THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE LAWS OF ANY STATE. THE TRANSFER OF THIS WARRANT IS SUBJECT
TO THE RESTRICTIONS SET FORTH IN SECTION 3 HEREOF, AND NO TRANSFER OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL THE TERMS AND
CONDITIONS OF SECTION 3 HEREOF HAVE BEEN COMPLIED WITH.
Coast Warrant No. 1
WARRANT
To Purchase Common Stock of
NETRIX CORPORATION
Expiring June ___, 2004
This is to certify that, for value received, COAST BUSINESS CREDIT, a
division of Southern Pacific Bank ("Coast"), or registered assigns, is entitled
to purchase from Netrix Corporation, a Delaware corporation (the "Company"),
50,000 duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock of the Company (the "Warrant Shares"), at the initial purchase
price per share of $2.00, as may be adjusted from time to time in the manner
hereinafter provided ("Current Warrant Price"), exercisable at any time and from
time to time during the period commencing on the date hereof and ending on June
___, 2004 (the "Exercise Period"), all further subject to the terms, conditions
and adjustments herein set forth. This Warrant may be assigned by the holder
subject to SECTION 3 below.
This Warrant is issued in connection with a Loan and Security Agreement,
dated as of November 18, 1997 by and between the Company and Coast and any and
all amendments, replacements, supplements and modifications thereto
(collectively, the "Credit Agreement"). Certain terms used in this Warrant are
defined in Section 5 hereof. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned thereto in the Credit Agreement.
SECTION 1. EXERCISE OF WARRANTS.
SEC 1.1 CASH EXERCISE. This Warrant may be exercised by the Warrantholder by
(i) the surrender of this Warrant to the Company at the Warrant
Office described in Section 2.1 with a duly executed Exercise Form
specifying the number of Warrant Shares to be purchased, during
normal business hours on any Business Day during the Exercise Period
and (ii) the delivery of payment to the Company, for the account of
the Company, by cash, wire transfer of immediately available funds
to a bank account specified by the Company, or by certified or bank
cashier's check, of the Current Warrant Price for the number of
Warrant Shares specified in the Exercise Form in lawful money of the
United States of America. The Company agrees that such Warrant
Shares shall be deemed to be issued to the Warrantholder as the
record holder of such Warrant Shares as of the close of business on
the date on which this Warrant has been surrendered and payment has
been made for such Warrant Shares in accordance with this Agreement.
A stock certificate or certificates for the Warrant Shares specified
in the Exercise Form shall be delivered to the Warrantholder as
promptly as practicable, and in any event within seven (7) Business
Days, thereafter. The stock certificate(s) so delivered shall be in
any such denominations as may be reasonably specified by the
Warrantholder in the Exercise Form.
SEC 1.2 NET ISSUE EXERCISE. In lieu of exercise pursuant to Section
1.1, this Warrant may be exercised by the Warrantholder by the
surrender of this Warrant to the Company, with a duly executed
Exercise Form marked to reflect net issue exercise and specifying
the number of Warrant Shares to be purchased, during normal business
hours on any Business Day during the Exercise Period. The Company
agrees that such Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the
close of business on the date on which this Warrant shall have been
surrendered. Upon such exercise, the Warrantholder shall be entitled
to receive a number shares equal to the value of this Warrant (or
the portion thereof being canceled) computed as of the date of
surrender hereof to the Company using the following formula:
X = Y(A-B)
------
A
Where:
X = the number of shares of Common Stock to be issued to
Warrantholder under this SECTION 1.2;
Y = the number of shares of Common Stock otherwise purchasable
under this Warrant (at the date of such calculation);
A = the Current Market Price of shares of Common Stock to be
issued to the Warrantholder (at the date of such
calculation);
B = the Current Warrant Price
SEC 1.3 CURRENT MARKET PRICE. For purposes of Section 1.2, current
market price of one share of the Company's Common Stock (the
"Current Market Price") shall mean (per share of Common Stock at any
date): the per share fair market value of the Common Stock (i)
determined by the average of the daily "market prices" over a period
of 10 consecutive Business Days before such date or (ii) if and so
long as there is no exchange or over-the-counter market for the
Common Stock of the Company, the price per share which the Company
could obtain from a willing buyer for the shares sold by the Company
from authorized but unissued shares, as such price shall be
determined in good faith by the Board of Directors of the Company
and the Warrantholder, PROVIDED, HOWEVER, if the Company and the
Warrantholder can not agree on a value, the Company and the
holder(s) of the majority of the Warrants shall retain an
independent investment banking firm to determine the per share fair
market value of the Common Stock, with the expense of such firm to
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be shared equally by the Company and the Warrantholder(s). The
market price referred to in clause (i) above for each such Business
Day shall be: (A) the last sale price on such day on the principal
securities exchange on which the Common Stock is then listed or
admitted to trading (or, if no sale takes place on such day on any
such exchange, the average of the closing bid and asked prices on
such day as officially quoted on any such exchange), or (B) if the
Common Stock is not then listed or admitted on any stock exchange,
the market price for each such business day shall be the last sale
price on such day (or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day in the
over-the-counter market), in either case as reported through NASDAQ,
(or, if such prices are not at the time so reported, as furnished by
any member of the National Association of Securities Dealers, Inc.
selected by the Company).
SEC 1.4 WARRANT SHARES TO BE FULLY PAID AND NONASSESSABLE. All shares
of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable and, if the Common
Stock is then listed on a securities exchange, shall be duly listed
thereon.
SEC 1.5 PARTIAL EXERCISE; FRACTIONAL SHARES. If this Warrant shall
have been exercised only in part, the Company shall, at the time of
delivery of the stock certificate(s), deliver to the Warrantholder a
new Warrant evidencing the rights to purchase the remaining Warrant
Shares, which new Warrant shall in all other respects be identical
with this Warrant. The Company shall not be required upon any
exercise of this Warrant to issue a certificate representing any
fraction of a share of Common Stock, but, in lieu thereof, shall pay
to the holder of this Warrant cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share)
of the Current Market Price of one share of Common Stock as of the
date of receipt by the Company of notice of exercise of this
Warrant.
SEC 1.6 LEGEND ON WARRANT SHARES. Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time
of exercise such Warrant Shares are registered under the Act, shall
bear the following legend (and any additional legend required by any
securities exchange upon which such Warrant Shares may, at the time
of such exercise, be listed) on the face thereof:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the laws
of any state."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend (except a new certificate issued
upon completion of (i) a public distribution pursuant to a
registration statement or (ii) an exempt sale pursuant to Rule 144
or Rule 144A under the Act of the securities represented thereby)
shall also bear such legend unless, in the opinion of Xxxxxx,
Xxxxxxxxxx & Sutcliffe LLP or such other counsel for the holder
thereof as shall be reasonably acceptable to the Company, the
securities represented thereby need no longer be subject to the
restrictions contained in said Section 3. The provisions of said
Section 3 shall be binding upon all subsequent holders of this
Warrant.
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SEC 1.7 ACKNOWLEDGMENT OF CONTINUING OBLIGATION. The Company will, at the
time of any exercise of this Warrant in whole or in part, upon
request of the holder hereof, acknowledge in writing its then
continuing obligation to such holder in respect of any rights
pursuant to this Warrant (including, without limitation, any
right to registration, if any, of the shares of Common Stock
issued upon such exercise) to which such holder shall continue to
be entitled after such exercise in accordance with this Warrant;
PROVIDED, HOWEVER, that the failure of such holder to make any
such request shall not affect the continuing obligation of the
Company to such holder in respect of such rights.
SECTION 2. WARRANT OFFICE; TRANSFER, DIVISION OR COMBINATION OF WARRANTS.
SEC. 2.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's office at 00000 Xxxxxx Xxxxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000, and may subsequently be such other office
of the Company or of any transfer agent of the Common Stock in the
continental United States as to which written notice has previously
been given to all of the Warrantholders.
SEC. 2.2 OWNERSHIP OF WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and
shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as
provided in this Section 2.
SEC. 2.3 TRANSFER OF WARRANTS. The Company agrees to maintain at the
Warrant Office books for the registration and registration of
transfer of the Warrants, and, subject to the provisions of Section
3 hereof, this Warrant and all rights hereunder are transferable, in
whole or in part, on said books at said office, upon surrender of
this Warrant at said office, together with a written assignment of
this Warrant duly executed by the holder hereof or his duly
authorized agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in
the denominations specified in such instrument of assignment, and
this Warrant shall promptly be cancelled. A Warrant may be exercised
by a new holder for the purchase of shares of Common Stock without
having a new Warrant issued.
SEC. 2.4 DIVISION OR COMBINATION OF WARRANTS. This Warrant may be
divided or combined with other Warrants upon presentation hereof and
of any Warrant or Warrants with which this Warrant is to be combined
at the Warrant Office, together with a written notice specifying the
names and denominations in which new Warrants are to be issued,
signed by the holders hereof and thereof or their respective
duly-authorized agents or attorneys. Subject to compliance with
Section 2.3 hereof as to any transfer which may be involved in such
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division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice; PROVIDED, that
no holder of this Warrant may divide the Warrant into a Warrant
exercisable into less than 1,000 shares of Common Stock.
SEC. 2.5 EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay all
expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of any Warrant hereunder;
PROVIDED, HOWEVER, that the Warrantholder shall be required to pay
any and all taxes which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
other than that of the Warrantholder as then reflected upon the
books of the Company.
SECTION 3. RESTRICTIONS ON EXERCISE AND TRANSFER; REGISTRATION RIGHTS.
SEC. 3.1 RESTRICTIONS ON EXERCISE AND TRANSFER. The holder of this Warrant,
as of the date of issuance hereof, represents to the Company that it
is acquiring the Warrants for its own account for investment
purposes and not with a view to the distribution thereof.
Notwithstanding any provisions contained in this Warrant to the
contrary, this Warrant and the related Warrant Shares shall not be
transferable except pursuant to the proviso contained in the
following sentence or upon the conditions specified in this Section
3, which conditions are intended, among other things, to insure
compliance with the provisions of the Act and applicable state law
in respect of the transfer of this Warrant or such Warrant Shares.
The holder of this Warrant, by its acceptance hereof, agrees that it
will not transfer this Warrant or the related Warrant Shares prior
to delivery to the Company of an opinion of such holder's counsel
(as such opinion and such counsel are described in Section 3.2
hereof) or until registration of such Warrant Shares under the Act
has become effective or after a sale of such Warrant or Warrant
Shares has been consummated pursuant to Rule 144 or Rule 144A under
the Act; PROVIDED, HOWEVER, that such holder may freely transfer
this Warrant or such Warrant Shares (without delivery to the Company
or opinion of Counsel) (w) to one of its nominees, Affiliates or a
nominee thereof, (x) to a pension or profit-sharing fund established
and maintained for its employees or for the employees of any such
Affiliate, (y) from a nominee to any of the aforementioned persons
as beneficial owner of this Warrant or such Warrant Shares, or (z)
to a Qualified Institutional Buyer (so long as such transfer is
effected in compliance with Rule 144A under the Act).
SEC. 3.2 NOTICE OF INTENTION TO TRANSFER; OPINION OF COUNSEL. The
Warrantholder, by its acceptance hereof, agrees that prior to any
transfer of this Warrant or of the related Warrant Shares (other
than as permitted by Section 3.1 hereof or pursuant to a
registration under the Act), the Warrantholder will give written
notice to the Company of its intention to effect such transfer,
together with an opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, or
such other counsel for the Warrantholder as shall be reasonably
acceptable to the Company, to the effect that the proposed transfer
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of this Warrant and/or such Warrant Shares may be effected without
registration under the Act, PROVIDED, HOWEVER, that the Company will
reimburse the Warrantholder in full for the reasonable fees and
disbursements of such counsel incurred by or on behalf of the
Warrantholder in connection with obtaining of such opinion. Upon
delivery of such notice and opinion to the Company, the
Warrantholder shall be entitled to transfer this Warrant and/or such
Warrant Shares in accordance with the intended method of disposition
specified in the notice to the Company; PROVIDED, HOWEVER, that if
such method of disposition would, in the opinion of the
aforementioned counsel to the Warrantholder, require that the
Company (a) take any action, and/or execute and file with the
Commission and/or any applicable state securities authority, and/or
(b) deliver to the Warrantholder or any other person any form or
document (other than a registration statement under the Act or under
any state securities laws or any action or documentation required
solely a by federal or state banking regulatory body) in order to
establish that the Warrantholder is entitled to take advantage of
such method of disposition, the Company agrees promptly, at its
expense, to take any such action and/or execute and file and/or
deliver any such form or document, PROVIDED, FURTHER, that the
Company shall not be required to provide a general consent to
service of process or qualify as a foreign corporation in any
jurisdiction solely by reason of this Section 3.2.
SEC. 3.3 [Reserved].
SEC. 3.4 PIGGYBACK REGISTRATIONS.
(a) If the Company at any time prior to June ___, 2001, proposes
to register any of its equity securities (as defined in the
Act), other than securities which are convertible into shares
of Common Stock, under the Act on Forms X-0, X-0 or S-3 (but
not Form S-4 or S-8 or any substantially similar form of
limited scope) or on any other form upon which may be
registered securities similar to the Warrant Shares, it will
at each such time give written notice at least 30 days prior
to the filing of the registration statement to all
Warrantholders of its intention so to do. Such notice shall
specify the proposed date of the filing of the registration
statement and advise each Warrantholder of its right to
participate therein. Upon the written request of any
Warrantholder given prior to the proposed date of filing set
forth in such notice, the Company will cause each Warrant
Share not otherwise covered under an effective registration
statement that such Warrantholder has requested the Company to
register to be registered under the Act, all to the extent
requisite to permit the sale or other disposition of such
Warrant Shares by such Warrantholder .
(b) If, in the written opinion of the underwriter or underwriters
managing the public offering which is the subject
of a registration pursuant to Section 3.4(a) (or in the event
that such distribution shall not be underwritten, in the
written opinion of an investment banking firm of recognized
standing satisfactory to the Warrantholders), the total amount
of the securities to be so registered, when added to the total
-6-
amount of Warrant Shares which the Warrantholders have
requested to be registered pursuant to Section 3.4(a), will
exceed the maximum amount of securities of the Company which
can be marketed (i) at a price reasonably related to their
then-current market value, or (ii) without otherwise
materially and adversely affecting the entire offering, then
the Company shall have the right to exclude from such
registration such number of Warrant Shares which it would
otherwise be required to register pursuant to Section 3.4(a)
as is necessary to reduce the total amount of securities to be
so registered to the maximum amount of securities which can be
so marketed; PROVIDED, HOWEVER, that if the securities (other
than the Warrant Shares) to be so registered for sale are to
be offered for the account of the Company and others, the
Company may only exclude Warrant Shares pro rata with the
securities held by such other persons (it being agreed that in
the case where such registration is to be effected as a result
of the exercise by a holder of the Company's securities of
such holder's right to cause such securities to be so
registered, such pro rata exclusion shall include the Company,
but shall not include such holder exercising its right to have
the securities so registered).
SEC. 3.5 COMPANY'S OBLIGATIONS IN REGISTRATION. If and whenever
the Company is obligated by the provisions of this Section 3 to
effect the registration of any Warrant Shares under the Act, the
Company will keep the Warrantholder advised in writing as to the
initiation of each registration and will use its best efforts to:
(a) cause such registration statement to remain effective
during the period required for the distribution of the
securities covered by the registration statement (the
"Effectiveness Period"); PROVIDED, HOWEVER, that in the
event that the Warrant Shares covered by such
registration statement are not to be sold to or through
underwriters acting for the Company, the Company shall
not be required to keep such registration statement in
effect, or prepare and file any amendments or
supplements thereto, after the expiration of two years
following the date of this Warrant, SUBJECT, HOWEVER to
the following restrictions:
(i) If, at any time prior to the expiration of the
Effectiveness Period, counsel to the Company (which
counsel shall be experienced in securities laws
matters) has determined in good faith that it is
reasonable to conclude that the filing of a
registration statement or the compliance by the
Company with its disclosure obligations in
connection with such registration statement may
require the disclosure of information which the
Board of Directors of the Company has identified as
material and which the Board of Directors has
determined that the Company has a bona fide business
purpose for preserving as confidential, then the
Company may delay the filing or the effectiveness of
such registration statement (if not then filed or
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effective, as applicable) and shall not be required
to maintain the effectiveness thereof or amend or
supplement such registration statement for a period
(an "Information Delay Period") expiring three
business days after the earlier to occur of (A) the
date on which such material information is disclosed
to the public or ceases to be material or the
Company is able to so comply with its disclosure
obligations and Commission requirements or (B) 45
days after the Company notifies the Holders of such
good faith determination. There shall not be more
than four Information Delay Periods during the
Effectiveness Period, and there shall not be two
Information Delay Periods during any contiguous 135
day period.
(ii) If, at any time prior to the expiration of
the Effectiveness Period, the Company is advised by
a nationally recognized investment banking firm
selected by the Company that, in such firm's written
reasonable opinion addressed to the Company, sales
of Common Stock pursuant to a registration statement
at such time would materially adversely affect any
immediately planned underwritten public equity
financing by the Company of at least $5 million, the
Company shall not be required to maintain the
effectiveness of such registration statement or
amend or supplement such registration statement for
a period (a "Transaction Delay Period") commencing
on the date of pricing of such equity financing and
expiring three business days after the earliest to
occur of (i) the abandonment of such financing or
(ii) 90 days after the completion of such financing.
There shall not be more than two Transaction Delay
Periods during the Effectiveness Period.
A Transaction Delay Period and an Information
Delay Period are hereinafter collectively referred to
as "Delay Periods" or a "Delay Period." The Company
will give prompt written notice, in the manner
prescribed by Section 10(b) hereof, to each Holder of
each Delay Period. Such notice shall be given (i) in
the case of a Transaction Delay Period, at least 20
days in advance of the commencement of such Delay
Period and (ii) in the case of an Information Delay
Period, as soon as practicable after the Board of
Directors makes the determination referenced in
Section 3.5(a)(i). Such notice shall state to the
extent, if any, as is practicable, an estimate of the
duration of such Delay Period. Each Holder agrees
that (i) upon receipt of such notice of an
Information Delay Period it will forthwith
discontinue disposition of any restricted securities
of the Company pursuant to the registration
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statement, (ii) upon receipt of such notice of a
Transaction Delay Period it will forthwith
discontinue disposition of the Common Stock pursuant
to the registration statement and (iii) in either
such case, will not deliver any prospectus forming a
part of the registration statement in connection with
any sale of restricted securities or Common Stock, as
applicable until the expiration of such Delay Period.
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of
all securities covered by such registration statement;
PROVIDED, HOWEVER, that in any event, the Company's
obligations under this Section 3.5(b) shall terminate
two years after the effective date of this Agreement;
(c) furnish such number of prospectuses and other
documents incident thereto, including any amendment of
or supplement to the prospectus, as the Warrantholder
from time to time may reasonably request;
(d) notify the Warrantholder at any time when a
prospectus relating thereto is required to be delivered
under the Act of the happening of any event which would
cause the prospectus included in such registration
statement, as then in effect, to include an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or otherwise
necessary to make the statements therein not misleading
or incomplete in the light of the circumstances then
existing, and prepare and furnish to the Warrantholder a
reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an 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 not misleading or incomplete in
the light of the circumstances then existing;
(e) provide a transfer agent and registrar for all
Warrant Shares registered pursuant to such registration
statement and a CUSIP number for all such Warrant
Shares, in each case not later than the effective date
of such registration
(f) use its reasonable efforts to register or qualify
the Warrant Shares covered by such registration
statement under such other securities or blue sky laws
of such jurisdictions as the Warrantholders for whom
such Warrant Shares are registered or are to be
registered shall reasonably request, and do any and all
-9-
other reasonable acts and things to so register or
qualify which may be necessary or advisable to enable
such Warrantholders to consummate the disposition in
such jurisdictions of such Warrant Shares, PROVIDED,
HOWEVER, that the Company shall not be required to
provide a general consent to service of process or
qualify as a foreign corporation in any jurisdiction
solely by reason of this Section 3.5;
In connection with any underwritten offering effected pursuant
to this Section 3, the Company will enter into an underwriting
agreement reasonably necessary to effect the offer and sale of
Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the
underwriter so requests, the underwriting agreement will contain
customary indemnification and contribution provisions. To the extent
reasonably necessary to effect the offer and sale of Common Stock in
connection with any underwritten offering in which it is
participating, the Warrantholder will agree to consent to and where
applicable, be subject to the terms and conditions of such
underwriting agreement.
SEC. 3.6 PAYMENT OF REGISTRATION EXPENSES. The costs and expenses
of all registrations under the Act and of all other actions which
the Company is required to take or effect pursuant to this Section 3
shall be paid by the Company (including, without limitation, all
registration, qualification and filing fees, printing expenses,
expenses of distributing prospectuses and other documents, fees and
disbursements of counsel and accountants for the Company, and
expenses of any special audits incident to or required in connection
with any such registration hereof, but excluding the fees and
disbursements of special counsel for the Warrantholders, any
consultants retained by the Warrantholders and underwriters' or
brokers' discounts or commissions applicable to the Warrant Shares).
SEC. 3.7 INFORMATION FROM WARRANTHOLDERS. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section
3 shall contain such information regarding the Warrant Shares and
the intended method of disposition thereof as shall reasonably be
required in connection with the action to be taken. To the extent
that any Warrantholder fails to provide such information to the
Company with respect to any of such Warrantholder's Warrant Shares,
the Company shall be relieved of its obligation to maintain
registration of such Warrant Shares until the such Warrantholder has
provided the Company with the required information and the Company
has had a reasonable time thereafter (but in no event more than 10
calendar days) in which to incorporate such information into its
registration materials.
SEC. 3.8 COMPANY'S INDEMNIFICATION. In the event of any registration
under the Act of any Warrant Shares pursuant to this Section 3, the
Company hereby agrees to indemnify and hold harmless each
Warrantholder disposing of such Warrant Shares and each other
person, if any, who controls such Warrantholder within the meaning
of Section 15 of the Act, as well as each other person (including
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underwriters) who participates in the offering of such Warrant
Shares against any losses, claims, damages or liabilities, joint or
several, to which such Warrantholder or controlling person or
participating person may become subject under the Act or otherwise,
in so far as such losses, claims, damages or liabilities (or
proceedings in respect thereof): (a) arise out of or are based upon
any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof: (i) in any
registration statement under which such Warrant Shares were
registered under the Act, (ii) in any preliminary prospectus or
final prospectus contained therein, or (iii) in any amendment or
supplement thereto, or (b) arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse such Warrantholder and
each such controlling person or participating person for any legal
or any other expenses incurred by such Warrantholder or such
controlling person or participating person in connection with
investigating or defending any such loss, claim, damage, liability
or proceeding; PROVIDED, HOWEVER, that the Company will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (a) an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, said preliminary or
final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to the Company
by an instrument duly executed by such Warrantholder or such
controlling or participating person, as the case may be,
specifically for use in the preparation thereof or (b) an untrue
statement or alleged untrue statement, omission or alleged omission
in a prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment
or supplement to the prospectus which amendment or supplement is
delivered to such Warrantholder and such Warrantholder thereafter
fails to deliver such prospectus as so amended or supplemented prior
to or concurrently with such Warrantholder's sale of Warrant Shares
to the person asserting such loss, claim, damage, liability or
expense.
SEC. 3.9 WARRANTHOLDER'S INDEMNIFICATION. It shall be a condition of
the Company's obligation under this Section 3 to effect any
registration under the Act that there shall have been delivered to
the Company an agreement or agreements duly executed by each
Warrantholder for whom Warrant Shares are to be so registered,
whereby such Warrantholder agrees to indemnify and hold harmless the
Company, each other person referred to in subparts (1), (2) and (3)
of Section 11(a) of Section 15 of the Act in respect of such
registration statement and each other person, if any, which controls
the Company within the meaning of the Act against any losses,
claims, damages or liabilities, joint or several, to which the
Company or its controlling person may become subject under the Act
or otherwise, in so far as such losses, claims, damages or
liabilities (or proceedings in respect thereof): (a) arise out of or
are based upon any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof: (i) in
any registration statement under which such Warrant Shares were
registered under the Act, (ii) in any preliminary prospectus or
final prospectus contained therein, or (iii) in any amendment or
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supplement thereto, or (b) arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Company and each such
controlling person for any legal or any other expenses incurred by
the Company or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability
or proceeding, PROVIDED, HOWEVER, that such Warrantholder shall be
liable to the Company only to the extent that such losses, claims,
damages or liabilities (or proceeding in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date
thereof, in any registration statement under which such Warrant
Shares were registered under the Act, in any preliminary prospectus
or final prospectus contained therein or in any amendment or
supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, which, in each such case, has been made in or omitted
from such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by an
instrument duly executed by such Warrantholder specifically for use
in the preparation thereof. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to
information with respect to such persons so furnished in writing by
such persons specifically for inclusion in any prospectus or
registration statement.
SEC. 3.10 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder will (a) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (b) unless, in such indemnified party's
reasonable judgment, a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party;
PROVIDED, HOWEVER, that the failure of an indemnified party to give
notice as provided herein shall not relieve the indemnifying party
of its obligations under this Section 3.10 with respect to such
indemnified party, except to the extent that the indemnifying party
is actually prejudiced by such failure. Whether or not such defense
is assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such
claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of the claim against the
indemnified party, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
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may exist between such indemnified party and any other such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses
of such additional counsel or counsels.
If for any reason the indemnification provided for in the
preceding Sections 3.8 and 3.9 hereof is unavailable to an
indemnified party as contemplated thereby, the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled
to contribution from any person who was not guilty of fraudulent
misrepresentation.
SEC. 3.11 UNDERWRITING AGREEMENT INDEMNIFICATION PROVISIONS.
Notwithstanding the provisions of Sections 3.8, 3.9 and 3.10 hereof,
if an underwriting agreement executed by the Company pursuant to
Section 3.5 hereof shall contain indemnification, contribution and
related procedural provisions in a form customary to the underwriter
which are substantially to the same effect as the provisions
provided for in Sections 3.8, 3.9 and 3.10 hereof, such customary
indemnification provisions shall be incorporated in such
underwriting agreement in lieu of those provided for in Sections
3.8, 3.9 and 3.10 hereof.
SEC. 3.12 PUBLIC INFORMATION. The Company covenants and agrees that if
and so long as the Common Stock shall be registered under Section 12
of the Exchange Act, at any time when any Warrantholder so entitled
desires to make sales of any Warrant Shares in reliance on Rule 144
or Rule 144A under the Act either (i) there will be available
adequate current public information with respect to the Company as
required by said Rules, or (ii) if such information is not available
the Company will use its best efforts to make such information
available without delay. Without limiting the foregoing, after the
time of any such registration the Company will timely file with the
Commission all reports required to be filed under Sections 13 and
15(d) of the Exchange Act and will promptly furnish to any
Warrantholder so requesting a written statement that the Company has
complied with all such reporting requirements.
SEC. 3.13 NO CONFLICTING REGISTRATION RIGHTS. The Company covenants and
agrees that if and so long as any Warrants or any Warrant Shares
shall remain outstanding and the holders thereof shall have any
rights under this Section 3, it will not enter into any agreement
with any person creating any rights with respect to any shares of
Common Stock or any other security in conflict with or inconsistent
with any rights retained by any holder of Warrants or Warrant Shares
pursuant to this Section 3.
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SECTION 4. ANTI-DILUTION PROVISIONS.
SEC. 4.1 ADJUSTMENT OF CURRENT WARRANT PRICE AND NUMBER OF SHARES
PURCHASABLE. In the event that the Company shall (A) pay a dividend
or make a distribution, in shares of Common Stock of the Company or
any subsidiary which is not directly or indirectly wholly owned by
the Company, (B) split or subdivide its outstanding Common Stock
into a greater number of shares, or (C) combine its outstanding
Common Stock into a smaller number of shares, then in each such
case, the Current Warrant Price in effect immediately prior thereto
shall be adjusted so that the Warrantholder shall be entitled to
receive the number of shares of Common Stock that such Warrantholder
would have owned or have been entitled to receive after the
occurrence of any of the events described above had such warrant
been converted immediately prior to the occurrence of such event.
Any adjustment made pursuant to this Section 4.1 shall become
effective immediately after the close of business on the record date
in the case of a dividend or distribution and shall become effective
immediately after the close of business on the effective date in the
case of such subdivision, split or combination, as the case may be.
Any shares of Common Stock issuable in payment of a dividend shall
be deemed to have been issued immediately prior to the close of
business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under
Sections 4.2(a) and (b).
SEC. 4.2 CALCULATION OF ADJUSTMENTS.
(a) In the event that the Company shall commit to issue or
distribute Common Stock or issue rights, warrants, options
or convertible or exchangeable securities entitling the
holder thereof to subscribe for or purchase, convert into
or exchange for Common Stock, in any such case at a price
per share less than the Current Market Price on the
earliest of (i) the date the Company shall enter into a
firm contract for such issuance or distribution, (ii) the
record date for the determination of stockholders entitled
to receive any such Common Stock or rights, warrants,
options or convertible or exchangeable securities, if
applicable, or (iii) the date of actual issuance or
distribution of any such Common Stock or rights, warrants,
options or convertible or exchangeable securities
(PROVIDED, HOWEVER, that the issuance of Common Stock upon
the exercise of rights, warrants, options or convertible or
exchangeable securities will not cause an adjustment in the
Current Warrant Price if no such event would have been
required at the time such right, warrant, option or
convertible or exchangeable security was issued), then the
Current Warrant Price in effect immediately prior to such
earliest date shall be reduced so that the Current Warrant
Price shall equal the price determined by multiplying the
Current Warrant Price in effect immediately prior to such
earliest date by the fraction:
(x) whose numerator shall be the number of shares of Common
Stock outstanding on such date, plus the number of
shares which the aggregate offering price of the total
number of shares so offered would purchase at such
Current Market Price (such amount, with respect to any
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such rights, warrants, options or convertible or
exchangeable securities, determined by multiplying the
total number of shares subject thereto by the exercise
price of such rights, warrants, options or convertible
or exchangeable securities and dividing the product so
obtained by the Current Market Price); and
(y) whose denominator shall be the number of shares of
Common Stock outstanding on such date (including any
rights, warrants, options or convertible securities
issuable after giving effect to any anti-dilution
provisions of the Company's other securities as a
result of such Adjustment Event), plus the number of
additional shares of Common Stock to be issued or
distributed or receivable upon exercise of any such
right, warrant, option or convertible or exchangeable
security.
Such adjustment shall be made successively whenever any such
Common Stock, rights, warrants, options or convertible or
exchangeable securities are issued or distributed. In
determining whether any rights, warrants or options entitle
the holders to subscribe for or purchase shares of Common
Stock at less than Current Market Price, and in determining
the aggregate offering price of shares of Common Stock so
issued or distributed, there shall be taken into account any
consideration received by the Company for such Common Stock,
rights, warrants, options or convertible or exchangeable
securities, the value of such consideration, if other than
cash, to be determined by the Board of Directors, whose good
faith determination shall be conclusive, and described in a
certificate filed with the Company's corporate records. If any
right, warrant, option or convertible or exchangeable security
to purchase or acquire Common Stock, the issuance of which
resulted in an adjustment in the Conversion Price pursuant to
this Section 4.2 shall expire and shall not have been
exercised, the Current Warrant Price shall immediately upon
expiration be recomputed to the Current Warrant Price which
would have been in effect had the adjustment of the Current
Warrant Price made upon the issuance of such right, warrant,
option or convertible or exchangeable security been made on
the basis of offering for subscription, purchase or issuance,
as the case may be, only of that number of shares of Common
Stock actually purchased or issued upon the actual exercise of
such right, warrant, option or convertible or exchangeable
security.
(b) No adjustment in the Current Warrant Price shall be required
unless the adjustment would require an increase or decrease of
at least 1% in the Current Warrant Price, PROVIDED, HOWEVER,
that any adjustments that by reason of this Section 4.2(b) are
not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations
under this Section 4.2(b) shall be made to the nearest cent.
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(c) Notwithstanding anything to the contrary set forth in this
Section 4.2, no adjustment shall be made to the Current
Warrant Price upon (A) the issuance of shares of Common Stock
pursuant to any compensation or incentive plan for officers,
employees or consultants of the Company which plan has been
directors, duly approved on or prior to the date of this
Warrant by the Compensation Committee of the Board of
Directors (or if there is no such committee then serving, by
the majority vote of the Directors then serving who are not
(i) employees or officers of the Company, (b) 5% or greater
stockholders of the Company, or (c) of an officer, employee
or affiliate of any such 5% or greater stockholder) and, if
required by law, the requisite vote of the stockholders of
the Company (unless the exercise price or maximum
authorized number of shares of Common Stock issuable under
such plan is changed after the date hereof, other than by
operation of the anti-dilution provisions hereof); or ( B)
the issuance of Common Stock upon the conversion or
exercise of any option or warrant of the Company
outstanding as of the date of this warrant, unless the
conversion or exercise price thereof is changed thereafter
(other than solely by operation of the anti-dilution
provisions of such options or warrants).
(d) The Company from time to time may reduce the Current Warrant
Price by any amount for any period of time in the discretion
of the Board of Directors. A voluntary reduction of the
Current Warrant Price does not change or adjust the Current
Warrant Price otherwise in effect for purposes of this Section
4.2.
SEC. 4.3 EFFECT OF MERGER OR CONSOLIDATION. In case the Company shall, while
this Warrant remains outstanding, enter into any consolidation with
or merger into any other corporation wherein the Company is not the
surviving corporation, or wherein securities of a corporation other
than the Company are distributable to holders of Common Stock, or
sell or convey its property as an entirety or substantially as an
entirety followed by distribution of any or all of the proceeds
thereof to shareholders, and in connection with such consolidation,
merger, sale or conveyance, shares of stock or other securities or
property shall be issuable or deliverable in exchange for the Common
Stock, then, as a condition of such consolidation, merger, sale or
conveyance, lawful and adequate provision shall be made whereby the
Warrantholder shall thereafter be entitled to purchase pursuant to
this Warrant (in lieu of the number of shares of Common Stock which
such Warrantholder would have been entitled to purchase immediately
prior to such consolidation, merger, sale or conveyance) the shares
of stock or other securities or property to which a holder of any
equal number of shares of Common Stock would have been entitled at
the time of such consolidation, merger, sale or conveyance, at an
aggregate purchase price equal to that which would have been payable
if such number of shares of Common Stock had been purchased by
exercise of this Warrant immediately prior thereto. In case of any
such consolidation, merger, sale or conveyance, appropriate
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provisions shall be made with respect to the rights and interests
thereafter of the Warrantholders, to the end that all the provisions
of the Warrants (including the provisions of this Section 4) shall
thereafter be applicable, as nearly as practicable, to such stock or
other securities or property thereafter deliverable upon the
exercise of the Warrants. The Company shall not effect any such
consolidation, merger, sale or conveyance unless prior to or
simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such
consolidation or merger or purchasing such assets shall assume by
written instrument, executed and mailed or delivered to each
Warrantholder, the obligation to deliver to such Warrantholder such
shares of stock or other securities or property as such
Warrantholder may be entitled to receive in accordance with the
foregoing provisions, which instrument shall contain the express
assumption by such successor corporation of the due and punctual
performance and observance of every provision of this Warrant to be
performed and observed by the Company and of all liabilities and
obligations of the Company hereunder.
SEC. 4.4 REORGANIZATION OR RECLASSIFICATION. In case of any capital
reorganization or any reclassification of the capital stock of the
Company (except as provided in Section 4.3 hereof) while this
Warrant remains outstanding, then, as a condition of such
reorganization or reclassification, lawful and adequate provision
shall be made whereby the holder of this Warrant shall thereafter be
entitled to purchase pursuant to this Warrant (in lieu of the number
of shares of Common Stock which such holder would have been entitled
to purchase immediately prior to such reorganization or
reclassification) the shares of stock of any class or classes or
other securities or property to which the holders of such number of
shares of Common Stock would have been entitled at the time of such
reorganization or reclassification, at an aggregate purchase price
equal to that which would have been payable if such number of shares
of Common Stock had been purchased immediately prior to such
reorganization or reclassification. In case of any such capital
reorganization or reclassification, appropriate provisions shall be
made with respect to the rights and interests thereafter of the
Warrantholders, to the end that all the provisions of the Warrants
(including the provisions of this Section 4) shall thereafter be
applicable, as nearly as practicable, to such stock or other
securities or property thereafter deliverable upon the exercise of
the Warrants.
SEC. 4.5 STATEMENT OF ADJUSTMENT. Upon each adjustment of the Current
Warrant Price and the number of shares of Common Stock purchasable
hereunder, and in the event of any change in the rights of the
Warrant holder by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a schedule
setting forth the adjusted Current Warrant Price and the adjusted
number of shares purchasable hereunder, or specifying the other
shares of stock, other securities or property and the amount thereof
receivable as a result of such change in rights, and setting forth
in reasonable detail the method of calculation and the facts upon
which such calculation is base. The Company will promptly mail a
copy of such schedule to the registered holder of this Warrant.
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SEC. 4.6 DETERMINATIONS BY THE BOARD OF DIRECTORS. All determinations
by the Board of Directors of the Company under this Warrant shall be
made in good faith with due regard to the interests of the holder of
this Warrant and the other holders of securities of the Company and
in accordance with good financial practice, and all valuations made
by the Board of Directors of the Company under the terms of this
Warrant must be made with due regard to any market quotations of
securities involved in, or related to, the subject of such
valuation.
SEC. 4.7 NOTIFICATIONS BY THE COMPANY. In case at any time the
Company proposes:
(a) to pay any dividend payable in stock (of any class or
classes) or in Convertible Securities upon Common Stock or
make any distribution to the holders of the Common Stock; or
(b) to make an offer for subscription pro rata to the holders of
Common Stock of any additional shares of stock of any class
or other rights or to grant to the holders of Common Stock
generally any rights, warrants or options; or
(c) to effect any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(d) to effect a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more such cases, the Company shall give written
notice to the registered holder of this Warrant of the date on which
(i) the transfer books of the Company shall close or a record date
shall be taken for such dividend, distribution, subscription rights
or grant, or (ii) a record date shall be taken to determine
stockholders entitled to notice of and to vote at any meeting of
stockholders at which any such proposed reorganization,
reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding-up is to be considered, or (iii)
such reorganization, reclassification, consolidation, merger, sale
of assets, dissolution, liquidation or winding-up shall take place,
as the case may be. Such notice shall also specify the date as of
which the holders of Common Stock of record shall participate in
such dividend, distribution, subscription rights or grant, or shall
be entitled to vote on or exchange their Common Stock for securities
or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding-up, as the case may be. Such
written notice shall be given not less than 20 days and not more
than 60 days prior to such date on which the transfer books of the
Company shall close or a record date shall be taken or any event
shall occur, as the case may be, and such notice may state that any
such action will be taken only if certain events specified in such
notice (such as the clearing of proxy material by the Commission or
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an affirmative vote of stockholders) occur prior thereto.
SECTION 5. CERTAIN DEFINITIONS.
For all purposes of this Warrant, unless the context otherwise requires,
the following terms shall have the following respective meanings:
"ACT": the Securities Act of 1933, as amended from time to time, or
any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"ADJUSTMENT EVENT": see Section 4.2(a) hereof.
"AFFILIATE" of an entity: any person controlling, controlled by or under
common control with such entity or who participates in a group within the
meaning of Section 13(d) of the Exchange Act which owns, including, but not
limited to (i) any director or officer of such entity or any of its subsidiaries
and (ii) any person who owns beneficially or of record 5% or more of the shares
of the capital stock of such entity or any of its subsidiaries or of which such
entity, directly or indirectly, owns beneficially or of record 5% or more of the
shares of capital stock.
"BUSINESS DAY": means any day other than a Saturday, Sunday or a day
on which national banks are authorized by law to close in California.
"CLOSING DATE": June ___, 1999.
"COMMISSION": the Securities and Exchange Commission, or any other
federal agency then administering the Act.
"COMMON STOCK": the Company's authorized Common Stock, as such class
existed on the Closing Date, including stock of the Company of any class
thereafter authorized which ranks, or is generally entitled to a participation,
as to assets or dividends substantially on a parity with Common Stock and
generally enjoys voting rights on a parity with Common Stock.
"COMPANY": Netrix Corporation, and any other corporation assuming the
Warrants pursuant to Section 4.4 hereof.
"CONVERTIBLE SECURITIES": see Section 4.2(b)(ii) hereof.
"CURRENT MARKET PRICE" (per share of Common Stock at any date): the per
share fair market value of the Common Stock (i) determined by the average of the
daily "market prices" over a period of 20 consecutive Business Days before such
date or (ii) if and so long as there is no exchange or over-the-counter market
for the Common Stock of the Company, the price per share which the Company could
obtain from a willing buyer for the shares sold by the Company from authorized
but unissued shares, as such price shall be determined in good faith by the
Board of Directors of the Company and the holder of the Warrant, provided if the
Company and the holder can not agree on a value, the Company and the holder(s)
of the majority of the Warrants shall retain an independent investment banking
firm, at the Company's expense, to determine the per share fair market value of
the Common Stock. The market price referred to in clause (i) above for each such
Business Day shall be the last sale price on such day on the principal
securities exchange on which the Common Stock is then listed or admitted to
20
trading, or, if no sale takes place on such day on any such exchange, the
average of the closing bid and asked prices on such day as officially quoted on
any such exchange, or if the Common Stock is not then listed or admitted on any
stock exchange, the market price for each such Business Day shall be the last
sale price on such day, or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day in the over-the-counter market, in
either case as reported through NASDAQ, or, if such prices are not at the time
so reported, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Company.
"CREDIT AGREEMENT": see the second paragraph of this Warrant.
"CURRENT WARRANT PRICE" (per share of Common Stock at any date): the price
at which one share of Common Stock may be purchased hereunder at any time;
initially $0.01 and thereafter such price as may be determined from time to time
pursuant to Section 4 hereof.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as amended from
time to time, or any successor federal statute, and the rules and regulations
of the Commission thereunder.
"OUTSTANDING": when used with reference to Common Stock at any date, all
issued shares of Common Stock (including, but without duplication, shares deemed
issued pursuant to Section 4 hereof) at such date, except shares then held in
the treasury of the Company.
"PERSON": an individual, corporation, partnership, joint venture,
trust estate, unincorporated organization or government or an agency or
political subdivision thereof.
"PRESUMED CONSIDERATION": see Section 4.2(b)(vii)(B) hereof.
"TOTAL WARRANTS": the sum of the aggregate number of shares of (i) Common
Stock purchasable by the holder(s) upon exercise of all Warrants then
outstanding and (ii) Warrant Shares which had been issued pursuant to the
exercise of Warrants.
"WARRANT OFFICE": see Section 2.1 hereof.
"WARRANT SHARES": the shares of Common Stock purchasable or purchased by
the Warrantholders upon the exercise of the Warrants. Unless otherwise expressly
stated herein, Warrant Shares shall not include shares of Common Stock purchased
upon exercise of a Warrant which have been sold by a Warrantholder pursuant to a
registration statement under the Act.
"WARRANTHOLDER": the registered holder of a Warrant or Warrants or any
related Warrant Shares.
"WARRANTS": the warrants (of which this Warrant is one) originally issued
by the Company pursuant to the Credit Agreement evidencing the right initially
to purchase an aggregate of 50,000 shares of Common Stock and all warrants
issued in substitution, combination or subdivision of any thereof.
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CERTAIN COVENANTS OF THE COMPANY
The Company covenants and agrees that:
(a) it will reserve and set apart and have at all times, free
from preemptive rights, a number of shares of authorized but
unissued Common Stock or other securities or property
deliverable upon the exercise of the Warrants sufficient to
enable it at any time to fulfill all its obligations
thereunder;
(b) before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value
of the shares of Common Stock issuable upon exercise of the
Warrants, it will take any corporate action which may be
necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price;
(c) if any shares of Common Stock required to be reserved for
the purposes of the exercise of this Warrant require
registration with or approval of any governmental authority
under any federal law (other than the Act) or under any
state law before such shares may be issued upon exercise of
this Warrant, the Company will, at its expense, as
expeditiously as possible, cause such shares to be duly
registered or approved, as the case may be;
(d) if and so long as the Common Stock is listed on any national
securities exchange (as defined in the Exchange Act), it
will, at its expense, obtain and maintain the approval for
listing upon official notice of issuance of all shares of
Common Stock issuable upon the exercise of the Warrants at
the time outstanding and maintain the listing of such shares
after their issuance; and the Company will so list on such
national securities exchange, will register under the
Exchange Act (or any similar statute then in effect) and
will maintain such listing of any other securities that at
any time are issuable upon exercise of the Warrants if, and
at the time that, any securities of the same class shall be
listed on such national securities exchange by the Company;
and
(e) this Warrant shall be binding upon any corporation
succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's
assets.
SECTION 7. NOTICE.
Any notice or other document required to be given or delivered to the
Warrantholders shall be delivered at, or sent by certified or registered mail
to, each such holder at the last address shown on the books of the Company
maintained at the Warrant Office for the registration and registration of
transfer of the Warrants or at any more recent address of which any
Warrantholder shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to holders of record of
outstanding Warrant Shares shall be delivered at, or sent by certified or
registered mail to, each such holder at such holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent by certified or registered mail to, the office of the
Company at 00000 Xxxxxx Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or such other
address within the United States of America as shall have been furnished by the
Company to the Warrantholders and the holders of record of Warrant Shares. Any
notice or other document sent by certified or registered mail, return receipt
requested, shall be deemed to have been delivered and received when sent if the
receipt is appropriately completed and returned. Notices or documents delivered
in any other manner shall be deemed to have been delivered only when and if
received.
SECTION 8. LIMITATIONS OF LIABILITY; NOT STOCKHOLDERS.
No provision of this Warrant shall be construed as conferring upon the
holder hereof the right to vote, consent, receive dividends or receive notice
other than as herein expressly provided in respect of meetings of stockholders
for the election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price of any Warrant
Shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
SECTION 9. LOSS, DESTRUCTION, ETC. OF WARRANTS.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Warrant, the Company will
make and deliver a new Warrant, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant; PROVIDED, HOWEVER, that neither the original
recipient of this Warrant pursuant to the Credit Agreement nor any other
financial institution having combined net capital, capital surplus and undivided
profits in excess of $50,000,000 which shall become a Warrantholder shall be
required to provide any such bond of indemnity. Any Warrant issued under the
provisions of this Section 9 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute an
original contractual obligation on the part of the Company.
SECTION 10. LAW GOVERNING.
This Warrant shall be governed by, and construed and enforced in
accordance with, the law of the State of California.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its Chairman of the Board, President or a Vice President and its
corporate seal to be impressed hereon and attested by its Secretary or an
Assistant Secretary.
Dated: June __, 1999
NETRIX CORPORATION
By: /s/
_______________________________________
Title:
[Corporate Seal]
Attest:
/s/
_____________________________________
Secretary
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EXHIBIT A
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
herewith tenders payment for _______ of the Warrant Shares to the
order of Netrix Corporation in the amount of $_________ in
accordance with the terms of this Warrant; or
herewith tenders this Warrant for _______ Warrant Shares pursuant to
the Net Issue Exercise provisions of SECTION 1.3 of this Warrant.
The undersigned requests that a certificate (or certificates) for such Warrant
Shares be registered in the name of the undersigned and that such certificate
(or certificates) be delivered to the undersigned's address below.
In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Warrant Shares are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for investment,
and that the undersigned will not offer, sell or otherwise dispose of any such
Warrant Shares except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any state securities laws.
Dated: ___________________.
Signature ______________________________
______________________________
(Print Name)
______________________________
(Xxxxxx Xxxxxxx)
______________________________
(City) (State) (Zip Code)
If said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder.
-24-
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________ the rights represented by the foregoing Warrant of
Netrix Corporation and appoints _____________________________ attorney to
transfer said rights on the books of said corporation, with full power of
substitution in the premises.
___________________________________________
Signature Guaranteed:
Dated:
1. Delay Periods; Suspension of Sales.
If at any time prior to the expiration of the Effectiveness Period counsel
to the Company (which counsel shall be experienced in securities laws
matters) has determined in good faith that it is reasonable to conclude that
the filing of the Shelf Registration Statement or the compliance by the
Company with its disclosure obligations in connection with the Shelf
Registration Statement may require the disclosure of information which the
Board of Directors of the Company has identified as material and which the
Board of Directors has determined that the Company has a bona fide business
purpose for preserving as confidential, then the Company may delay the
filing or the effectiveness of the Shelf Registration Statement (if not then
filed or effective, as applicable) and shall not be required to maintain the
effectiveness thereof or amend or supplement the Shelf Registration
Statement for a period (an "Information Delay Period") expiring three
business days after the earlier to occur of (A) the date on which such
material information is disclosed to the public or ceases to be material or
the Company is able to so comply with its disclosure obligations and
Commission requirements or (B) 45 days after the Company notifies the
Holders of such good faith determination. There shall not be more than four
Information Delay Periods during the Effectiveness Period, and there shall
not be two Information Delay Periods during any contiguous 135 day period.
(b) If at any time prior to the expiration of the Effectiveness Period the
Company is advised by a nationally recognized investment banking firm
selected by the Company that, in such firm's written reasonable opinion
addressed to the Company, sales of Common Stock pursuant to the Shelf
Registration Statement at such time would materially adversely affect any
immediately planned underwritten public equity financing by the Company of
at least $5 million, the Company shall not be required to maintain the
effectiveness of the Shelf Registration Statement or amend or supplement the
Shelf Registration Statement for a period (a "Transaction Delay Period")
commencing on the date of pricing of such equity financing and expiring
three business days after the earliest to occur of (i) the abandonment of
such financing or (ii) 90 days after the completion of such financing. There
shall not be more than two Transaction Delay Periods during the
Effectiveness Period.
-26-
A Transaction Delay Period and an Information Delay Period are hereinafter
collectively referred to as "Delay Periods" or a "Delay Period." The Company
will give prompt written notice, in the manner prescribed by Section 10(b)
hereof, to each Holder of each Delay Period. Such notice shall be given
(i) in the case of a Transaction Delay Period, at least 20 days in advance
of the commencement of such Delay Period and (ii) in the case of an
Information Delay Period, as soon as practicable after the Board of
Directors makes the determination referenced in Section 3(a). Such notice
shall state to the extent, if any, as is practicable, an estimate of the
duration of such Delay Period. Each Holder, by his acceptance of any
Transfer Restricted Securities, agrees that (i) upon receipt of such notice
of an Information Delay Period it will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the Shelf Registration Statement,
(ii) upon receipt of such notice of a Transaction Delay Period it will
forthwith discontinue disposition of the Common Stock pursuant to the Shelf
Registration Statement and (iii) in either such case, will not deliver any
prospectus forming a part of the Shelf Registration Statement in connection
with any sale of Transfer Restricted Securities or Common Stock, as
applicable until the expiration of such Delay Period.
