AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NX NETWORKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 54-1345159
(State or other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 22071
(703) 742-6000
(Address and Telephone Number of Principal Executive Offices)
JOHN DUBOIS
CHIEF EXECUTIVE OFFICER
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 22071
(703) 742-6000
(Name, Address and Telephone Number of Agent for Service)
WITH COPIES TO:
JOHN T. CAPETTA JAY R. SCHIFFERLI
KELLEY DRYE & WARREN LLP GENERAL COUNSEL
TWO STAMFORD PLAZA 13595 DULLES TECHNOLOGY DRIVE
281 TRESSER BOULEVARD HERNDON, VIRGINIA 22071
STAMFORD, CONNECTICUT 06901 (703) 742-6000
(203) 324-1400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
========================= ===================== ========================= ======================== ===================
Proposed Maximum Proposed Maximum
Title of Shares to be Amount to be Aggregate Price Per Aggregate Offering Amount of
Registered Registered(1) Share Price Registration Fee
========================= ===================== ========================= ======================== ===================
Common Stock, $0.05 16,206,469 $.95(2) $15,395,195(2) $3,849.04(3)
par value
========================= ===================== ========================= ======================== ===================
(1) Includes 4,164,423 shares of outstanding common stock, 10,226,703 shares
issuable upon the conversion of preferred stock, 1,365,343 shares issuable
upon the exercise of warrants and 450,000 shares that may be issued as
dividends on preferred stock. For purposes of determining the number of
shares issuable upon the conversion of preferred stock, we have applied the
minimum conversion price per share of our Series E 8% convertible preferred
stock of $0.575 per share. On May 24, 2001, the conversion price was
approximately $0.85 per share. In addition, we include in this registration
statement shares that may be issued as a result of any stock split, stock
dividend or similar transaction as provided in Rule 416 under the
Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based
upon the market value of our common stock as established by the average of
the high and low sales prices of our common stock on May 18, 2001, which
was $.95.
(3) The registration fee has been calculated pursuant to Section 6(b) of the
Securities Act by multiplying the aggregate offering amount of $15,395,195
by 0.00025.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED MAY 25, 2001
PRELIMINARY PROSPECTUS
NX NETWORKS, INC.
This prospectus relates to the offer of 16,206,469 shares of
common stock of Nx Networks, Inc. that may be offered for sale by the
security holders identified on page 11 of this prospectus under the caption
"Selling Security Holders." We will not receive any proceeds from the sale
of the common stock by the security holders.
Our common stock is currently traded on the Nasdaq National Market
under the trading symbol "NXWX." On May 24, 2001, the last sale price of
the common stock on that market was $0.96 per share.
__________
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 3.
__________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
determined if this prospectus is truthful and complete. Any representation
to the contrary is a criminal offense.
__________
The date of this Prospectus is _________, 2001
YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE
NOT, AND THE SELLING SECURITY HOLDERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO
PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE SELLING
SECURITY HOLDERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE
FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
SUMMARY
NX NETWORKS
We are a leading provider of voice and internet protocol convergence
solutions to carriers, Tier 1 internet service providers and wireless providers.
We combine patented, switched, compressed voice technology and advanced
networking capabilities to provide networking solutions that improve network
performance and deliver an array of tariffable network services. Our voice over
internet protocol (VoIP) products and managed router products deliver
next-generation carrier and ISP services such as IP Centrex and managed virtual
private network services. We provide products and services to over 6,000
customers in more than 83 countries.
We were incorporated in Virginia in October 1985, and reincorporated in
Delaware in March 1987. Our principal executive offices are located at 13595
Dulles Technology Drive, Herndon, Virginia 20171, and our telephone number is
(703) 742-6000.
THE OFFERING
Common stock that may be offered for sale by the selling
security holders (1)......................................... 16,206,469 shares
Common stock to be outstanding after the offering if all of
the selling security holders convert all of their preferred
stock and exercise all of their warrants (1)................. 56,454,046 shares
Nasdaq Stock Market symbol................................... NXWX
Risk Factors................................................. Purchase of the common stock offered
by this prospectus carries significant
risks. Please carefully review the
risks described under the caption
"Risk Factors" beginning on page 3.
(1) This assumes that all of our Series E convertible preferred stock
will be converted into common stock at the minimum conversion price of
$0.575 per share and that we issue 450,000 shares of common stock in
payment of dividends on our preferred stock. If we use the maximum
conversion price of $1.265 and assume we pay dividends on our preferred
stock in cash instead of in shares of common stock, the selling security
holders will offer 13,526,469 shares and the common stock to be
outstanding after the offering if all the securities are sold is
53,774,046.
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RISK FACTORS
This offering involves a high degree of risk. Before investing in the
common stock, you should consider carefully the following risk factors, in
addition to the other information contained in this prospectus. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you could lose part or all of your investment.
TO DATE, WE HAVE INCURRED SUBSTANTIAL NET LOSSES, AND IF THIS CONTINUES, WE MAY
BE UNABLE TO MEET OUR WORKING CAPITAL REQUIREMENTS OR CONTINUE AS A GOING
CONCERN
For the years ended December 31, 2000 and 1999, respectively, we
incurred net losses of approximately $180.7 million and $26.2 million. Through
March 31, 2001, we have incurred additional losses of approximately $14.3
million. These losses present a significant risk to our stockholders. If we
cannot achieve profitability or positive cash flows from operating activities,
we may be unable to meet our working capital and other payment obligations,
which would have a material adverse effect on our business, financial condition
and results of operation and the price of our common stock. In addition, if we
cannot return to sustained profitability we will be forced to sell all or part
of our business, liquidate or seek to reorganize. These factors raise
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying accounts or the amount and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.
WE REQUIRE ADDITIONAL CAPITAL TO CONTINUE OUR OPERATIONS, AND WE CANNOT BE
CERTAIN THAT THE NECESSARY FUNDS WILL BE AVAILABLE
Our ability to return to and maintain profitability is largely dependent
upon our ability to introduce new products and technologies and expand our sales
efforts in new geographic and product markets. These activities require
substantial capital, and if we do not have access to sufficient funds, either
from our own operations or through third party financing, our ability to make
these necessary expenditures will be limited. Our current available cash and our
anticipated cash from operations are insufficient to fund our operations until
we are able to attain profitability, and the audit report of our independent
public accountants reflects this contingency. Accordingly, we will require third
party financing in order to continue our operations. We cannot assure you that
we will be able to obtain financing on terms favorable to us, or at all. If we
obtain additional funds by selling any of our equity securities, the percentage
ownership of our stockholders will be reduced, stockholders may experience
additional dilution, or the equity securities may have rights, preferences or
privileges senior to the common stock. If we obtain additional funds by selling
assets, there can be no assurance that we will be able to negotiate a favorable
price for those assets or that the loss of those assets will not affect our
future business prospects. If adequate funds are not available to us or
available to us on satisfactory terms, we may be required to limit our marketing
and product development activities or other operations, or otherwise modify our
business strategy. These actions, if taken, could increase the difficulties we
face in returning to sustained profitability.
WE HAVE SIGNIFICANT ACCOUNTS PAYABLE TO CERTAIN OF OUR VENDORS, AND WE MUST
MANAGE OUR AVAILABLE CASH UNTIL WE HAVE SUFFICIENT CASH TO SATISFY ALL OF THE
DEMANDS FOR PAYMENT.
Over the past six months, we have sought to raise capital in relatively
small increments in an effort to minimize the dilution to our stockholders
resulting from our capital raising efforts. Given the current state of the
financial markets and our own expectations regarding our ability to continue to
raise funds over the next several months, we continue to believe that this
approach is in the best interests of our
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creditors, customers and stockholders. However, as a consequence of our decision
to raise capital in small increments, our accounts payable balance at any given
date is significant in relation to our available cash balance. This makes it
more difficult to satisfy the payment demands of all of our vendors on a timely
basis and it makes it more difficult to convince vendors that they will be paid
all amounts to which they are entitled despite our low balance of available
cash. If a large number of our vendors demand payment in advance or demand
payment of all currently outstanding amounts payable, our business could be
disrupted because we do not have sufficient cash to fund all these obligations
unless we raised additional funds and, accordingly, we would have to immediately
raise additional funds to satisfy these payment demands. In addition to the
disruption to our business, seeking to raise capital under such circumstances
would be even more difficult than the circumstances now facing us.
WE RELY TO A LARGE EXTENT ON INDEPENDENT DISTRIBUTION CHANNELS AND THE LOSS OF A
SIGNIFICANT NUMBER OF DISTRIBUTORS COULD ADVERSELY EFFECT US
We rely on reseller channels, including distributors and systems
integrators, for a significant portion of our revenues. In particular, in
foreign markets we often have one distributor designated for an entire country,
and that distributor provides local support and service for our products. The
loss of one or more significant resellers could adversely affect our business in
terms of:
o lost revenues;
o lost market presence; and
o the difficulties we would encounter in servicing customers
introduced to us by our resellers if we do not have other resellers
in that geographic area.
WE HAVE A SIGNIFICANT PAYMENT OBLIGATION TO OUR PRIMARY MANUFACTURER, AND IF WE
DO NOT MAINTAIN OUR PAYMENT SCHEDULE THE MANUFACTURER MAY CEASE SHIPPING OUR
PRODUCTS
We authorized our primary manufacturer to purchase a substantial amount
of parts, materials and long lead-time items during 2000 in anticipation of a
significant increase in product sales during the year. Our sales did not reach
the levels we expected, and we have not utilized a substantial amount of the raw
materials. Accordingly, as of March 31, 2001, we have a payment obligation of
approximately $4.9 million to the manufacturer to pay for the cost of these
materials. We have agreed upon a payment schedule with the manufacturer, and
during the period we are paying down the obligation the manufacturer is
requiring us to pay in advance for all fabrication costs. If we do not adhere to
the payment schedule or if we do not pay fabrication costs in advance, the
manufacturer has expressed its intent not to ship any products on our behalf. We
must raise additional capital to maintain this payment schedule and pay the
fabrication costs. If we are unable to raise sufficient capital to adhere to the
schedule and the manufacturer ceases to ship products on our behalf, then a
material and adverse result to our revenues could occur. Also, if the
manufacturer brings a legal action to collect the outstanding amount, we do not
have sufficient current financial resources to pay this obligation.
WE ARE EXPOSED TO POTENTIAL DELAYS IN PRODUCT SHIPMENTS BECAUSE WE CONTRACT OUT
PRODUCT MANUFACTURING AND SOME COMPONENTS FOR OUR PRODUCTS ARE AVAILABLE ONLY
FROM A SINGLE SUPPLIER OR A LIMITED NUMBER OF SUPPLIERS
We rely on others to manufacture our products and product components and
this dependence exposes us to potential interruptions or delays in product
delivery. An interruption could have a short-term effect on our revenues and a
longer-term effect on our ability to market our products. Currently, we rely on
a single contract manufacturer to assemble and test our voice products. Also,
some of the components we use in our products are available from only one source
or a limited number of suppliers. Although we have been able to obtain our
products and these components to date, our inability to develop
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alternative sources if and as required in the future, or to obtain sufficient
sole source or limited source components as required, could result in delays or
reductions in product shipments.
OUR BUSINESS WILL SUFFER IF WE LOSE CERTAIN KEY PERSONNEL OR FAIL TO ATTRACT AND
RETAIN OTHER QUALIFIED PERSONNEL
The success of our business is dependent, to a significant extent, upon
the abilities and continued efforts of our management, sales and engineering
personnel, many of whom would be difficult to replace. We do not have employment
contracts with all of our key employees and we do not have "key man" life
insurance on any of our officers or directors.
Our success will also depend on our ability to attract, retain and
motivate qualified management, sales and engineering executives and other
personnel who are in high demand and who often have multiple employment options.
In addition, as a result of the changes to technology-based industries, and
particularly telecommunications companies, over the past year, many employees
that we would like to retain may decide to pursue other opportunities or we may
be forced to increase their compensation to retain them. The loss of the
services of key personnel, or the inability to attract, retain and motivate
qualified personnel, could have a material adverse effect on our business,
financial condition, results of operations and the price of our common stock.
OUR INTELLECTUAL PROPERTY RIGHTS ARE AN IMPORTANT PROTECTION FOR OUR PRODUCTS,
AND WE COULD BE ADVERSELY AFFECTED IF OUR RIGHTS ARE CHALLENGED OR CIRCUMVENTED
BY COMPETITORS
Our ability to compete successfully within our industry is dependent in
part upon:
o patents and nondisclosure agreements that we have obtained;
o technical measures that we take to protect confidential information;
and
o trade secret, copyright and trademark laws that we rely on to
establish and protect our proprietary rights.
If any of our proprietary rights are successfully challenged or
circumvented by competitors, or if other companies are able to market
functionally similar products, systems or processes without infringing our
proprietary rights, then our results of operations and the value of our common
stock could be materially and adversely affected. In addition, legal proceedings
to enforce intellectual property rights are expensive given the technical nature
of the legal and functional analysis. Given our current financial condition, we
could experience difficulty funding enforcement of our intellectual property
rights.
THE MARKET PRICE OF OUR COMMON STOCK IS VOLATILE
The market price of our common stock has been and can be expected to be
significantly affected by factors such as:
o quarterly variations in our results of operations;
o the announcement of new services or service enhancements by us or
our competitors;
o technological innovations by us or our competitors;
o changes in earnings estimates or buy/sell recommendations by
analysts;
o the operating and stock price performance of other comparable
companies; and
o general market conditions or market conditions specific to
particular industries.
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In particular, the stock prices for many companies in the
telecommunications equipment sector have experienced wide fluctuations that have
often been unrelated to their operating performance. We have been, and we are
likely to continue to be, subject to such fluctuations.
OUR SERIES E CONVERTIBLE PREFERRED STOCK HAS A FLOATING CONVERSION PRICE, AND
THIS COULD RESULT IN DILUTION TO OUR STOCKHOLDERS AND DOWNWARD PRICE PRESSURE ON
OUR STOCK
In May 2001 we sold 19,000 shares of Series E 8% convertible preferred
stock for an aggregate purchase price of $2.4 million. Each share of the Series
E preferred stock has an initial conversion price of $1.265 per share, and the
number of shares of common stock initially issuable under the terms of the
Series E preferred stock is 1.9 million shares. However, after an initial period
the conversion price of the Series E preferred stock will be fixed by reference
to the volume weighted average sales price (VWAP) of our common stock.
Specifically, the Series E preferred stock will have a conversion price per
share equal to the lesser of (1) $1.265 or (2) 87% of the VWAP during the five
days preceding a notice of conversion, subject to a minimum conversion price of
$0.575 per share. Accordingly, between the common stock prices of $1.46 and
$0.66, the number of shares of common stock we will have to issue upon
conversion of the Series E preferred stock will fluctuate. The range is between
1.9 million shares at a VWAP of $1.46 (reflecting a conversion price of $1.265
per share) to 4.2 million shares at a VWAP of $0.66 (reflecting a conversion
price of $0.575 per share).
If the price of our common stock decreases over time, the number of
shares we will have to issue upon conversion of the Series E preferred stock
will increase. Sales of an increased number of shares of common stock issued
upon conversion of the Series E preferred stock as a result of a decline in our
common stock price can cause the market price of our common stock to decline
further.
Short sales of our common stock may be attracted by or accompany the
sale of converted Series E preferred stock, which in the aggregate could cause
downward pressure upon the price of our common stock, regardless of our
operating results, market conditions or other factors. A decline in the price of
our common stock, in turn, could attract additional short sales of our common
stock and would result in additional shares becoming eligible for sale upon
conversion of the Series E preferred stock. This would put further downward
pressure on the price of our common stock.
OUR STOCK PRICE IS CURRENTLY BELOW THE MINIMUM THRESHOLD REQUIRED BY THE NASDAQ
STOCK MARKET, AND UNDER CURRENT NASDAQ RULES IF OUR STOCK PRICE DOES NOT RISE
AND/OR OUR TANGIBLE NET ASSETS DO NOT REACH $4.0 MILLION, WE MAY BE DELISTED BY
THE NASDAQ STOCK MARKET
On May 24, 2001, the last reported bid price of our common stock on the
Nasdaq Stock Market was $0.96 per share, and our tangible net value per share
was less than $4.00. Under the current listing requirements of the Nasdaq
National Market, on which our common stock is listed for trading, our common
stock may be delisted if (1) we do not have a closing bid price of at least
$1.00 per share and tangible net assets per share of at least $4.0 million or
(2) we do not have a closing bid price of at least $5.00 per share. We do not
currently meet either of these listing requirements.
Nasdaq has proposed to change the listing requirements to replace the
$4.0 million net tangible asset test with a $10.0 million stockholders' equity
test, but this change requires approval by the SEC. Nasdaq has notified us that
we are not in compliance with the net tangible asset test, but we do comply with
the proposed stockholders' equity test. Nasdaq also informed us that they are
not taking any action at this time with respect to our listing, pending SEC
action on the proposed rule change. If the SEC does not approve the rule change,
and Nasdaq notifies us of the listing deficiency, we must be in compliance with
the listing requirements for at least 10 consecutive business days in the 90
calendar day period after we receive the Nasdaq notice. If we fail to meet this
standard, then our common stock may be delisted from the Nasdaq National Market.
We expect that if we are delisted from the Nasdaq National Market,
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and our common stock is in compliance with the $1.00 per share bid price
requirement, then we will list our shares on the Nasdaq SmallCap Market.
If the closing bid price of our common stock is below $1.00 per share
for 30 consecutive trading days, then we expect Nasdaq will notify us we are not
in compliance with the listing requirements. If Nasdaq notifies us of a listing
deficiency related to the $1.00 minimum bid price requirement, we must be in
compliance with the listing requirements for at least 10 consecutive business
days in the 90 calendar day period after we receive the Nasdaq notice. If we
fail to meet this standard, then our common stock may be delisted from the
Nasdaq Stock Market. If we are delisted from the Nasdaq Stock Market, our common
stock will trade on the over-the-counter market.
We expect that if we change from the Nasdaq National Market to the
Nasdaq SmallCap Market or the over-the-counter market, there will be an adverse
effect on the liquity and value of our common stock.
IN DECEMBER 2000 WE RE-PRICED SUBSTANTIALLY ALL OF OUR STOCK OPTIONS TO A LOWER
EXERCISE PRICE, AND THE RESULTING ACCOUNTING CHARGES MAY CAUSE OUR FUTURE
EARNINGS TO FLUCTUATE WIDELY
As part of a program to retain our employees, we adopted a program to
re-price the options of our current employees. We also re-priced the options
issued to our board of directors and to our chairman of the board. Under the
program, each of these persons exchanged their current stock options for newly
issued stock options with an exercise price of $0.75 per share. Approximately
7.3 million options were exchanged to obtain the lower exercise price. Under
applicable accounting rules, we will have to account for future variations in
the price of our common stock above $0.75 per share as compensation expense
until the re-priced options are either exercised, cancelled or expire. This
calculation will be made each quarter based upon the performance of our common
stock in that quarter. As of March 31, 2001, $100,000 of compensation expense
was recorded based on the performance of our common stock in that quarter.
Accordingly, our operating results and earnings per share are subject to
potentially significant fluctuations based upon changes in the market price of
our common stock.
OUR CERTIFICATE OF INCORPORATION AND BY-LAWS CONTAIN PROVISIONS THAT COULD DELAY
OR PREVENT A CHANGE IN CONTROL
Provisions of our certificate of incorporation and by-laws may have the
effect of discouraging, delaying or preventing a take-over attempt that could be
in the best interests of our stockholders. These include provisions that:
o separate our board of directors into three classes;
o limit the ability of our stockholders to call special stockholder
meetings;
o require advance notice of nominations for directors and stockholder
proposals to be considered at stockholder meetings; and
o require a vote greater than two-thirds to remove directors from
office or amend many of the provisions of our certificate of
incorporation and by-laws.
Our board of directors also has the right, without further action of the
stockholders, to issue and fix the terms of preferred stock, which could have
rights senior to the common stock. We are also subject to the "business
combination" provisions of the Delaware General Corporate Law, which impose
procedures impeding business combinations with "interested stockholders" that
are not approved of by our board of directors.
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RAPIDLY CHANGING TECHNOLOGY MAY MAKE OUR PRODUCTS OBSOLETE OR UNMARKETABLE
We have focused our products on the edge of the Internet and telephony.
This market is characterized by rapid technological change, frequent new product
introduction and evolving industry standards. The introduction of products
embodying new technologies by our competitors and the emergence of new industry
standards could render our existing products obsolete and could cause new
products to be unmarketable. Under these circumstances, our revenue would be
adversely affected.
Our success will depend on the ability to address the increasingly
sophisticated needs of customers, to enhance existing products and to develop
and introduce, on a timely basis, new competitive products that keep pace with
technological development and emerging industry standards. If we cannot
successfully identify, manage, develop manufacture or market products
enhancements or new products, our business will be materially and adversely
affected.
OUR INDEPENDENT PUBLIC ACCOUNTANTS HAVE IDENTIFIED WEAKNESSES IN OUR FINANCIAL
SYSTEMS AND CONTROLS, AND IF WE DO NOT REMEDY THE WEAKNESSES, WE MAY HAVE
DIFFICULTY EFFECTIVELY MANAGING OUR BUSINESS AND PREPARING TIMELY FINANCIAL
REPORTS
In connection with conducting the audit of our year 2000 financial
statements, our independent public accountants identified a number of
deficiencies in design and operation of our internal accounting controls.
Although our accountants did not qualify their audit opinion with respect to
these matters, they advised us that we must remedy the identified problems. If
we are unable to remedy the deficiencies identified by our accountants, we could
have difficulties in preparing and maintaining the systems and reports we need
to effectively manage our business and ensure timely financial reporting. These
difficulties could result in adverse effects on our business.
A PORTION OF OUR REVENUES ARE DERIVED FROM INTERNATIONAL SALES, WHICH ARE
SUBJECT TO FOREIGN REGULATORY STANDARDS AND CURRENCY EXCHANGE RATE FLUCTUATIONS
International sales accounted for 48% and 47% of our total revenues in
2000 and 1999, respectively, and 59% of our total revenues in the first quarter
of 2001. International sales will continue to be significant to us. The conduct
of international operations subjects us to certain risks. Foreign regulatory
bodies continue to establish standards different from those in the United
States, and our products are designed generally to meet those standards. Our
inability to design products in compliance with such foreign standards could
have an adverse effect on our operating results. Also, our international
business may be affected by changes in demand resulting from fluctuation in
currency exchange rates and tariffs and difficulties in obtaining export
licenses. We do not expect that we will hedge against fluctuations in currency
exchange rates.
LEGAL PROCEEDINGS
LITIGATION
Cabletron Systems, Inc. filed a civil complaint against AetherWorks
Corporation, OpenROUTE Networks, Inc. and Netrix Corporation (the Defendants) on
June 5, 2000 in the United States District Court for the District of
Massachusetts. Docket # 00-CV-11105 RWZ is assigned to this matter. In its
complaint, Cabletron alleges that the Defendants have infringed seven Cabletron
patents and Cabletron seeks monetary damages against the Defendants. We answered
the complaint by denying the allegations contained therein. Discovery is
underway. Cabletron has sought permission of the Court to amend its complaint to
increase the number of patents it alleges have been infringed, but this was
denied. We have notified certain of our equipment providers that we claim
indemnification from them because the infringements alleged by Cabletron appear
to relate to the equipment those suppliers provided to us.
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Based upon discussions with counsel and the information currently available to
us, we believe we have meritorious defenses to the claims by Cabletron, and we
will continue to vigorously defend this action.
In November 2000 we were served with complaints in purported class
action proceedings captioned TRACY REESE AND CHRISTINE JOYCE V. BRYAN HOLLEY,
STEVEN T. FRANCESCO AND NX NETWORKS, INC., Civil Action No. 00-CV-11850-JLT and
MARC JACOBSEN V. BRYAN HOLLEY, STEVEN T. FRANCESCO AND NX NETWORKS, INC., Civil
Action No. 00-CV-11999-JLT. Each complaint was originally filed September 2000
in the United States District Court for the District of Massachusetts. In May
2001, the plaintiffs filed an amended complaint consolidating the two actions
and dropping Mr. Holley as a defendant. The amended complaint alleges violation
of the federal securities laws in connection with statements and disclosures
made between December 8, 1999 and April 24, 2000. The complaints seek
unspecified damages. We believe the allegations in the amended complaint are
without merit, and we intend to vigorously defend ourselves in this litigation.
We have notified our insurance carrier regarding the claims.
In November 2000, we were served with a complaint in a purported class
action proceeding captioned ROY WERBOWSKI V. NX NETWORKS, INC., STEVEN FRANCESCO
AND PETER KENDRICK, Civil Case No. 00-1967-A. The complaint was originally filed
in November 2000 in the United States District Court, Eastern District of
Virginia. In May 2001, the plaintiffs filed an amended complaint. The amended
complaint alleges that between July 27 and November 2, 2000 we breached
securities laws in connection with the circumstances that led us to restate our
financial statements for the quarter ended June 30, 2000. The amended complaint
seeks unspecified damages. We believe we have meritorious defenses in this
litigation, and we intend to vigorously defend ourselves. We have notified our
insurance carrier regarding the claims.
In January, 2001 we were served with a complaint captioned MANAGEMENT
INFORMATION CONSULTING, INC. ("MIC") V. NX NETWORKS, INC. This action was filed
in the Alexandria Division Court for the Commonwealth of Virginia, and the case
is assigned No. CL01-45. In the complaint, MIC claims entitlement to
approximately $150,000 in payment for web site development services performed by
it. We dispute that this amount is due, based upon the quality and quantity of
services provided by MIC. We have filed an answer denying the claims and we
intend to vigorously defend ourselves in this litigation.
An action captioned K.S. TELECOM, INC. ("K.S. TELECOM") V. NX NETWORKS,
INC. was commenced in July, 2000 in the Southern District of New York, and it is
assigned case number 00 Civ. 3375 (KMW). In this action, we are named as a third
party defendant by K.S. Telecom under a number of legal theories in an action
brought against K.S. Telecom by Netrix Leasing, LLC, an unrelated entity. Netrix
Leasing LLC had purchased equipment from us and leased it to K.S. Telecom.
Netrix Leasing alleges that K.S. Telecom subsequently defaulted on the lease
payment obligations. In its third-party complaint, K.S. Telecom alleges that it
breached its lease because of our failure to properly prepare, install and
repair the equipment. In its complaint, K.S. Telecom seeks damages against us
equal to approximately $177,000 plus any amounts they are found to owe to Netrix
Leasing. Netrix Leasing is seeking approximately $550,000 pursuant to its
original complaint against K.S. Telecom, representing lease amounts past due of
approximately $78,000 and acceleration of future payments under the lease of
approximately $472,000. We responded to the third-party complaint of K.S.
Telecom by denying all of their allegations and we sought dismissal of the
claims in a summary judgment motion. On March 7, 2001, the court ruled that
certain of the claims against us must be dismissed, but that other claims may
proceed. Specifically, the court ruled that K.S. Telecom could proceed to try to
prove its allegation that it is a third party beneficiary of our agreements with
Netrix Leasing and that we breached obligations to K.S. Telecom under those
agreements. We believe we have meritorious defenses to the claims of K.S.
Telecom, and we intend to vigorously defend this action.
9
In January 2001, we were informed that a former employee in France has
obtained a trial court ruling in France related to his termination in 1997. The
amount of the award to him is approximately 800,000 French Francs, and using an
exchange rate into U.S. dollars of 7:1, this is approximately $100,000.
Approximately $25,000 of the amount represents payment of a disputed bonus, and
approximately $75,000 represents an award of punitive damages. We are appealing
this ruling because we believe the award of punitive damages is unjustified.
In May 2001, we were served with a complaint captioned MANAGEMENT
RECRUITERS - MONTICELLO, L.L.C. V. NETRIX CORPORATION, Civil Case No. 00-1867-1.
The case was filed in the Circuit Court for the County of Albermarle in the
Commonwealth of Virginia. The complaint demands payment of approximately $50,000
for recruiting expenses allegedly incurred by us in 2000. We are reviewing the
complaint, and expect that we will settle this matter.
In May 2001, we were served with a complaint captioned U.S. ASSEMBLIES
NEW ENGLAND, INC. V. OPENROUTE NETWORKS, INC. AND NETRIX CORPORATION D/D/A NX
NETWORKS, Civil Case No. BRCV 2001-00551A. The case was filed in the Superior
Court for the Commonwealth of Massachusetts in Bristol, Massachusetts. The
complaint alleges that we owe U.S. Assemblies approximately $1.0 million,
representing (1) claimed amounts for products delivered of $$700,000 less an
offset due us of $120,000, (2) $40,000 of work in process and (3) $360,000 for
inventory purchased on our behalf. We are reviewing the complaint, and have not
yet filed an answer. Based upon our initial review of the allegations set forth
in the complaint, we expect to deny entirely the allegations related to any
amounts for inventory purchased on our behalf and for work-in-process. We also
expect to dispute the amount claimed by U.S. Assemblies for products delivered
and to assert various other defenses to the claims by U.S. Assemblies. In
addition, we expect to assert counterclaims against U.S. Assemblies for breach
of contract related to production delays they incurred in manufacturing products
for us and for amounts payable by them to us. We will vigorously defend this
action.
In addition to the above matters, we are periodically involved in
disputes arising from normal business activities. In our opinion, resolution of
these matters will not have a material adverse effect upon our financial
condition or future operating results, and adequate provision for any potential
losses have been made in our financial statements.
SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
The Securities and Exchange Commission has commenced an investigation
into the matters surrounding the Company's restatement of revenues for its
quarter ended June 30, 2000. For the quarter ended June 30, 2000, the Company
restated revenues from $10.4 million to $8.4 million for sales made to two of
its value added resellers ("VARs"). These sales were dependent upon the payment
to the VARs from their customers.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act. As required by the Securities Exchange Act, we file reports, proxy
statements and other information with the SEC. The reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at regional offices of the SEC at Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661 and at Seven World Trade
Center, 13th Floor, New York, New York 10048. In addition, we are required to
file electronic versions of these documents through the SEC's Electronic Data
Gathering, Analysis and Retrieval System (EDGAR). The SEC maintains a World Wide
Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The common stock is quoted on the Nasdaq
10
National Market. Information regarding the trading of our common stock on the
Nasdaq National Market can be obtained from the Nasdaq National Market, 9801
Washingtonian Boulevard, Gaithersburg, Maryland 20878 ((202) 496-2500).
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement contains more information than this
prospectus regarding us and our common stock, including certain exhibits. You
can get a copy of the registration statement from the sources listed above.
The SEC allows us to "incorporate by reference" into this document the
information that we have on file with the SEC. This means that we may disclose
important information to you by referring you to other documents. The
information incorporated by reference is considered to be part of this
prospectus. In addition, any later information we file with the SEC and
incorporated by reference will update and supersede the information referred to
or contained in this prospectus. We incorporate by reference the documents
listed below and any future filings we make with the SEC under section 13a,
13(c), 14 or 15(d) of the Exchange Act until this offering has been completed:
o Our Annual Report on Form 10-K for the year ended December 31, 2000.
o Our Quarterly Report on From 10-Q for the period ended March 31,
2001.
o The description of our common stock contained in our Registration
Statement of Form 8-A filed August 5, 1992.
o The Annual Report on Form 10-K for the year ending December 31, 1998
of OpenROUTE Networks, Inc.
o The Quarterly Reports on Form 10-Q for the quarters ending March 31,
1999, June 30, 1999 and September 30, 1999 of OpenROUTE Networks,
Inc.
o Our Current Report on Form 8-K filed on May 16, 2001.
You may request a copy of these documents, at no cost, by writing or
telephoning us at the following address: Nx Networks, Inc., 13595 Dulles
Technology Drive, Herndon, Virginia 20171, Attention: Investor Relations; (703)
742-6000.
11
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the information set forth in this prospectus includes "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. In addition, from time to time, we may publish
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act or make oral statements that constitute
forward-looking statements. These forward-looking statements may relate to
matters such as anticipated financial performance, future revenues or earnings,
business prospectus, projected ventures, new products, anticipated market
performance and similar matters. The words "budgeted," "anticipate," "project,"
"estimate," "expect," "may," "believe," "potential" and similar statements are
intended to be among the statements that are forward looking statements. Because
these statements reflect the reality of risk and uncertainty that is inherent in
our business, actual results may differ materially from those expressed or
implied by the forward-looking statements. You are cautioned not to place undue
reliance on these forward-looking statements, which are made as of the date of
this prospectus.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, we caution you that a variety of factors could cause our actual
results to differ materially from the anticipated results or other expectations
expressed in our forward-looking statements. These risks and uncertainties, many
of which are beyond our control, include, but are not limited to those set forth
under the caption "Risk Factors" on page 3 and in our filings with the SEC.
We undertake no obligation to release publicly any revisions to the
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect unanticipated events or developments.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling security holders. Some of the shares that selling security holders have
registered for sale are shares that they can obtain only upon the exercise of
warrants they hold. In order to obtain the common stock underlying the warrants
for sale, these selling security holders must exercise the warrants. The
warrants have exercise prices ranging from $0.90 to $12.43 per share, and, if
all of the warrants are exercised, we will receive approximately $2.2 million.
We will use the proceeds from any warrant exercises for general corporate and
working capital purposes.
12
SELLING SECURITY HOLDERS
This prospectus relates to the sale of up to 16,206,469 shares of common
stock by the selling security holders. The number of shares of common stock that
may be offered for sale by the selling stockholders may vary from time to time
depending upon (1) the conversion price of our Series E convertible preferred
stock, which is dependent upon the market price of our common stock, and (2)
whether we elect to issue any shares of common stock as dividends upon our
Series B, Series C, Series D or Series E convertible preferred stock. The number
of shares offered by the selling stockholders pursuant to this prospectus may
not exceed 16,206,469.
The following table sets forth, to our knowledge:
o the number of shares of common stock beneficially owned by each of
the selling security holders;
o the number of shares of common stock to be offered and sold by each
of the selling security holders; and
o the number of shares of common stock and percentage of outstanding
shares of common stock to be beneficially owned by each of the
selling security holders after the offer and sale contemplated by
this prospectus, assuming that all the shares offered by the selling
security holder are in fact sold.
For purposes of preparing this table, we have assumed the Series E
convertible preferred stock will be converted at the lowest potential conversion
price and that we will not issue shares of common stock as payment of dividends
on our preferred stock. We have also assumed that each selling security holder
will sell all of the shares identified to be sold in this prospectus. The
selling security holders are not required to sell any of their shares in this
offering.
To our knowledge, each person has sole investment and voting power, with
respect to the securities set forth in the following table.
As of May 15, 2001, we had approximately 44,412,000 shares of common
stock issued and outstanding.
Beneficial Ownership
After the Offering (1)
----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number
Name and Address Prior to the Offering (1)(3) Be Sold (3) of Shares Percentage
- ------------------- --------------------------- ----------- --------- ----------
Steven T. Francesco (2)(8)(9) 4,250,003 1,800,003 2,450,000 5.2
1270 Cobble Pond Way
Vienna, Virginia 22182
Suhail Nanji (1) 399,997 399,997 -- --
5376 Beaumont Canyon Drive
San Jose, CA 95138
Richard Waye (2)(4)(9) 638,338 613,338 25,000 *
12080 Kingsten Place
Reston, Virginia 20190
John DuBois (2)(4)(9) 3,776,682 3,326,682 450,000 1.0
c/o Nx Networks, Inc.
13595 Dulles Technology Drive
Herndon, Virginia 20171
13
Beneficial Ownership
After the Offering (1)
----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number
Name and Address Prior to the Offering (1)(3) Be Sold (3) of Shares Percentage
- ------------------- --------------------------- ----------- --------- ----------
Generation Capital Associates (3) 150,000 150,000 -- --
1085 Riverside Trace
Atlanta, Georgia 30328
Ardent Research Partners, LP (3) 76,923 76,923 -- --
153 East 53rd Street, Suite 4800
New York, NY 10022
Peter E. Kaplan, Jr. (3) 3,077 3,077 -- --
321 W. 13th Street, Unit 5C
New York, New York 10014
Steve D. Roberts (3)(9) 432,692 307,692 125,000 *-
12073 Chancery Station Circle
Reston, Virginia 20190
Johnson Agogbua (3) 153,846 153,846 -- --
9405 Cross Timber Court
Fairfax Station, Virginia 22039
HFS Venture Fund I LLLP (3) 307,692 307,692 -- --
7926 Jones Branch Drive
Suite 330
McLean, Virginia 22182
Rosalind Mills (3) 6,154 6,154 -- --
1755 York Avenue, Apt 166
New York, New York 10128
Eric Meyer (3) 100,000 100,000 -- --
270 N. Wilton Road
New Canaan, Connecticut 06840
EMDD (3) 50,000 50,000 -- --
780 3rd Avenue, 15th Floor
New York, New York 10017
Knight Investments L.P. (3)(4) 734,374 734,374 -- --
960 Reef Road
Vero Beach, Florida 32963
Ardent Research Partners, Ltd. (3) 76,923 76,923 -- --
153 East 53rd Street, Suite 4800
New York, NY 10022
Albert Weis (4) 85,333 85,333 -- --
85 Barkers Point Road
Sands Point, New York 11050
William Cole (4) 85,336 85,336 -- --
17100 Los Robles Way
Los Gatos, California 95030
Raymond Earle (4) 170,672 170,672 -- --
87 Westover Avenue
West Caldwell, New Jersey 07006
Langley Partners, L.P.(5) 1,680,000 1,680,000 -- --
535 Madison Avenue, 15th Floor
New York, New York 10022
Gryphon Partners, LP (5) 1,680,000 1,680,000 -- --
Suite 250
500 Crescent Court
Dallas, Texas 75201
14
Beneficial Ownership
After the Offering (1)
----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number
Name and Address Prior to the Offering (1)(3) Be Sold (3) of Shares Percentage
- ------------------- --------------------------- ----------- --------- ----------
Lancaster Investment Partners, LP (5) 1,240,000 1,240,000 -- --
1150 First Avenue
Suite 600
King of Prussia, Pennsylvania 19406
Kingdon Partners (6) 220,702 220,702 -- --
c/o Kingdon Capital Management, LLC
152 West 57th Street
50th Floor
New York, New York 10019
Kingdon Associates (6) 441,403 441,403 -- --
c/o Kingdon Capital Management, LLC
152 West 57th Street
50th Floor
New York, New York 10019
M. Kingdon Offshore, NV (6) 1,544,913 1,544,913 -- --
c/o Kingdon Capital Management, LLC
152 West 57th Street
50th Floor
New York, New York 10019
Kier Kleinknecht (9)(10) 211,667 166,667 45,000 *
960 Reef Road
Vero Beach, Florida 32963
Sabrina Kleinknecht (9)(10) 168,542 166,667 1,875 *
960 Reef Road
Vero Beach, Florida 32963
Gavin Kleinknecht (10) 166,666 166,666 -- --
960 Reef Road
Vero Beach, Florida 32963
Bryan Holley (7) 7,405 7,405 -- --
P.O. Box 162526
Austin, Texas 78716
Gallagher, Harnett & Lagalante LLP(7) 60,000 60,000 -- --
380 Lexington Avenue
Suite 1110
New York, New York 10168
Avondale Capital 24,000 24,000 -- --
9044 Melrose Avenue
West Hollywood, California 90069
- ----------------------
(footnotes are on the following page)
15
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes consideration of voting or
investment power with respect to the securities at issue. Information with
respect to beneficial ownership is based upon information as of May 15,
2001 and assumes that there is outstanding an aggregate of 44,412,000
shares of common stock.
(2) An investor in our December 2000 Series B 8% convertible preferred stock
financing.
(3) An investor in our January 2001 Series C 8% convertible preferred stock
financing.
(4) An investor in our March 2001 Series D 8% convertible preferred stock
financing.
(5) An investor in our May 2001 Series E 8% convertible preferred stock
financing.
(6) Issued pursuant to our March 2001 common stock private placement.
(7) Issued in lieu of cash payments.
(8) Issued pursuant to an employment agreement.
(9) Includes shares issuable upon the exercise of stock options that can be
exercised in the 60-day period commencing May 15, 2001. In the case of Mr.
DuBois, includes 500,000 shares obtained upon the exercise of stock
options.
(10) Keir Kleinknecht, Sabrina Kleinknecht and Gavin Kleinknecht are related.
Other of their relatives control Knight Investments, L.P., and they
disclaim beneficial ownership of the shares owned by Knight Investments.
SHARES RELATED TO OUR SERIES B 8% CONVERTIBLE PREFERRED STOCK OFFERING
3,333,330 of the shares offered hereby are issuable upon the conversion
of our Series B 8% convertible preferred stock and 666,667 of the shares offered
hereby are issuable upon exercise of warrants we issued in connection with the
Series B preferred stock. We sold the Series B preferred stock on December 29,
2000 at $7.50 per share, and we received net proceeds of approximately $2.5
million. We have applied these proceeds to fund operations, severance and other
restructuring activities and marketing and sales initiatives.
The Series B preferred stock bears a dividend of 8% per annum, which we
can elect to pay in cash or shares of common stock. Each share of Series B
preferred stock is convertible into shares of our common stock at a conversion
price of $0.75 per share, which represents ten shares of common stock for every
share of preferred stock. The Series B preferred stock has a liquidation
preference per share equal to the purchase price of that share, plus the amount
of accrued but unpaid dividends. The Series B preferred stock has no voting
rights, except to the extent required by applicable law. The Series B preferred
stock is redeemable by us at a repurchase price of $21.00 per share if the last
reported sales price of our common stock is $5.00 or more for ten consecutive
days.
In connection with the sale of the Series B preferred stock, we issued
to each purchaser warrants to purchase the number of shares of common stock
equal to 20% of the number of shares of common stock the purchaser can obtain by
converting the Series B preferred stock purchased in the offering. The warrants
have a five-year term, and have an exercise price of $0.90 per share.
SHARES RELATED TO OUR SERIES C 8% CONVERTIBLE PREFERRED STOCK OFFERING
1,540,000 of the shares offered hereby are issuable upon the conversion
of our Series C 8% convertible preferred stock. We sold the Series C preferred
stock on January 17, 2001 at $162.50 per share, and we received net proceeds of
approximately $2.5 million. We have applied these proceeds to fund operations.
16
The Series C preferred stock bears a dividend of 8% per annum, which we
can elect to pay in cash or shares of common stock. Each share of Series B
preferred stock is convertible into shares of our common stock at a conversion
price of $1.625 per share, which represents one hundred shares of common stock
for every share of preferred stock. The Series C preferred stock has a
liquidation preference per share equal to the purchase price of that share, plus
the amount of accrued but unpaid dividends. The Series C preferred stock has no
voting rights, except to the extent required by applicable law. The Series C
preferred stock is redeemable by us at a repurchase price of $500.00 per share
if the last reported sales price of our common stock is $5.00 or more for ten
consecutive days.
Each holder of the Series C preferred stock agreed not to sell any of
the shares of common stock underlying the preferred stock prior to June 30,
2001, unless the common stock reached certain levels in excess of the initial
conversion price of the Series C preferred stock. The levels at which the common
stock has to trade for 10 consecutive days and the number of shares which become
eligible for sale at such levels are:
Common stock price Number of shares that become tradeable
------------------ --------------------------------------
$2.03 25%
2.53 25%
3.17 25%
3.96 25%
The common stock has traded in excess of $2.03 for more than 10 consecutive days
since the issue date of the Series C preferred stock, so 25% of the shares are
currently eligible for sale.
In connection with the Series C preferred stock offering, we paid fees
of $12,500 to Intercontinental Capital {LLC}. Intercontinental provided
consulting services to us related to the structure and marketing of the Series C
preferred stock offering.
SHARES RELATED TO OUR SERIES D 8% CONVERTIBLE PREFERRED STOCK OFFERING
1,173,373 of the shares offered hereby are issuable upon the conversion
of our Series D 8% convertible preferred stock and 234,676 of the shares offered
hereby are issuable upon exercise of warrants we issued in connection with the
Series D preferred stock. We sold the Series D preferred stock on March 6, 2001
at $141.00 per share, and we received net proceeds of approximately $1.65
million. We have applied these proceeds to fund operations.
The Series D preferred stock bears a dividend of 8% per annum, which we
can elect to pay in cash or shares of common stock. Each share of Series D
preferred stock is convertible into shares of our common stock at a conversion
price of $1.41 per share, which represents one hundred shares of common stock
for every share of preferred stock. The Series D preferred stock has a
liquidation preference per share equal to the purchase price of that share, plus
the amount of accrued but unpaid dividends. The Series D preferred stock has no
voting rights, except to the extent required by applicable law. The Series D
preferred stock is redeemable by us at a repurchase price of $5.00 per share if
the last reported sales price of our common stock is $5.00 or more for ten
consecutive days.
Each holder of the Series D preferred stock agreed not to sell any of
the shares of common stock underlying the preferred stock prior to June 30,
2001, unless the common stock reached certain levels in excess of the initial
conversion price of the Series D preferred stock. The levels at which the common
stock has to trade for 10 consecutive days and the number of shares which become
eligible for sale at such levels are:
17
Common stock price Number of shares that become tradeable
------------------ --------------------------------------
$1.76 25%
2.20 25%
2.75 25%
3.44 25%
The common stock has not yet met any of these thresholds.
In connection with the sale of the Series D preferred stock, we issued
to each purchaser warrants to purchase the number of shares of common stock
equal to 20% of the number of shares of common stock the purchaser can obtain by
converting the Series D preferred stock purchased in the offering. The warrants
have a five-year term, and have an exercise price of $2.11 per share.
SHARES RELATED TO OUR SERIES E 8% CONVERTIBLE PREFERRED STOCK OFFERING
Up to 4,180,000 of the shares offered hereby are issuable upon the
conversion of our Series E 8% convertible preferred stock. We sold the Series E
preferred stock on May 14, 2001 at $126.50 per share, and we received net
proceeds of approximately $2.2 million. We will apply these proceeds to fund
operations.
The Series E preferred stock bears a dividend of 8% per annum, which we
can elect to pay in cash or shares of common stock. The Series E preferred stock
has a liquidation preference per share equal to the purchase price of that
share, plus the amount of accrued but unpaid dividends. The Series B preferred
stock has no voting rights, except to the extent required by applicable law. The
Series E preferred stock is redeemable by us at a repurchase price of $132.83
per share if the last reported sales price of our common stock is $5.00 or more
for ten consecutive trading days.
Each share of the Series E preferred stock has an initial conversion
price of $1.265 per share, and the number of shares of common stock initially
issuable under the terms of the Series E preferred stock is 1.9 million shares.
However, from and after May 19, 2001 the conversion price of the Series E
preferred stock will be fixed by reference to the volume weighted average sales
price (VWAP) of our common stock. Specifically, the Series E preferred stock
will have a conversion price per share equal to the lesser of (1) $1.265 or (2)
87% of the VWAP during the five days preceding a notice of conversion, subject
to a minimum conversion price of $0.575 per share. Accordingly, between the
common stock prices of $1.46 (resulting in a conversion price of $1.265 per
share) and $0.66 (resulting in a conversion price of $0.575 per share), the
number of shares of common stock we will have to issue upon conversion of the
Series E preferred stock will fluctuate. The range is between 1.9 million shares
at a VWAP of $1.46 to 4.2 million shares at a VWAP of $0.66.
In connection with the Series E preferred stock offering, we paid fees
of $120,000 to Avondale Capital Partners, Inc. and issued to them warrants to
purchase 24,000 shares of our common stock at an exercise price of $1.52 per
share. Avondale Capital introduced the investors to us and they indemnified us
with respect to their services under applicable securities laws.
In connection with the sale of the Series E preferred stock, we issued
to each purchaser warrants to purchase the number of shares of common stock
equal to 20% of the number of shares of common stock the purchaser can obtain by
converting the Series E preferred stock purchased in the offering using a
conversion price of $1.265 per share. The warrants have a five-year term, and
have an exercise price of $1.438 per share.
Pursuant to the Securities Purchase Agreement we entered into with the
purchasers of the Series E preferred stock:
18
o The initial purchasers have a right of first offer and a right of
participation, subject to certain conditions, in any financing we
undertake prior to May 14, 2002.
o Each holder of Series E preferred stock is prohibited from engaging
in direct or indirect sales transactions during the five trading day
period preceding the date such buyer delivers a notice of conversion
to us, unless the conversion price is at least $1.265 per share or
we have previously given a notice of redemption for such shares.
PRIVATE PLACEMENT OF COMMON STOCK
On March 28, 2001 we raised $2.0 million through a private placement of
common stock. We sold 2,207,018 shares of common stock at $0.9062 per share. We
received net proceeds of $2.0 million, which we have applied to fund our
operations.
Each holder of the common stock issued in this offering agreed not to
sell any shares prior to June 30, 2001 unless the common stock reached certain
levels in excess of the initial purchase price. The levels at which the common
stock has to trade for 10 consecutive days and the number of shares which become
eligible for sale at such levels are:
Common stock price Number of shares that become tradeable
------------------ --------------------------------------
$1.125 25%
1.40 25%
1.75 25%
2.20 25%
The common stock has not yet met any of these thresholds.
SHARES ISSUED IN LIEU OF CASH PAYMENT
The shares offered by Gallagher, Harnett & Lagalante LLP underlie
warrants we issued to them in September 1999 and September 2000. We issued the
warrants to Gallagher, Harnett & Lagalante LLP as partial payment for legal
services they performed for us related to certain commercial litigation matters.
The September 1999 warrant is for 15,000 shares, has an exercise price of $12.43
per share and has a five-year term. The September 2000 warrant is for 45,000
shares, has an exercise price of $8.00 per share and has a five-year term.
Gallagher, Harnett & Lagalante has served as one of our primary litigation firms
since 1999.
The shares offered by Keir Kleinknecht, Sabrina Kleinknecht and Gavin
Kleinknecht underlie warrants we issued to Keir Kleinknecht in December 2000. We
issued the warrants pursuant to a consulting agreement with Mr. Kleinknecht
pursuant to which he is and has provided a variety of services to us, including
(1) the recruitment of Mr. DuBois as our chief executive officer, (2) the
recruitment of other senior employees, (3) advice regarding the structure,
timing and amount of financing as we progress with re-establishing our business
and (4) general business advice. The warrants we initially issued to Mr.
Kleinknecht are for a total of 500,000 shares, had an exercise price of $0.70
per share and had a five-year term. The consulting agreement has a one-year
term, and pursuant to the agreement we issued the 500,000 warrants to Mr.
Kleinknecht and agreed to pay him $15,000 per month during the term of the
agreement. The consulting agreement superceded a prior consulting agreement
dated August 2000 pursuant to which we granted Mr. Kleinknecht options to
purchase 25,000 shares at a purchase price of $6.25 per share and agreed to pay
to him $10,000 per month during the one-year term of the Agreement. During
2000, Mr. Klienknecht was also a member of our business advisory board. As a
member of the
19
business advisory board, Mr. Klienknecht was issued options to acquire 20,000
shares at prices ranging from $26.00 to $3.75 per share.
SALES BY CERTAIN EMPLOYEES AND FORMER EMPLOYEES
The shares offered by Mr. Steven T. Francesco include 800,003 shares
underlying his investment in the Series B 8% convertible preferred stock and
950,000 shares he owns and to which he became entitled under his employment
agreement with us. Mr. Francesco was our chief executive officer from March 1999
until November 2000, and he was employed by us at the time we acquired OpenROUTE
Networks, Inc. The acquisition of OpenROUTE constituted a 'change of control'
under Mr. Francesco's employment agreement and, as a result, he became entitled
to 1,000,000 shares of our common stock pursuant to the agreement.
The shares offered by Bryan Holley were issued to him in full
satisfaction of our indemnification obligations to him through April 21, 2001.
Mr. Holley was the chief executive officer of OpenROUTE Networks, Inc. and
served us as an executive officer from December 1999 until January 2000. In his
capacity as a former executive officer, Mr. Holley is entitled to
indemnification from us with respect to his being named as a defendant in a
class action lawsuit. We owed Mr. Holley approximately $8,000 in indemnification
payments through April 21, 2001, and he agreed to accept payment in shares
valued at the last reported share price on the date of our agreement. That share
price was $1.05 per share.
The shares offered by John DuBois include 2,400,000 shares underlying
his investment in the Series B 8% convertible preferred stock, 426,682 shares
underlying his investment in the Series D 8% convertible preferred stock and
500,000 shares he acquired upon the exercise of stock options. Mr. DuBois is our
chief executive officer and the chairman of our Board of Directors.
The shares offered by Steve Roberts include 307,692 shares underlying
his investment in the Series C 8% convertible preferred stock. Mr. Roberts is
our chief operating officer.
The shares offered by Richard Waye include 399,997 shares underlying
his investment in the Series B 8% convertible preferred stock and 213,341 shares
underlying his investment in the Series D 8% convertible preferred stock. Mr.
Waye is one of our employees.
The shares offered by Sabrina Kleinknecht include 166,667 shares
underlying warrants. Ms. Kleinknecht is one of our employees. Ms. Kleinknecht is
related to Keir Kleinknecht, who has performed consulting services to us.
20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements,
including the notes thereto, and our other financial data contained in this
prospectus and incorporated into this prospectus. The statement of operations
data and balance sheet data as of and for the years ended December 31, 1996,
1997, 1998, 1999 and 2000 are derived from the consolidated financial statements
of Nx Networks and the notes related thereto, which were audited by our
independent public accountants. The selected consolidated statement of
operations data and balance sheet data as of and for the three month periods
ended March 31, 2000 and 2001 are derived from our unaudited consolidated
financial statements which, in the opinion of management, include all
adjustments necessary for a fair presentation of our financial condition and
results of operations for such periods. The results of operations for interim
periods are not necessarily indicative of a full year's operations. Net loss per
share is computed on the basis described in the notes to our consolidated
financial statements.
Three Months Ended
Years Ended December 31, March 31,
-------------------------------------------------------------- ----------------------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Total revenues $43,635 $33,087 $31,482 $31,245 $27,215 $ 8,943 $ 3,369
Gross profit 21,572 14,647 15,388 14,710 4,615 3,455 1,016
Operating expenses:
Sales and marketing 11,632 10,120 9,292 6,468 13,382 3,518 2,661
Research and
development 11,079 8,323 6,771 7,043 16,696 2,675 3,211
General and administrative
3,862 3,384 4,059 4,937 10,705 2,776 3,225
Stock compensation 900 - - 18,778 18,631 6,495 3,186
In-process research and
development - - - - 30,800 30,800 -
Impairment of acquired
intangibles and goodwill - - - - 64,500 - -
Amortization of acquired
intangibles and goodwill 404 618 265 636 27,890 5,143 2,277
Restructuring charge - 875 - 900 - - -
Bad debt expense - 100 1,489 540 3,239 455 116
------- ------- ------- ------- -------- -------- --------
Loss from operations (6,305) (8,773) (6,488) (24,592) (181,228) (48,407) (13,660)
Net loss attributable to
common shareholders (5,968) (8,577) (6,517) (26,169) (180,669) (48,437) (15,725)
Basic and diluted net loss
per share (0.63) (0.90) (0.60) (2.17) (5.31) (1.57) (0.38)
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit) $17,782 $10,271 $ 7,600 $ 8,020 $ (7,598) $ 18,677 $ (9,208)
Total assets 34,493 24,024 20,241 95,253 45,255 158,338 38,751
Total long-term liabilities 614 97 - 352 735 713 173
Stockholders' equity 24,847 16,840 12,117 82,459 21,955 145,003 20,140
21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENT
The following Unaudited Pro Forma Condensed Consolidated Statement of
Operations of Nx Networks for the year ended December 31, 2000 illustrates the
effect of the merger with AetherWorks. The Unaudited Pro Forma Condensed
Consolidated Statement of Operations assumes that the merger with AetherWorks
was completed as of the beginning of the period presented. Certain
reclassifications have been made to the AetherWorks' financial statements to
conform with Nx Networks presentation.
Under the terms of the AetherWorks transaction, it is assumed the
holders of AetherWorks common stock, warrants, and stock options received an
aggregate of 1.36 shares of Nx Networks Common Stock.
ACCOUNTING TREATMENT
Nx Networks recorded the AetherWorks merger as a purchase transaction.
For accounting purposes, Nx Networks is deemed to be the acquiring company in
this merger.
The pro forma adjustments are based upon currently available
information and assumptions that Nx Networks management believes are reasonable
as well as certain information provided by AetherWorks management. Nx Networks
accounted for each merger based upon the estimated fair market value of the net
tangible assets, intangible assets and liabilities acquired at the date of
acquisition. The adjustments included in the Unaudited Pro Forma Condensed
Consolidated Financial Statement represent the final determination of these
adjustments based upon available information. Nx Networks cannot assure you that
the actual values will not differ significantly from the pro forma adjustments
reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statement.
The Unaudited Pro Forma Condensed Consolidated Financial Statement is
not necessarily indicative of either future results of operations or results
that might have been achieved if the merger with AetherWorks had been
consummated as of the indicated date. The Unaudited Pro Forma Condensed
Consolidated Financial Statement should be read in conjunction with the
historical financial statements of Nx Networks and AetherWorks, together with
the related notes thereto, which are incorporated by reference into this
registration statement.
22
NX NETWORKS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Aetherworks Pro Nx Networks
Nx Networks Aetherworks Forma Pro Forma
Historical (1) Historical (2) Adjustments Combined
--------------- ---------------- ----------------- ------------
Revenues:
Product $ 19,730 $ - $ - $ 19,730
Service and other 7,485 - - 7,485
--------------- ---------------- ----------------- ------------
Total revenues 27,215 - - 27,215
--------------- ---------------- ----------------- ------------
Cost of revenues:
Product 17,709 - - 17,709
Service and other 4,891 - - 4,891
--------------- ---------------- ----------------- ------------
Total cost of revenues 22,600 - - 22,600
--------------- ---------------- ----------------- ------------
Gross profit 4,615 - - 4,615
--------------- ---------------- ----------------- ------------
Operating expenses
Sales and marketing 13,382 - - 13,382
Research and development 16,696 950 - 17,646
General and administrative 10,705 478 - 11,183
Impairment of acquired intangibles and 64,500
goodwill 64,500 - -
Amortization of acquired intangibles and
goodwill 27,890 - 3,035 (3) 30,925
In-process research and development 30,800 - (30,800) (4) -
Stock compensation 18,631 - - 18,631
Bad debt expense 3,239 - - 3,239
Restructuring reserve - - - -
--------------- ---------------- ----------------- ------------
Loss from operations (181,228) (1,428) 28,088 (154,891)
Interest and other income, net 560 38 - 598
--------------- ---------------- ----------------- ------------
Loss before income taxes (180,668) (1,390) 28,088 (154,293)
Provision for income taxes - - - -
--------------- ---------------- ----------------- ------------
Net loss (180,668) (1,390) 28,088 (154,293)
Dividends on preferred stock (1) - - (1)
--------------- ---------------- ----------------- ------------
Net loss $ (180,669) $ (1,390) $ 28,088 $(154,294)
=============== ================ ================= ============
Basic and diluted loss per common share $ (5.31) $ ( 3.93)
=============== ============
Weighted average common shares outstanding,
basic and diluted 34,037 39,261 (5)
=============== ============
The accompanying notes are an integral part of this unaudited pro forma
condensed consolidated financial statement.
23
NOTES TO NX NETWORKS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(1) Information obtained from the historical consolidated statement of
operations of Nx Networks.
(2) Information obtained from the historical unaudited statement of operations
of AetherWorks.
(3) Reflects the amortization expense of goodwill and intangibles acquired in
the merger of AetherWorks by use of the straight-line method over 4 years.
(4) AetherWorks pro forma adjustments excludes the one-time in-process research
and development charges of $30.8 million in connection with the AetherWorks
acquisition.
(5) The average common shares outstanding used in calculating basic and diluted
pro forma loss per common share are calculated assuming that the estimated
number of shares of Nx Networks common stock issued in the merger was
outstanding from the beginning of the periods presented. For purposes of
this Unaudited Pro forma Financial Information, the Company assumed that it
would issue approximately 7,400,000 shares of common stock (including the
4,777,793 of additional shares issued in connection with the $22.50 per
share guarantee negotiated in December 2000) in connection with the
AetherWorks acquisition. Options and warrants to purchase shares of common
stock were not included in computing pro forma diluted earnings per common
share because their inclusion would result in a smaller loss per common
share.
PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, transferees or
other successors in interest, may sell up to 16,206,469 shares of common stock
from time to time. No selling security holder is required to offer or sell any
of the common stock. Sales may be made in one or more transactions on the Nasdaq
Stock Market or in negotiated transactions, or both. The selling security
holders may sell at market prices at the time of sale, at prices related to the
market price or negotiated prices.
The selling security holders may sell shares to or through
broker-dealers, and the broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling security holders and/or
the purchasers of shares. The selling security holders and any broker-dealers
that participate in the sale of the common stock offered hereby may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act and
any commissions and any profit on the resale of the shares they receive may be
deemed to be underwriting discounts and commissions under the Securities Act. We
have agreed to indemnify the selling security holders against some liabilities,
including under the Securities Act.
The selling security holders and any other persons participating in the
distribution of the shares of common stock offered by the selling security
holders will be subject to Securities Exchange Act, which may limit their timing
of purchases and sales of common stock and restrict their ability to engage in
market-making activities.
All proceeds from the sale of the common stock will be paid directly to
the selling security holders and will not be deposited in an escrow, trust or
other similar arrangement. We will not receive any of the proceeds from the
sales of the common stock by the selling security holders. However, we will
24
receive proceeds from the exercise of the warrants, and these proceeds will be
approximately $2.2 million if all of the warrants are issued.
We will pay the legal, accounting and other fees and expenses related
to the offer and sale of the common stock contemplated by this prospectus,
excluding commissions charged by any broker or dealer acting on behalf of a
selling security holder. We estimate the fees and expenses will be $25,000.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for us by Kelley Drye & Warren LLP.
EXPERTS
The consolidated financial statements and schedule of Nx Networks, Inc.
and its subsidiaries as of December 31, 1999 and 2000 and for each of the three
years in the period ended December 31, 2000 incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference in reliance upon
the authority of said firm as experts in giving said reports. Reference is made
to said report, which includes an explanatory paragraph with respect to the
uncertainty regarding our ability to continue as a going concern, as discussed
in Note 1 to the financial statements.
The consolidated financial statements of OpenROUTE Networks, Inc. and
its subsidiaries as of and for the year ended December 31, 1998 incorporated by
reference in the registration statement have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the period set
forth in their report (which contains an explanatory paragraph regarding the
Company's ability to continue as a going concern) and are incorporated by
reference in reliance upon such report having been given upon the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and schedule of OpenROUTE
Networks, Inc. and its subsidiaries as of December 31, 1996 and 1997, and for
each year in the two year period ended December 31, 1997, (except as to the
segment information for the years ended December 31, 1996 and 1997 presented in
Note 8), have been included herein and in the registration statement in reliance
upon the report of PricewaterhouseCoopers, LLP, independent certified public
accountants appearing elsewhere herein, and upon the authority of such firm as
experts in accounting and auditing.
The financial statements of AetherWorks Corporation at September 30,
1999 and 1998, and for the years then ended and the period from February 24,
1993 (inception) to September 30, 1999, incorporated by reference in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as indicated in their reports with respect thereto, and
are incorporated by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
25
No dealer, sales person or other person
has been authorized to give any
information or to make any
representation not contained in this
prospectus, and, if given or made, that
information or representation must not
be relied upon as having been authorized
by us. This prospectus does not
constitute an offer to sell or a
solicitation of an offer to buy any of
the securities in any jurisdiction to
any person to whom it is unlawful to
make an offer. Neither the delivery of
this prospectus nor any sale made
pursuant to this prospectus shall, under Nx NETWORKS, INC.
any circumstances, create any
implication that there has been no
change in our affairs since the date of
this prospectus or that the information 16,206,469 Shares of
contained in this prospectus is correct Common Stock
as of any time subsequent to its date.
__________
__________
TABLE OF CONTENTS
PROSPECTUS
Page
---- __________
Summary.......................................2
Risk Factors..................................3
Legal Proceedings ............................8
Where You Can Find More Information..........10
Special Note Regarding Forward Looking
Statements.................................12
Use of Proceeds..............................12
Selling Security Holders.....................13
Selected Consolidated Financial Data.........21
Unaudited Pro Forma Condensed Consolidated
Financial Statements......................22
Plan of Distribution.........................24
Legal Matters................................25
Experts......................................25
_____, 2001
26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. We will pay
the expenses.
TYPE OR NATURE OF EXPENSE AMOUNT TO BE PAID
SEC registration fee........................... $ 3,849.04
Accounting fees and expenses................... 15,000*
Legal fees and expenses........................ 5,000*
Miscellaneous.................................. 10,000*
----------
Total.................................... $33,849.04*
==========
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with that action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A Delaware corporation may indemnify any person under
Section 145 who was, is or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure judgment in its favor, by reason of such fact as provided in the
preceding sentence, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of that
action or suit, except that no indemnification shall be made in respect of the
action or suit if he did not act in good faith and in a manner he reasonably
believed to be in or not opposed to our best interests and unless, and then only
to the extent that, a court of competent jurisdiction shall determine upon
application that he is fairly and reasonably entitled to indemnity for those
expenses as the court shall deem proper. A Delaware corporation must indemnify
any person who was successful on the merits or otherwise in defense of any
action, suit or proceeding or in defense of any claim, issue or matter in any
proceeding, by reason of such fact as provided in the preceding two sentences
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the indemnified claim. A Delaware corporation may pay for
the expenses (including attorneys' fees) incurred by an officer or director in
defending a proceeding in advance of the final disposition to repay the amount
advances if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for any
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) in respect of certain unlawful dividend
II-1
payments or stock redemptions or repurchases; or (iv) for any transaction from
which the director derived an improper personal benefit. The DGCL permits the
purchase of insurance on behalf of directors and officers against any liability
asserted against directors and officers and incurred by them in their capacity
as an officer or director, or arising out of their status as an officer or
director, whether or not the corporation would have the power to indemnify
directors and officers against that liability. We have acquired officers' and
directors' liability insurance of $1 million for members of our Board of
Directors and executive officers.
At present, there is no pending litigation or other proceeding involving
any of our directors or officers for which indemnification is being sought, and
we are not aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
Article Eighth of our certificate of incorporation provides that we will
indemnify all persons we are permitted to indemnify under the Delaware General
Corporation Law, and that this indemnification will be to the fullest extent
permitted the Delaware General Corporation Law.
ITEM 16. EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated September 30, 1999, between Netrix
Corporation and OpenROUTE Networks, Inc. (incorporated by reference to
Exhibit 4.2 to our quarterly report on Form 10-Q filed on August 16,
1999).
2.2 Amendment to Agreement and Plan of Merger between Netrix Corporation
and OpenROUTE Networks, Inc., dated November 9, 1999 (incorporated by
reference to Exhibit 2.2 to our registration statement on Form S-4
filed on November 19, 1999).
2.3 Agreement and Plan of Merger, dated December 31, 1999 among Netrix
Corporation, Nx1 Acquisition Corp. and AetherWorks Corporation
(incorporated by reference to Exhibit 2.1 to our current report on Form
8-K filed on January 14, 2000).
3.1 Amended and Restated Certificate of Incorporation of Netrix Corporation
(incorporated by reference to Exhibit 3.1 to our registration on Form
S-1 filed on September 18, 1992, as amended, File No. 33-50464 (the
"l992 S-1")).
3.2 Amendment to Certificate of Incorporation of Netrix Corporation dated
August 26, 1999 (incorporated by reference to Exhibit 4.8 to our
registration statement on Form S-3, filed on June 18, 1999, as amended,
File No. 333-81109 (the "1999 S-3")).
3.3 Certificate of Merger between Netrix Corporation and OpenROUTE
Networks, Inc. (incorporated by reference to our annual report on Form
10-K for the year ended December 31, 1999).
3.4 Amendment to Certificate of Incorporation of Netrix Corporation dated
September 13, 2000 (incorporated by reference to Exhibit 3.4 to our
Registration Statement on Form S-3 filed on January 17, 2001 File No.
333-53852 (the "January 2001 S-3").
3.5 Amendment to Certification of Incorporation of Nx Networks, Inc. dated
March 2001 (incorporated by reference to Exhibit 4.6 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
II-2
Exhibit
Number Description
- ------ -----------
4.1 Specimen certificate of common stock of Nx Networks, Inc. (incorporated
by reference to Exhibit 4.1 to the January 2001 S-3).
4.2 Certificate of designations for the form of Series B 8% convertible
preferred stock (incorporated by reference to Exhibit 4.2 to the
January 2001 S-3).
4.3 Form of Warrant (incorporated by reference to Exhibit 4.3 to the
January 2001 S-3).
4.4 Certificate of designations for the form of Series C 8% convertible
preferred stock (incorporated by reference to Exhibit 4.4 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
4.5 Certificate of designations for the form of Series D 8% convertible
preferred stock (incorporated by reference to Exhibit 4.5 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
4.6 Subscription Agreement related to the March 2001 private sale of common
stock (incorporated by reference to Exhibit 4.7 to our Annual Report on
Form 10-K for the year ended December 31, 2000).
4.7 Certificate of designations for the form of Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
4.8 Form of warrant related to the Series E 8% convertible preferred stock
(incorporated by reference to Exhibit 4.7 to our Current Report on Form
8-K dated May 16, 2001).
4.9 Securities Purchase Agreement related to the Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
4.10 Registration Rights Agreement related to the Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
5.1* Opinion of Kelley Drye & Warren LLP regarding the validity of the
securities being registered.
10.1 Employment Agreement dated December 29, 2000 between Nx Networks, Inc.
and John DuBois (incorporated by reference to Exhibit 10.1 to the
January 2001 S-3).
10.2 Severance Agreement dated November 10, 2000 between Nx Networks, Inc.
and Steven T. Francesco, as amended (incorporated by reference to
Exhibit 10.2 to the January 2001 S-3).
10.3 Employment Agreement between Netrix Corporation and Steven T.
Francesco, dated March 22, 1999 (incorporated by reference to Exhibit
10.5 to our quarterly report on Form l0-Q, filed on November 15, 1999).
II-3
Exhibit
Number Description
- ------ -----------
10.4 Employment Agreement between Netrix Corporation and Peter J. Kendrick,
dated August 2, 1999 (incorporated by reference to Exhibit 10.6 to our
quarterly report on Form 10-Q, filed on November 15, 1999).
10.5 Employment Agreement between Nx Networks, Inc. and Gregory C. McNulty,
dated January 4, 2000 (incorporated by reference to Exhibit 10.23 to
our annual report on Form 10-K for the year ended December 31, 1999).
10.6 Termination Agreement dated March 22, 2001 between Nx Networks, Inc.
and Greg McNulty (incorporated by reference to Exhibit 10.32 to the
Annual Report on Form 10-K for the year ended December 31, 2000).
10.7 Employment Agreement dated March 8, 2000 between Nx Networks, Inc. and
Jay R. Schifferli (incorporated by reference to Exhibit 10.6 to the
January 2001 S-3).
10.8 Employment Agreement dated December 29, 2000 between Nx Networks, Inc.
and Jonathan Sachs, together with note and pledge agreement
(incorporated by reference to Exhibit 10.7 to the January 2001 S-3).
10.9 Amended and Restated Promissory Note, dated May 7, 2001, issued by
Jonathan Sachs to Nx Networks, Inc. (incorporated by reference to
Exhibit 10.5 to our quarterly report on Form 10-Q, filed on May 20,
2001).
10.10 Form of Retention Agreement with Executive Officers of Netrix
Corporation (incorporated by reference to Exhibit 10.7 to our quarterly
report on Form l0-Q, as amended, filed on November 15, 1999).
10.11 Consulting Agreement, dated December 29, 2000 between Nx Networks, Inc.
and Keir Kleinknecht (incorporated by reference to Exhibit 10.9 to the
January 2001 S-3).
10.12 Consulting Agreement, dated December 29, 2000 between Nx Networks, Inc.
and Doug Mello (incorporated by reference to Exhibit 10.10 to the
January 2001 S-3).
10.13 1999 Long Term Incentive Plan of Netrix Corporation, as amended
(incorporated by reference to Exhibit 10.9 to our quarterly report on
Form 10-Q filed on November 15, 1999).
10.14 Amendment to the 1999 Long Term Incentive Plan dated March 7, 2001
(incorporated by reference to Exhibit 10.31 to our Annual Report on
Form 10-K for the year ended December 31, 2000).
10.15 1992 Employee Stock Purchase Plan of Netrix Corporation (incorporated
by reference to Exhibit 10.2 to our annual report on Form 10-K for the
year ended December 31, 1995).
10.16 1996 Stock Option Plan of Netrix Corporation (incorporated by reference
to Exhibit 10.4 to our annual report on Form 10-K for the year ended
December 31, 1995).
II-4
Exhibit
Number Description
- ------ -----------
10.17 Amended and Restated 1997 Stock Option Plan of AetherWorks Corporation
(incorporated by reference to Exhibit 10.16 to the January 2001 S-3).
10.18 1991 Restated Stock Option Plan of OpenROUTE Networks, Inc.
(incorporated by reference to Exhibit 19.1 to OpenROUTE's quarterly
report on Form 10-Q for the quarter ended June 27, 1992).
10.19 Settlement Agreement and Release dated December 29, 2000 by and among
Nx Networks and certain of the former owners of AetherWorks Corporation
(incorporated by reference to Exhibit 10.21 to the January 2001 S-3).
10.20 Office lease, dated July 1998, by and between Netrix Corporation and
Bedminster Capital Funding LLC (incorporated by reference to Exhibit
10.15 to our amended quarterly report on Form 10-Q filed December 21,
1999).
10.21 Office Sublease, dated September 30, 1999, by and between Netrix
Corporation and Scoreboard, Inc. (incorporated by reference to Exhibit
10.14 to our quarterly report on Form l0-Q, filed on November 15,
1999).
10.22 Lease Agreement, dated December 19, 1994, by and between OpenROUTE
Networks, Inc. and WCB Twenty Limited Partnership (incorporated by
reference to Exhibit 10.31 to OpenROUTE's annual report on Form 10-K
for the year ended December 31, 1994).
10.23 Amendment to Lease Agreement, dated December 19, 1994, by and between
OpenROUTE Networks, Inc. and WCB Twenty Limited Partnership, dated May
23, 1997 (incorporated by reference to Exhibit 10.18 to OpenROUTE's
annual report on Form 10-K for the fiscal year ended December 31,
1997).
10.24 Amendment to Lease Agreement, dated December 19, 1994, by and between
OpenROUTE Networks, Inc. and WCB Twenty Limited Partnership, dated
June, 2000 (incorporated by reference to Exhibit 10.26 to the January
2001 S-3).
10.25 Lease Agreement dated May 18, 2000 between Water Tower Campbell LLC and
Netrix Corporation (incorporated by reference to Exhibit 10.1 to our
quarterly report on Form l0-Q, filed on August 15, 2000).
10.26 Termination Agreement dated May 2001 between Nx Networks, Inc. and
Water Tower II, LLC (incorporated by reference to Exhibit 10.6 to our
quarterly report on Form 10-Q filed on May 20, 2001).
10.27 Software License Agreement, dated January 1, 1990, by and between
OpenROUTE Networks, Inc. and Noel Chiappa (incorporated by reference to
Exhibit 10.5 to OpenROUTE's registration statement on Form S-1).
10.28 Manufacturing Agreement, dated September, 1999, by and between Netrix
Corporation and SMT Centre S.F. Inc. (incorporated by reference to
Exhibit 10.8 to our quarterly report on Form 10-Q, as amended, filed on
November 15, 1999).
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Exhibit
Number Description
- ------ -----------
10.29 Master Manufacturing and Purchase Agreement, dated August 1, 1998, by
and between OpenROUTE Networks, Inc., and U.S. Assemblies New England
(incorporated by reference to Exhibit 10.30 to the January 2001 S-3).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of PricewaterhouseCoopers, LLP.
23.4 Consent of Ernst & Young LLP.
23.5 Consent of Kelley Drye & Warren LLP (included in the opinion filed as
Exhibit 5.1 to this registration statement).
24 Power of Attorney (included in signature page).
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
A. To file, during any period in which offers or sales are being
made, a post-effective amendment of this registration
statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933.
(ii) To include in the prospectus any facts or events
arising after the effective date of the registration
statement (or most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
B. That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. To remove from registration by means of post-effective
amendment any of the securities registered which remain unsold
at the termination of the offering.
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to any
charter provisions, by-laws, contract, arrangements, statute
or otherwise, the registrant
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has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the
final adjudication of such issue.
E. Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, as amended, Netrix
Corporation hereby undertakes to file with the Securities and
Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any
rule or regulation of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that Section.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, Nx Networks, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and authorizes this
registration statement to be signed on its behalf by the undersigned, in the
City of Herndon, Commonwealth of Virginia, on May 24, 2001.
Nx NETWORKS, INC.
By: /s/ John DuBois
----------------------------------
John DuBois
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints John DuBois and Peter J. Kendrick,
and each of them, his true and lawful agent, proxy and attorney-in-fact, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to (i) act on, sign and file with the
Securities and Exchange commission any and all amendments (including
post-effective amendments) to this Registration Statement together with all
schedules and exhibits thereto, (ii) act on, sign and file such certificates,
instruments, agreements and other documents as may be necessary or appropriate
in connection therewith, (iii) act on and file any supplement to any prospectus
included in this registration Statement or any such amendment, and (iv) take any
and all actions which may be necessary or appropriate in connection therewith,
granting unto such agents, proxies and attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
Chief Executive Officer and Chairman of the
/s/ John DuBois Board of Directors May 24, 2001
- ------------------------------------ (Principal Executive Officer)
John DuBois
Vice President-Finance and Administration and
/s/ Peter J. Kendrick Chief Financial Officer (Principal Financial and May 24 , 2001
- ------------------------------------ Accounting Officer
Peter J. Kendrick
/s/ Heidi Heiden Director May 24, 2001
- ------------------------------------
Heidi Heiden
/s/ Douglas J. Mello Director May 24, 2001
- ------------------------------------
Douglas J. Mello
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Signature Title Date
--------- ----- ----
/s/ Richard Yalen Director May 24, 2001
- ------------------------------------
Richard Yalen
/s/ Thomas Liebermann Director May 24, 2001
- ------------------------------------
Thomas Liebermann
/s/ Robert Glorioso Director May 24, 2001
- ------------------------------------
Robert Glorioso
Director May 24, 2001
- ------------------------------------
William Yundt
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ITEM 27. EXHIBITS
(a) The exhibits listed below have been filed as part of this
registration statement.
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated September 30, 1999, between Netrix
Corporation and OpenROUTE Networks, Inc. (incorporated by reference to
Exhibit 4.2 to our quarterly report on Form 10-Q filed on August 16,
1999).
2.2 Amendment to Agreement and Plan of Merger between Netrix Corporation
and OpenROUTE Networks, Inc., dated November 9, 1999 (incorporated by
reference to Exhibit 2.2 to our registration statement on Form S-4
filed on November 19, 1999).
2.3 Agreement and Plan of Merger, dated December 31, 1999 among Netrix
Corporation, Nx1 Acquisition Corp. and AetherWorks Corporation
(incorporated by reference to Exhibit 2.1 to our current report on Form
8-K filed on January 14, 2000).
3.1 Amended and Restated Certificate of Incorporation of Netrix Corporation
(incorporated by reference to Exhibit 3.1 to our registration on Form
S-1 filed on September 18, 1992, as amended, File No. 33-50464 (the
"l992 S-1")).
3.2 Amendment to Certificate of Incorporation of Netrix Corporation dated
August 26, 1999 (incorporated by reference to Exhibit 4.8 to our
registration statement on Form S-3, filed on June 18, 1999, as amended,
File No. 333-81109 (the "1999 S-3")).
3.3 Certificate of Merger between Netrix Corporation and OpenROUTE
Networks, Inc. (incorporated by reference to our annual report on Form
10-K for the year ended December 31, 1999).
3.4 Amendment to Certificate of Incorporation of Netrix Corporation dated
September 13, 2000 (incorporated by reference to Exhibit 3.4 to our
Registration Statement on Form S-3 filed on January 17, 2001 File No.
333-53852 (the "January 2001 S-3").
3.5 Amendment to Certification of Incorporation of Nx Networks, Inc. dated
March 2001 (incorporated by reference to Exhibit 4.6 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
4.1 Specimen certificate of common stock of Nx Networks, Inc. (incorporated
by reference to Exhibit 4.1 to the January 2001 S-3).
4.2 Certificate of designations for the form of Series B 8% convertible
preferred stock (incorporated by reference to Exhibit 4.2 to the
January 2001 S-3).
4.3 Form of Warrant (incorporated by reference to Exhibit 4.3 to the
January 2001 S-3).
4.4 Certificate of designations for the form of Series C 8% convertible
preferred stock (incorporated by reference to Exhibit 4.4 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
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Exhibit
Number Description
- ------ -----------
4.5 Certificate of designations for the form of Series D 8% convertible
preferred stock (incorporated by reference to Exhibit 4.5 to our Annual
Report on Form 10-K for the year ended December 31, 2000).
4.6 Subscription Agreement related to the March 2001 private sale of common
stock (incorporated by reference to Exhibit 4.7 to our Annual Report on
Form 10-K for the year ended December 31, 2000).
4.7 Certificate of designations for the form of Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
4.8 Form of warrant related to the Series E 8% convertible preferred stock
(incorporated by reference to Exhibit 4.7 to our Current Report on Form
8-K dated May 16, 2001).
4.9 Securities Purchase Agreement related to the Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
4.10 Registration Rights Agreement related to the Series E 8% convertible
preferred stock (incorporated by reference to Exhibit 4.7 to our
Current Report on Form 8-K dated May 16, 2001).
5.1* Opinion of Kelley Drye & Warren LLP regarding the validity of the
securities being registered.
10.1 Employment Agreement dated December 29, 2000 between Nx Networks, Inc.
and John DuBois (incorporated by reference to Exhibit 10.1 to the
January 2001 S-3).
10.2 Severance Agreement dated November 10, 2000 between Nx Networks, Inc.
and Steven T. Francesco, as amended (incorporated by reference to
Exhibit 10.2 to the January 2001 S-3).
10.3 Employment Agreement between Netrix Corporation and Steven T.
Francesco, dated March 22, 1999 (incorporated by reference to Exhibit
10.5 to our quarterly report on Form l0-Q, filed on November 15, 1999).
10.4 Employment Agreement between Netrix Corporation and Peter J. Kendrick,
dated August 2, 1999 (incorporated by reference to Exhibit 10.6 to our
quarterly report on Form 10-Q, filed on November 15, 1999).
10.5 Employment Agreement between Nx Networks, Inc. and Gregory C.
McNulty, dated January 4, 2000 (incorporated by reference to Exhibit
10.23 to our annual report on Form 10-K for the year ended December 31,
1999).
10.6 Termination Agreement dated March 22, 2001 between Nx Networks, Inc.
and Greg McNulty (incorporated by reference to Exhibit 10.32 to the
Annual Report on Form 10-K for the year ended December 31, 2000).
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Exhibit
Number Description
- ------ -----------
10.7 Employment Agreement dated March 8, 2000 between Nx Networks, Inc. and
Jay R. Schifferli (incorporated by reference to Exhibit 10.6 to the
January 2001 S-3).
10.8 Employment Agreement dated December 29, 2000 between Nx Networks, Inc.
and Jonathan Sachs, together with note and pledge agreement
(incorporated by reference to Exhibit 10.7 to the January 2001 S-3).
10.9 Amended and Restated Promissory Note, dated May 7, 2001, issued by
Jonathan Sachs to Nx Networks, Inc. (incorporated by reference to
Exhibit 10.5 to our quarterly report on Form 10-Q, filed on May 20,
2001).
10.10 Form of Retention Agreement with Executive Officers of Netrix
Corporation (incorporated by reference to Exhibit 10.7 to our quarterly
report on Form l0-Q, as amended, filed on November 15, 1999).
10.11 Consulting Agreement, dated December 29, 2000 between Nx Networks, Inc.
and Keir Kleinknecht (incorporated by reference to Exhibit 10.9 to the
January 2001 S-3).
10.12 Consulting Agreement, dated December 29, 2000 between Nx Networks, Inc.
and Doug Mello (incorporated by reference to Exhibit 10.10 to the
January 2001 S-3).
10.13 1999 Long Term Incentive Plan of Netrix Corporation, as amended
(incorporated by reference to Exhibit 10.9 to our quarterly report on
Form 10-Q filed on November 15, 1999).
10.14 Amendment to the 1999 Long Term Incentive Plan dated March 7, 2001
(incorporated by reference to Exhibit 10.31 to our Annual Report on
Form 10-K for the year ended December 31, 2000).
10.15 1992 Employee Stock Purchase Plan of Netrix Corporation (incorporated
by reference to Exhibit 10.2 to our annual report on Form 10-K for the
year ended December 31, 1995).
10.16 1996 Stock Option Plan of Netrix Corporation (incorporated by reference
to Exhibit 10.4 to our annual report on Form 10-K for the year ended
December 31, 1995).
10.17 Amended and Restated 1997 Stock Option Plan of AetherWorks Corporation
(incorporated by reference to Exhibit 10.16 to the January 2001 S-3).
10.18 1991 Restated Stock Option Plan of OpenROUTE Networks, Inc.
(incorporated by reference to Exhibit 19.1 to OpenROUTE's quarterly
report on Form 10-Q for the quarter ended June 27, 1992).
10.19 Settlement Agreement and Release dated December 29, 2000 by and among
Nx Networks and certain of the former owners of AetherWorks Corporation
(incorporated by reference to Exhibit 10.21 to the January 2001 S-3).
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Exhibit
Number Description
- ------ -----------
10.20 Office lease, dated July 1998, by and between Netrix Corporation and
Bedminster Capital Funding LLC (incorporated by reference to Exhibit
10.15 to our amended quarterly report on Form 10-Q filed December 21,
1999).
10.21 Office Sublease, dated September 30, 1999, by and between Netrix
Corporation and Scoreboard, Inc. (incorporated by reference to Exhibit
10.14 to our quarterly report on Form l0-Q, filed on November 15,
1999).
10.22 Lease Agreement, dated December 19, 1994, by and between OpenROUTE
Networks, Inc. and WCB Twenty Limited Partnership (incorporated by
reference to Exhibit 10.31 to OpenROUTE's annual report on Form 10-K
for the year ended December 31, 1994).
10.23 Amendment to Lease Agreement, dated December 19, 1994, by and between
OpenROUTE Networks, Inc. and WCB Twenty Limited Partnership, dated May
23, 1997 (incorporated by reference to Exhibit 10.18 to OpenROUTE's
annual report on Form 10-K for the fiscal year ended December 31,
1997).
10.24 Amendment to Lease Agreement, dated December 19, 1994, by and between
OpenROUTE Networks, Inc. and WCB Twenty Limited Partnership, dated
June, 2000 (incorporated by reference to Exhibit 10.26 to the January
2001 S-3).
10.25 Lease Agreement dated May 18, 2000 between Water Tower Campbell LLC and
Netrix Corporation (incorporated by reference to Exhibit 10.1 to our
quarterly report on Form l0-Q, filed on August 15, 2000).
10.26 Termination Agreement dated May 2001 between Nx Networks, Inc. and
Water Tower II, LLC (incorporated by reference to Exhibit 10.6 to our
quarterly report on Form 10-Q filed on May 20, 2001).
10.27 Software License Agreement, dated January 1, 1990, by and between
OpenROUTE Networks, Inc. and Noel Chiappa (incorporated by reference to
Exhibit 10.5 to OpenROUTE's registration statement on Form S-1).
10.28 Manufacturing Agreement, dated September, 1999, by and between Netrix
Corporation and SMT Centre S.F. Inc. (incorporated by reference to
Exhibit 10.8 to our quarterly report on Form 10-Q, as amended, filed on
November 15, 1999).
10.29 Master Manufacturing and Purchase Agreement, dated August 1, 1998, by
and between OpenROUTE Networks, Inc., and U.S. Assemblies New England
(incorporated by reference to Exhibit 10.30 to the January 2001 S-3).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of PricewaterhouseCoopers, LLP.
23.4 Consent of Ernst & Young LLP.
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Exhibit
Number Description
- ------ -----------
23.5 Consent of Kelley Drye & Warren LLP (included in the opinion filed as
Exhibit 5.1 to this registration statement).
24 Power of Attorney (included in signature page).
* To be filed by amendment.
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