Registered Holder may, at its option, elect to pay some or all of the Purchase Price payable upon an exercise of this Warrant by cancelling a portion of this Warrant exercisable for such number of Warrant Shares as is determined by dividing (i) the total Purchase Price payable in respect of the number of Warrant Shares being purchased upon such exercise by (ii) the excess of the Fair Market Value per share of Common Stock as of the effective date of exercise, as determined pursuant to subsection 1(c) below (the "Exercise Date") over the Purchase Price per share. ------------- If the Registered Holder wishes to exercise this Warrant pursuant to this method of payment with respect to the maximum number of Warrant Shares purchasable pursuant to this method, then the number of Warrant Shares so purchasable shall be equal to the total number of Warrant Shares, minus the product obtained by multiplying (x) the total number of Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase Price per share and the denominator of which shall be the Fair Market Value per share of Common Stock as of the Exercise Date. The Fair Market Value per share of Common Stock shall be determined as follows: (i) If the Common Stock is listed on a national securities exchange, the NASDAQ National Market, the NASDAQ system, or another nationally recognized exchange or trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the last reported sale price per share of Common Stock thereon on the Exercise Date; or, if no such price is reported on such date, such price on the next preceding business day (provided that if no such price is reported on the next preceding business day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (ii)). (ii) If the Common Stock is not listed on a national securities exchange, the NASDAQ National Market, the NASDAQ system or another nationally recognized exchange or trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company); and, upon request of the Registered Holder, the Board of Directors (or a representative thereof) shall promptly notify the Registered Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board of Directors has not made such a determination within the three-month period prior to the Exercise Date, then (A) the Fair Market Value per share of Common Stock shall be the amount next determined by the Board of Directors to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company), (B) the Board of Directors shall make such a determination within 15 days of a request by the Registered Holder that it do so, and (C) the exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until such determination is made. (c) Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have -2- been surrendered to the Company as provided in subsection 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. (d) As soon as practicable after the exercise of this Warrant in full or in part, and in any event within 10 days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of full Warrant Shares to which such Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the sum of (a) the number of such shares purchased by the Registered Holder upon such exercise plus (b) the number of Warrant Shares (if any) covered by the portion of this Warrant cancelled in payment of the Purchase Price payable upon such exercise pursuant to subsection 1(b) above. 2. Adjustments. ----------- (a) If outstanding shares of the Company's Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Purchase Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Purchase Price, the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment. -3- (b) If there shall occur any capital reorganization or reclassification of the Company's Common Stock (other than a change in par value or a subdivision or combination as provided for in subsection 2(a) above), or any consolidation or merger of the Company with or into another corporation, or a transfer of all or substantially all of the assets of the Company, then, as part of any such reorganization, reclassification, consolidation, merger or sale, as the case may be, lawful provision shall be made so that the Registered Holder of this Warrant shall have the right thereafter to receive upon the exercise hereof the kind and amount of shares of stock or other securities or property which such Registered Holder would have been entitled to receive if, immediately prior to any such reorganization, reclassification, consolidation, merger or sale, as the case may be, such Registered Holder had held the number of shares of Common Stock which were then purchasable upon the exercise of this Warrant. In any such case, appropriate adjustment (as reasonably determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Registered Holder of this Warrant, such that the provisions set forth in this Section 2 (including provisions with respect to adjustment of the Purchase Price) shall thereafter be applicable, as nearly as is reasonably practicable, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of this Warrant. (c) When any adjustment is required to be made in the Purchase Price, the Company shall promptly mail to the Registered Holder a certificate setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such certificate shall also set forth the kind and amount of stock or other securities or property into which this Warrant shall be exercisable following the occurrence of any of the events specified in subsection 2(a) or (b) above. 3. Fractional Shares. The Company shall not be required upon the ----------------- exercise of this Warrant to issue any fractional shares, but shall make an adjustment therefor in cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to subsection 1(b) above. 4. Requirements for Transfer. ------------------------- (a) This Warrant and the Warrant Shares shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Registered Holder which is a partnership -4- to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner, if the transferee agrees in writing to be subject to the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144 under the Act. (c) Each certificate representing Warrant Shares (unless at the time of exercise the Warrant Shares have been sold pursuant to a registration statement under the Act) shall bear a legend substantially in the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED." The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act. 5. No Impairment. The Company will not, by amendment of its charter or ------------- through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 6. Liquidating Dividends. If the Company pays a dividend or makes a --------------------- distribution on the Common Stock payable otherwise than in cash out of earnings or earned surplus (determined in accordance with generally accepted accounting principles) except for a stock dividend payable in shares of Common Stock (a "Liquidating Dividend"), then the Company will pay or distribute to the - --------------------- Registered Holder of this Warrant, upon the exercise hereof, in addition to the Warrant Shares purchased upon such exercise, the Liquidating Dividend which would have been paid to such Registered Holder if he had been the owner of record of such Warrant Shares immediately prior to the date on which a record is taken for such Liquidating Dividend or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends or distribution are to be determined. 7. Notices of Record Date, etc. In case: --------------------------- -5- (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or (b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company; or (c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice. 8. Reservation of Stock; Character of Warrant Shares. The Company will ------------------------------------------------- at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant. All Warrant Shares issuable upon the exercise of this Warrant, when paid or in accordance with this Warrant, shall be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company. 9. Exchange of Warrants. Upon the surrender by the Registered Holder of -------------------- any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 4 hereof, issue and deliver to or upon the order of such Holder, at the Company's expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered -6- Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 10. Replacement of Warrants. Upon receipt of evidence reasonably ----------------------- satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 11. Transfers, etc. -------------- (a) The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Any Registered Holder may change its or his address as shown on the warrant register by written notice to the Company requesting such change. (b) Subject to the provisions of Section 4 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed assignment (in the form of Exhibit II ---------- hereto) at the principal office of the Company. (c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this -------- ------- Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 12. Mailing of Notices, etc. All notices and other communications from ----------------------- the Company to the Registered Holder of this Warrant shall be mailed by first- class certified or registered mail, postage prepaid, to the address furnished to the Company in writing by the last Registered Holder of this Warrant who shall have furnished an address to the Company in writing. All notices and other communications from the Registered Holder of this Warrant or in connection herewith to the Company shall be mailed by first-class certified or registered mail, postage prepaid, to the Company at its principal office set forth below. If the Company should at any time change the location of its principal office to a place other than as set forth below, it shall give prompt written notice to the Registered Holder of this Warrant and thereafter all references in -7- this Warrant to the location of its principal office at the particular time shall be as so specified in such notice. 13. No Rights as Stockholder. Until the exercise of this Warrant, the ------------------------ Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company. 14. Change or Waiver. Any term of this Warrant may be changed or waived ---------------- only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. 15. Headings. The headings in this Warrant are for purposes of reference -------- only and shall not limit or otherwise affect the meaning of any provision of this Warrant. 16. Governing Law. This Warrant will be governed by and construed in ------------- accordance with the laws of the State of Delaware. NETRIX CORPORATION By: ------------------------------------- [Corporate Seal] Title: ---------------------------------- ATTEST: - ---------------------------- -8- EXHIBIT I --------- PURCHASE FORM ------------- To: Dated: ----------------- ------------------ The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the Common Stock covered by such Warrant. The undersigned herewith makes payment of $____________, representing the full purchase price for such shares at the price per share provided for in such Warrant. Such payment takes the form of (check applicable box or boxes): [_] $_________ in lawful money of the United States, and/or [_] the cancellation of such portion of the attached Warrant as is exercisable for a total of ______ Warrant Shares (using a Fair Market Value of $_______ per share for purposes of this calculation). Signature: -------------------------- Address: ---------------------------- ---------------------------- -9- EXHIBIT II ---------- ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant (No. ____) with respect to the number of shares of Common Stock covered thereby set forth below, unto: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: Signature: ---------------- -------------------------- Dated: Witness: ---------------- ---------------------------- -10- EX-27 5 FDS
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1,768 0 7,119 1,161 8,263 17,501 4,769 18,550 23,336 7,803 0 0 0 482 15,051 23,336 4,995 7,241 2,109 3,523 4,711 100 46 (952) 0 (952) 0 0 0 (952) (.10) (.10)
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