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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Radius Inc.
(Name of Issuer)
Common Stock, No Par Value
(Title of Class of Securities)
750470 20 5
(CUSIP Number)
Raymond Sadowski
Senior Vice President and
Chief Financial Officer
Avnet, Inc.
80 Cutter Mill Road
Great Neck, New York 11021
(516) 466-7000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 27, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box. [ ]
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
1
CUSIP No. 750470 20 5
1 NAME OF REPORTING PERSON: Avnet, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 11-1890605
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e): [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION: New York
NUMBER OF 7 SOLE VOTING POWER: 1,275,000 shares
SHARES
BENEFICIALLY 8 SHARED VOTING POWER: -0-
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER: 1,275,000 shares
REPORTING
PERSON WITH 10 SHARED DISPOSITIVE POWER: -0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
1,275,000 shares (See Items 4 and 5.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.33%
14 TYPE OF REPORTING PERSON: CO
2
Item 1. Security and Issuer.
This statement relates to the Common Stock, no par value (the "Common
Stock"), of Radius Inc. (the "Company"), a California corporation having its
principal executive office at 215 Moffett Park Drive, Sunnyvale, California
94089.
Item 2. Identity and Background.
This statement is being filed by Avnet, Inc. ("Avnet"), a New York
corporation whose principal business is the distribution of electronic
components and computer products principally to industrial customers. The
address of Avnet's principal business and principal office is 80 Cutter Mill
Road, Great Neck, New York 11021.
The names, business addresses and present principal occupations of the
directors and executive officers of Avnet are listed below. All such directors
and executive officers are citizens of the United States except Keith Williams,
who is a citizen of the United Kingdom. Unless otherwise indicated below, the
principal business address of each such director and executive officer is Avnet,
Inc., 80 Cutter Mill Road, Great Neck, New York 11021.
Name and Principal
Business Address Principal Occupation
---------------- --------------------
Eleanor Baum* Dean of the School of Engineering of The Cooper
The Cooper Union Union, New York, NY.
51 Astor Place
New York, NY 10003
Gerald J. Berkman* Retired Senior Partner of Berkman & Leff,
stock brokers.
J. Veronica Biggins* Consultant to Heidrick & Struggles, an
Heidrick & Struggles executive search firm.
303 Peachtree Street NE
Atlanta GA 30308
Joseph F. Caligiuri* Retired Executive Vice President of Litton
Industries, Inc., a provider of resource
exploration services, industrial automation
systems and advanced electronic and
defense systems.
- --------
*Director of Avnet.
3
Name and Principal
Business Address Principal Occupation
---------------- --------------------
Sylvester D. Herlihy* Senior Vice President and Secretary of Avnet and
President of Avnet's Channel Master division.
Ehud Houminer* Professor and Executive-in-Residence at Columbia
Columbia Graduate School Graduate School of Business, Columbia University,
of Business New York, NY, and a principal of Lead, Yavitz and
Room 526, Uris Hall Associates, a management consulting firm.
3022 Broadway
New York, NY 10027
Leon Machiz* Chairman of the Board and Chief Executive Officer
of Avnet.
Salvatore J. Nuzzo* Chairman and CEO of Datron Inc., a manufacturer of
Datron Inc. aerospace and defense products; Chairman of the
8 Griffin Road North Board of Marine Mechanical Corp., a manufacturer
Windsor, CT 06095 of defense products; Chairman of the Board and
director of SL Industries, Inc., a manufacturer of
industrial/communications products.
Frederic Salerno* Vice Chairman, Finance and Business Development,
1095 Avenue of the NYNEX Corporation, a telecommunications company.
Americas
New York, NY 10013
David Shaw* Consultant to Avnet and retired Senior Vice
President of Avnet.
Roy Vallee* Vice Chairman of the Board, President and Chief
2617 South 46th Street Operating Officer of Avnet.
Phoenix, AZ 85034
Keith Williams* Senior Vice President of Avnet and President of
6 Meadway Court Avnet's International Electronic Marketing Group.
Rutherford Close
Meadway
Stevenage, Herts
England
- --------
*Director of Avnet.
4
Name and Principal
Business Address Principal Occupation
---------------- --------------------
Frederick S. Wood* Consultant to General Dynamics Corporation,
a supplier to the United States Defense
Department and the aerospace industry.
David R. Birk Senior Vice President and General Counsel of Avnet.
Steven C. Church Senior Vice President of Avnet and President of its
OMG Marketing Group.
Anthony DeLuca Senior Vice President and Chief Information Officer
of Avnet.
Burton Katz Senior Vice President of Avnet and President of its
Time Electronics Division.
Raymond Sadowski Senior Vice President, Chief Financial Officer and
Assistant Secretary of Avnet.
Richard Ward Senior Vice President of Avnet and President of its
Computer Marketing Group.
Charles Smith Vice President of Avnet and President of its
Hamilton Hallmark division.
John T. Clark Vice President of Avnet.
John F. Cole Controller of Avnet.
Stephanie A. Wagoner Vice President and Treasurer of Avnet.
During the past five years, neither Avnet nor (to the best knowledge of
Avnet) any of its executive officers or directors listed above has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, as a result of which proceeding
it, he or she was or is subject to a judgment, decree or final order
- --------
*Director of Avnet.
5
enjoining future violations of, or prohibiting or mandating activities subject
to, United States federal or state securities laws, or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds and Other Consideration
As more fully described in Item 4 herein, on September 27, 1996, Avnet
acquired 3,188,966 shares of Common Stock (the "Shares"), and rights (the
"Rights") to receive an additional 970,555 shares of Common Stock (the "Rights
Shares"), in satisfaction of claims of approximately $4,000,000. Such claims
resulted from the Company's purchases from Avnet of electronic components for
the Company's systems business.
Item 4. Purpose of Transaction
As of June 30 1996, the Company was delinquent in its accounts payable and
had a negative net worth, and several of its vendors had initiated legal action
to collect allegedly delinquent accounts. As a result, the Company established
an unofficial unsecured creditors committee (the "Committee") consisting of
eight of the Company's larger unsecured creditors, in an effort to resolve the
Company's delinquent accounts payable, capital deficiency and creditor
litigation issues outside of insolvency or bankruptcy proceedings. Avnet is a
member of the Committee. The Company, the Committee and IBM Credit Corporation,
the Company's secured creditor ("IBM Credit"), agreed to a plan (the "Plan"),
pursuant to which, among other things, (i) IBM Credit received 750,000 shares of
the Company's Series A Convertible Preferred Stock (the "Preferred Stock") and
warrants to purchase 600,000 shares of Common Stock, (ii) Mitsubishi Electronics
America, Inc., an unsecured creditor and continuing supplier of the Company,
received warrants to purchase 200,000 shares of Common Stock, and (ii)
Mitsubishi and the Company's other unsecured creditors received either shares of
Common Stock or, in the case of certain smaller creditors, a discounted cash
payment, in satisfaction of their claims. Pursuant to the Plan, unsecured
creditors received (a) an aggregate of 36,294,198 shares of Common Stock, or 60%
of the outstanding Common Stock after consummation of the Plan, and (b) rights
to receive an aggregate of 11,046,060 additional shares of Common Stock in the
event that all the Preferred Stock is converted into Common Stock, so that the
number of shares of Common Stock received by such unsecured creditors continues
to represent 60% of the outstanding Common Stock after such conversion.
The Plan is set forth in (i) a Term Sheet executed effective July 11, 1996,
by the Company, IBM Credit and the Committee (the "Term Sheet"), (ii) a letter
dated July 11, 1996, from L. Morris Dennis to Garrett L. Cecchini and Harvey S.
Schochet, and agreed to by the Company, IBM Credit and the Committee, which
contained
6
additional terms and conditions of the Plan (the "Cover Letter"), and (iii) an
Addendum to the Term Sheet executed in July 1996 by the Company, IBM Credit and
the Committee, which changed certain terms of the Plan (the "Addendum"). The
Term Sheet is filed herewith as Exhibit 1, the Cover Letter is filed herewith as
Exhibit 2, and the Addendum is filed herewith as Exhibit 3, and each of such
documents is hereby incorporated herein by reference.
Avnet received the Shares and the Rights upon consummation of the Plan on
September 27, 1996, pursuant to a Subscription Agreement dated as of August 30,
1996, between Avnet and the Company (the "Subscription Agreement"). The
Subscription Agreement is filed herewith as Exhibit 4 and is hereby incorporated
herein by reference.
Avnet holds the Shares and the Rights solely for investment purposes and
intends to sell them at the earliest appropriate opportunity. As more fully
described in Item 5 herein, during the period from March 11, 1997, through April
18, 1997, Avnet disposed of an aggregate of 1,913,966 of the Shares in open
market transactions on the Nasdaq SmallCap Market for gross proceeds of
$597,522. Avnet intends to dispose of the remainder of the Shares, and may
consider disposing of the Rights and, if issued, the Rights Shares, when lawful
at any time and from time to time, depending upon market conditions and
prevailing prices for the Common Stock. See Item 6 of this Statement.
Apart from the foregoing, Avnet has no plan or proposal which may relate to
or would result in: (a) the acquisition by any person of additional securities
of the Company, or the disposition of securities of the Company; (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or of any of its
subsidiaries; (d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; (e) any material
change in the present capitalization or dividend policy of the Company; (f) any
other material change in the Company's business or corporate structure; (g)
changes in the Company's charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Company by any
person; (h) causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (j) any action similar to any of those enumerated
above. Avnet reserves the right to adopt such plans or proposals in the future.
7
Item 5. Interest in Securities of Issuer
(a) and (b) On September 27, 1996, pursuant to the Plan, Avnet became the
beneficial owner, with sole voting and dispositive power, of (i) 3,188,966
shares of Common Stock (the "Shares"), which represented approximately 5.86% of
the 54,408,000 shares of Common Stock outstanding on September 30, 1996, as
reported in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, and (ii) Rights to receive an additional 970,555 shares of
Common Stock upon conversion of the Preferred Stock into Common Stock, as
described in the next paragraph. As a result of the sales of Common Stock
described in Item 5(c) below, Avnet currently is the beneficial owner, with sole
voting and dispositive power, of (i) 1,275,000 shares of the Common Stock, which
represents approximately 2.33% of the 54,660,475 shares of the Common Stock
outstanding on February 10, 1997, as reported in the Company's Quarterly Report
on Form 10-Q for the quarterly period ended December 28, 1996, and (ii) Rights
to receive an additional 970,555 shares of Common Stock upon the conversion of
the Preferred Stock into Common Stock, as described in the next paragraph.
Pursuant to the rules of the Securities and Exchange Commission, Avnet is
not currently deemed to be the beneficial owner of the Rights Shares, but only
if and when all of the 750,000 shares of Preferred Stock shall have been
converted into Common Stock. Avnet has been advised that the Preferred Stock is
subject to conversion from time to time, in whole or in part, at the option of
the holder into an aggregate of 5,523,030 shares of Common Stock. In addition, a
portion of the Preferred Stock is convertible at the Company's option into
shares of Common Stock at any time if the trading price of the Common Stock
exceeds, for a period of 15 consecutive trading days, a price per share equal to
$0.815 and a registration statement with respect to the Common Stock issuable
upon conversion of the Preferred Stock is in effect. If the foregoing conditions
are satisfied, 93,750 shares of Preferred Stock would be convertible at the
option of the Company into an aggregate of 759,413 shares of Common Stock (or
8.1004 shares of Common Stock for each share of Preferred Stock). No more than
93,750 shares of Preferred Stock may be so converted in any fiscal quarter. The
trading price of the Common Stock must then exceed $0.815 per share for 15
trading days in a subsequent quarter before an additional 93,750 shares of
Preferred Stock would be convertible.
(c) The following table sets forth all transactions by Avnet in the Common
Stock since September 27, 1996, the date on which Avnet acquired the Shares. All
such transactions were sales of the Shares in open market transactions on the
Nasdaq SmallCap Market. Merrill Lynch, Pierce, Fenner & Smith, Inc. acted as
Avnet's broker
8
in all these sales. To Avnet's best knowledge, none of its directors and
executive officers identified in Item 2 of this Statement have engaged in any
transactions in the Common Stock since September 27, 1996.
Trade
date Shares Price
---- ------ -----
03/11/97 15,000 $0.37500
03/12/97 150,000 0.31250
03/13/97 173,966 0.28125
03/14/97 75,000 0.28125
03/17/97 50,000 0.31250
03/18/97 25,000 0.31250
03/19/97 25,000 0.31250
03/20/97 25,000 0.31250
03/21/97 50,000 0.31250
03/24/97 100,000 0.31250
03/27/97 50,000 0.31250
04/02/97 25,000 0.28125
04/03/97 125,000 0.28125
04/04/97 75,000 0.28125
04/07/97 25,000 0.31250
04/07/97 250,000 0.28125
04/08/97 25,000 0.31250
04/09/97 25,000 0.31250
04/10/97 75,000 0.31250
04/11/97 50,000 0.31250
04/14/97 100,000 0.31250
04/15/97 25,000 0.37500
04/15/97 75,000 0.34375
04/16/97 25,000 0.37500
9
Trade
date Shares Price
---- ------ -----
04/16/97 25,000 $0.34375
04/17/97 50,000 0.37500
04/17/97 50,000 0.34375
04/18/97 25,000 0.40625
04/18/97 125,000 0.37500
-------
Total 1,913,966
=========
Gross Proceeds: $597,522
Avnet intends to dispose of the remainder of the Shares, and may consider
disposing of the Rights and, if issued, the Rights Shares, when lawful at any
time and from time to time, depending upon market conditions and prevailing
prices for the Common Stock.
(d) Not applicable.
(e) As a result of the sales described in paragraph (c) of this Item 5,
Avnet has ceased to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock and thus is no longer subject to the
requirements of Section 13(d) of the Securities Exchange Act of 1934 with
respect to its beneficial ownership of Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
The Company and Avnet are parties to a Registration Rights Agreement dated
as of August 30, 1996, (the "Registration Rights Agreement"). The Registration
Rights Agreement is being filed herewith as Exhibit 5 and is hereby incorporated
herein by reference. Pursuant to the Registration Rights Agreement, on September
20, 1996, the Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-1, Registration No. 333-12417 (the
"Registration Statement"), for an offering to be made on a continuous basis,
covering, among other things, the resale by Avnet of the Shares and the Rights
Shares. The Registration Statement was declared effective by the Securities and
Exchange Commission as of November 12, 1996. Pursuant to the Registration Rights
Agreement, the Company is obligated to keep the Registration Statement effective
until September 12, 1998, subject to earlier termination in certain events.
10
Reference is made to Item 4 of this Statement for a description of
additional agreements, to which Avnet is a party, with respect to the securities
of the Company.
Item 7. Material to be Filed as Exhibits
1. Term Sheet executed effective July 11, 1996, by Radius Inc., IBM Credit
Corporation, and the Unofficial Creditors Committee of Radius Inc.
2. Letter dated July 11, 1996, from L. Morris Dennis to Garrett L. Cecchini
and Harvey S. Schochet, and agreed to by Radius, Inc., IBM Credit Corporation
and the Unofficial Creditors Committee of Radius Inc.
3. Addendum to Term Sheet executed in July 1996 by Radius Inc., IBM Credit
Corporation and the Unofficial Creditors Committee of Radius Inc.
4. Subscription Agreement dated as of August 30, 1996, by and between
Radius Inc. and Avnet, Inc.
5. Registration Rights Agreement dated as of August 30, 1996, between
Radius, Inc. and Avnet, Inc.
11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 24, 1997 AVNET, INC.
By:/s/Raymond Sadowski
----------------------
Raymond Sadowski
Senior Vice President and
Chief Financial Officer
12
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------ -------------------
1 Term Sheet executed effective July 11, 1996, by
Radius Inc., IBM Credit Corporation, and the
Unofficial Creditors Committee of Radius Inc.
2 Letter dated July 11, 1996, from L. Morris Dennis to
Garrett L. Cecchini and Harvey S. Schochet, and
agreed to by Radius Inc., IBM Credit Corporation and
the Unofficial Creditors Committee of Radius Inc.
3 Addendum to Term Sheet executed in July 1996 by
Radius Inc., IBM Credit Corporation and the
Unofficial Creditors Committee of Radius Inc.
4 Subscription Agreement dated as of August 30, 1996,
by and between Radius Inc. and Avnet, Inc.
5 Registration Rights Agreement dated as of August 30,
1996, between Radius Inc. and Avnet, Inc.
13
EXHIBIT 1
TERM SHEET
1. GENERAL
a. The largest unsecured creditors, i.e. those with claims in excess of
$50,000, ("Major Creditors") shall convert all of their unsecured debt
(approximately $45,000,000) into Radius' common stock.
b. A convenience class of unsecured creditors, i.e. those with claims less
than $50,000, ("Convenience Class") shall be given the election of receiving a
portion of their claim in cash or converting into equity on same terms as Major
Creditors.
c. IBM Credit Corporation ("IBM Credit") shall agree to restructure its
loan, including a conversion of a portion of its debt into senior preferred
stock convertible into Radius' common stock.
2. CONVERSION OF DEBT INTO EQUITY BY MAJOR CREDITORS
a. Debt of Major Creditors will include "component claims" of SCI Avex, MSL
and Mitsubishi.
b. Debt owed to Major Creditors shall be converted into the number of
shares of the common stock of Radius which will, together with common stock
issued to the members of the Convenience Class electing to convert their debt
into common stock, represents 60% of the issued and outstanding common stock of
Radius.
i. The shares of common stock shall be allocated among
the Major Creditors and the electing members of the
Convenience Class on a prorate basis, based upon
their allowed claims. Appropriate amounts of common
stock will be reserved for any disputed claims.
Determination of allowed and disputed claims shall be
made by Radius with the concurrence of the Creditors'
Committee by the Closing Date.
ii. The common stock issued to the Major Creditors shall
have the same rights and privileges as the currently
outstanding common stock of Radius, including the
right to receive the same dividends and the same
right to vote.
iii. The agreement of all Major Creditors to the
conversion of their claims into shares of said common
stock shall be a condition of the obligations of
Radius, IBM Credit and the Unofficial Creditors
Committee of Radius, Inc. ("Committee") under this
Term Sheet. Radius, IBM Credit and the Committee
may elect to waive this requirement that all
of the Major Creditors must convert.
iv. The agreement of Major Creditors, holding at least
75% of the total amount of claims held by Major
Creditors, to hold their shares in a trust or other
arrangement to insure a stable market price for the
stock issued to the Major Creditors, shall be a
condition of the obligations of Radius, IBM Credit
and the Committee under this Term Sheet.
3. TREATMENT OF THE CONVENIENCE CLASS
a. This class consists of creditors of Radius, each holding claims in an
amount less than $50,000, numbering approximately 290 creditors to whom is owed
approximately $1,900,000.
b. Radius will initially offer to each creditor in the Convenience Class
payment, on the Closing Date, an amount not to exceed 20% of their allowed
claim, in full payment of said claim. The existing Committee will assist Radius
in obtaining said consents.
c. Creditors in the Convenience Class, who do not accept the offer
described in sub-paragraph III.B. above, may exchange their claim for common
stock on the same terms set forth in paragraph II.
d. The agreement of creditors in the Convenience Class numbering at least
95% of said creditors and holding at least 95% of the total amount of claims
held by all creditors in the Convenience Class, to accept either the payment
referred to in sub-paragraph III.B. or the conversion of debt into common stock
referred to in sub-paragraph III.C., shall be a condition of the obligations of
Radius, IBM Credit and the Committee under this Term Sheet. Radius, IBM Credit
and the Committee may elect to waive this requirement.
e. IBM Credit shall advance to Radius up to $500,000, to be used, as
determined by Radius, to make the payments to the creditors in the Convenience
Class, pursuant to the Working Line of Credit referred to in paragraph IV.B.
below. Radius will not pay more than $500,000 to the Convenience Class in
connection with settling the claims of the Convenience Class.
4. RESTRUCTURE OF IBM CREDIT DEBT
IBM Credit will restructure its existing debt of approximately $23,000,000 as
follows:
a. IBM Credit will convert $3,000,000 of its existing debt into preferred
stock, convertible into the common stock of Radius.
2
The rights and preferences of the preferred stock are as follows: i. The
preferred stock shall at all times be senior to any other preferred stock and
have a liquidation preference of $3,000,000 plus any accrued but unpaid
dividends (collectively the "Liquidation Value"). ii. The preferred stock shall
be convertible into the number of shares of the common stock of Radius, which
will represent 7% of the issued and outstanding common stock of Radius as of the
date of the conversion into common stock, excluding common shares issued
pursuant to the warrants or as dividends on the preferred stock and any other
equity issuances authorized by Radius and approved by IBM Credit after the
Closing Date. The common stock issued to IBM Credit, on the conversion of the
preferred stock, shall have the same rights and privileges as the currently
outstanding common stock of Radius, including the right to receive the same
dividends and the same right to vote. iii. The preferred stock shall receive 104
cumulative dividends, which shall, at the election of Radius, be payable either
in cash or in additional shares of common stock of Radius, at the market price
in effect on the date the dividend is due, which shall have the same rights and
privileges as the common stock to be issued to IBM Credit on the conversion of
the preferred stock into common stock. iv. The preferred stock shall be
redeemable, at IBM Credit's election, at 100% of Liquidation Value, upon the
sale of Radius' "Splash" stock or such other non-ordinary course of business
events as may be agreed to by Radius, IBM Credit, and the Committee prior to the
Closing Date. In the event IBM Credit does not so elect, then Radius can either,
at IBM Credit's election, (i) redeem the preferred stock at 110% of the
Liquidation Value or (ii) convert the preferred stock to common stock pursuant
to paragraph IV.A.2. above. v. Radius can elect to convert the preferred stock
into common stock, at any time more than ninety (90) days after the Closing
Date, when the average closing market price of Radius' common stock is more than
150% of the conversion price for a period of over fifteen consecutive trading
days, at a premium of 10% (i.e. the shares shall be converted into common stock
representing 7.7% of the outstanding common stock rather than 7%). vi. The
preferred stock, the common stock into which it is convertible, the warrants,
the common stock issuable in connection with the exercise of the warrants and
the common stock which may be issued as dividends on the preferred stock, shall
be registered with the SEC at the time of the issuance of the preferred stock.
IBM Credit shall have the right to demand registration of any common stock
issued to it by Radius once per year for two years after the last such issuance.
After the expiration of the initial registration statement by Radius (on form
S-l), at IBM Credit's request, Radius shall file a form S-3 registration
statement with the SEC as soon as permitted by the SEC and shall use its best
efforts to make such registration statement effective as soon as practicable
after notice by IBM Credit of its intention to sell common stock.
3
b. IBM Credit and Radius shall negotiate a new loan agreement between IBM
Credit and Radius ("Working Line of Credit"), upon terms and conditions
satisfactory to IBM Credit and Radius, with a credit limit of at least
$5,000,000 subject to the following: i. The initial amount of the existing
indebtedness which shall continue to be subject to the Working Line of Credit
shall be the amount of the "borrowing base" upon which IBM Credit is required to
loan pursuant to the Working Line of Credit, as of the Closing Date, plus the
amount to be advanced pursuant to paragraph III.E. above. ii. IBM Credit shall,
upon the request of Radius, be required to make advances to Radius, as required
by Radius' business from time to time, to the extent of the "borrowing base",
without taking into account the amount advanced pursuant to paragraph III.E.
above, provided Radius, at the time of said request, is in full compliance with
the terms and conditions of said Working Line of Credit and the Term Loan
referred to below. iii. The interest rate on the amount owing on the Working
Line of Credit up to the amount of the "borrowing base" shall be prime plus
2.25%; the interest rate on any portion of the amount owing in excess of the
"borrowing base" shall be prime plus 3.25%. iv. The "borrowing base" shall be:
(i) the lesser of 10% of the gross value of eligible inventory or $500,000; plus
(ii) 80% of the value of eligible domestic accounts receivable; plus (iii) the
lesser of 50% of the gross value of eligible QMS (Japan) and Computers Unlimited
(Europe) accounts receivable or $500,000.
c. The balance of Radius' existing indebtedness to IBM Credit, as of the
Closing Date, shall be converted into a term loan with a term of four years (the
"Term Loan") to be paid follows: i. The interest rate on the Term Loan shall be
prime plus 3.25% and shall be payable with the interest on the Working Line of
Credit. ii. Principal on the Term Loan shall (subject to the minimum payments
specified below) be paid as follows: (i) 50% from the Net Operating Cash Flow of
Radius; (ii) 100% of any Non-Operating Cash Flow of Radius (i.e. net proceeds
from the disposition of assets of Radius, other than in the ordinary course of
business); and (iii) 10% of any new equity invested in Radius during the term of
the Term Loan. Net Operating Cash Flow and Non-Operating Cash Flow of Radius
shall be defined in a manner approved by Radius, IBM Credit and the Committee
prior to the Closing Date. iii. The minimum payments due on the Term Loan, from
Net Operating Cash Flow, shall be 37.5% of the Net Operating Cash Flow projected
by Radius, on schedules prepared by Radius and approved by IBM Credit from time
to time, during the term of the Term Loan. Failure of Radius to achieve the
levels of cash flow projected shall constitute a "performance default" under the
loan documents and failure of Radius to pay the amounts due pursuant to the
foregoing shall constitute a "payment default" under the loan documents. iv. IBM
Credit shall have the right to require Radius to sell the following percentages
of its interest in the "Splash stock", on a cumulative basis, and to apply the
proceeds received from said sale to the
4
payment of the Term Loan as follows: (i) up to 50% of Radius' interest in said
stock at any time within one year after the registration of said stock as part
of a public offering of the stock; (ii) up to 25% of Radius' interest in said
stock at any time during each of the second and third years after the
registration of said stock as part of a public offering of the stock (plus any
unsold portion of the Radius' interest in said stock which IBM Credit could have
required Radius to sell in a previous year); (iii) up to 100% of Radius'
interest in said stock, notwithstanding the provisions of paragraphs (a) and (b)
above, at any time after the registration of said stock as part of a public
offering of the stock, that the balance of the Term Loan shall be more than 90%
of the market value of Radius' interest in said stock.
d. The Working Line of Credit and the Term Loan shall be
cross-collateralized and cross-defaulted and shall include customary positive
and negative covenants including a prohibition on common stock dividends while
amounts are owing on the Working Line of Credit and the Term Loan.
e. All Non-Operating Cash Flow, including all proceeds from any collateral
held by IBM Credit to secure its indebtedness, shall be applied in the following
order: i. first, to the payment of any amounts advanced by IBM Credit, on or
after the Closing Date, in excess of the amount of the "borrowing base" upon
which IBM Credit is required to loan pursuant to the terms and conditions of
Working Line of Credit, including the $500,000 to be advanced pursuant to
paragraph III.; ii. second, to the payment of any amounts outstanding on the
Term Loan; iii. third, at IBM Credit's election, to the redemption of any
preferred stock received by IBM Credit on the conversion of a portion of its
debt pursuant to paragraph IV.A. of this Term Sheet; and iv. finally, to the
payment of any amounts owing on the Working Line of Credit.
f. IBM Credit and Radius will agree on what portion of the remaining Net
Operating Cash Flow, which is not required to be applied to the Term Loan, shall
be used to repay the amount to be advanced pursuant to paragraph III.E.
5. STOCK RESTRICTIONS AND RIGHTS.
a. The issuance of the common stock (and the preferred stock convertible
into common stock, warrants, the common stock issuable in connection with the
exercise of the warrants and the common stock which may be issued as dividends
on the preferred stock) referred to herein shall be in compliance with all
applicable federal and state securities laws. Radius shall register said
securities with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, and take all action required by applicable federal and
state securities laws so that said securities may be freely traded. Radius shall
remain current in all of
5
its required filings pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and all applicable state securities laws.
b. It is understood that Radius may issue additional shares of common stock
to provide incentive compensation to management of Radius, provided that the
number of shares to be issued, when combined with shares to be issued on the
exercise of any existing stock options, shall not exceed 10% of the common stock
issued and outstanding as of the Closing Date (counting any common stock to be
issued to IBM Credit upon the conversion of its preferred stock). The issuance
of said additional shares of common stock shall not reduce the interest of the
Major Creditors, together with the members of the Convenience Class electing to
convert their debt into common stock, below 60% of the outstanding common stock,
or the interest of IBM Credit below 7% of the outstanding common stock. Any
dilution of ownership due to the issuance of said additional shares of common
stock shall be to the currently issued and outstanding common stock. Prior to
the Closing Date, no additional shares, nor options or other rights to acquire
shares in Radius shall be issued or granted other than in connection with
Radius' existing stock option plans (which will not dilute the unsecured
creditors' 60% and IBM Credit's 7% interests in Radius).
6. TERMINATION OF OVERRIDE PAYMENTS. Upon execution of this Term Sheet, and for
so long as the parties shall continue to pursue their efforts to carry out the
terms of this Term Sheet, each of the members of the Committee who have
continued to supply product to Radius, on condition that Radius pay to them an
amount equal to 110% of the price of the new product shipped, shall cease said
requirement for payment of said override.
7. WARRANTS TO CREDITORS. In consideration for the credit which they have
extended and may extend in the future, the following creditors shall receive
warrants to purchase shares of Radius' common stock as follows:
a. IBM Credit shall receive warrants to purchase 600,000 shares;
b. Any Major Creditor who shall extend to Radius open credit terms, agreed
to by Radius and said Major Creditor, shall receive warrants to purchase a
number of shares computed on a mutually agreeable basis (provided that the
warrants issued to all Major Creditors shall not exceed 600,000 shares).
c. The exercise price shall be the average market price of Radius' common
stock during the period from five trading days prior to the Closing Date until
five trading days following the Closing Date, not to exceed $1.25 per share.
6
d. The warrants may be exercised, at any time, during the four years
following the Closing Date, provided that at the time of said exercise, in the
case of a Major Creditor who has extended open credit terms to Radius, said
Major Creditor has not ceased extending said credit for any reason other than
Radius' failure to pay amounts owing to said Major Creditor in accordance with
said terms.
8. OTHER DOCUMENTS. This Term Sheet sets forth the broad terms of an agreement
in principle between Radius, IBM Credit and the Committee concerning the subject
matter hereof and is intended to provide the framework for further
documentation. The provisions set forth above represent certain key terms that
have been the basis of the parties' discussions to date and will continue to
serve as the basis of the various agreements, documents and instruments
(relating to the restructuring, recapitalization and related transactions
referenced above) to be negotiated and documented in order for there to be a
definitive and binding agreement among the parties. Accordingly, this agreement
in principle is not intended to confer any legal or equitable rights or to
impose any legal or equitable obligations whatsoever, of any kind, character or
nature on any party. Such agreements, documents and instruments, when they
become fully effective in accordance with their terms, shall supersede in their
entirety this Term Sheet. All parties agree to maintain the confidentiality of
the terms provided in this document, except as required by law.
9. TIMETABLE. All documents and all actions necessary to carry out the terms and
conditions of this Term Sheet and the conversion shall be executed and completed
by September 30, 1996, or such other date as may be mutually agreed by the
parties to this Term Sheet ("Closing Date").
Executed effective this 11 day of July, 1996.
RADIUS, INC. IBM CREDIT CORPORATION
by /s/Charles Berger by /s/Philip Morse
Charles Berger, President Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA
by
Carl Carlson, Co-Chairman
7
SCI SYSTEMS by
by
Michael Ledbetter, Co-Chairman
AVNET EMG
MANUFACTURERS' SERVICES LTD.
by
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by
by
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by
David Vetter
8
EXHIBIT 2
July 11, 1996
Garrett L. Cecchini, Esq.
Wright, Robinson, Osthimer & Tatum
44 Montgomery Street, 18th Floor
San Francisco, CA 94104-4705
Harvey S. Schochet, Esq.
Steefel, Levitt & Weiss
One Embarcadero Center, 29th Floor
San Francisco, CA 94111
Re: Recapitalization of Radius, Inc.
Gentlemen:
Attached you will find the final draft of the Term Sheet containing the
agreement in principle which we believe has been reached regarding the
recapitalization of Radius, Inc. The Term Sheet contemplates that the
recapitalization will be accomplished by an out of court voluntary arrangement
between Radius and its creditors which the Creditors Committee will actively
support. It was agreed, however, that if it becomes apparent that the
recapitalization cannot be accomplished by an out of court voluntary
arrangement, a petition for reorganization of Radius under Chapter 11 of the
United States Bankruptcy Code will be filed to consummate the recapitalization
plan. The following is a summary of the procedure for the attempt to achieve the
plan voluntarily and filing the pre-packaged Chapter 11 if it becomes necessary.
a. A good faith attempt shall be made by all parties to achieve the
recapitalization of Radius, in the manner set forth in the Term Sheet, without
the necessity of filing a petition for reorganization of Radius under Chapter 11
of the United States Bankruptcy Code. To that end, the parties shall do the
following:
i. The Committee shall, within two (2)days following execution of the Term
Sheet by Radius and IBM Credit send out a bulletin to the creditors of Radius
indicating:
(i) that the Committee has met and conferred with Radius and IBM
Credit and agreed in principle that it believes that it would be in the
best interests of all unsecured creditors to compromise or convert their
claims into stock of Radius upon the terms set forth in the Term Sheet;
(ii) that Radius will, subject to the registration of the necessary
stock, make an offer to the creditors to compromise or convert their claims
into stock of Radius upon the terms set forth in the Term Sheet;
(iii) that the Committee recommends that the creditors accept such
offer from Radius when received;
(iv) that if the percentage of creditors specified in the Term Sheet
does not accept said offer, a petition for reorganization of Radius under
Chapter 11 of the United States Bankruptcy Code, will be filed proposing a
plan of reorganization consistent with the Term Sheet; and
(v) that the creditors will be receiving an informational package
concerning Radius and a ballot to elect how their claims will be treated.
b. In the event that it should become necessary because of:
i. the failure of Radius to deliver to counsel for the Committee the items
specified herein in paragraph C in a timely manner;
ii. an inability to comply with federal or state securities laws required
to issue the preferred and common stock and warrants provided for in the Term
Sheet (including an inability to have the registration statement become
effective on or before September 30, 1996, (the "Closing Date");
iii. an inability to obtain the necessary consents of creditors as
specified in the Term Sheet, especially in the convenience class;
iv. the necessity of staying litigation against Radius which would
otherwise unreasonably interfere with Radius' ability to continue to operate its
business;
v. protection of Radius' Board of Directors, IBM Credit or the Committee
from claims related to their negotiations or other dealings with one another;
vi. protection of Radius and its creditors from materially adverse tax
consequences from the conversion of debt into stock, as provided for in the Term
Sheet; or
vii. an inability, for any other reason, to carry out the provisions of the
Term Sheet without the filing of a petition for reorganization of Radius under
Chapter 11 of the United States Bankruptcy Code, on or before the Closing Date;
Radius shall cause to be filed such a petition, in which Radius shall propose a
plan of reorganization which is consistent with the terms of the Term Sheet,
other than those related to registration of the preferred and common stock and
warrants. IBM Credit and the Committee shall support said Plan.
2
c. To facilitate the ability to file such a petition:
i. Radius will prepare and deposit with counsel for the Committee, within
seven (7) days from the execution of the Term Sheet, a duly executed petition
for reorganization of Radius under Chapter 11 of the United States Bankruptcy
Code and certified resolutions of Radius' Board of Directors authorizing the
filing of such petition and such other documents as are required to file such a
petition;
ii. Radius will prepare and deposit with counsel for the Committee, within
twenty one (21) days from the execution of the Term Sheet, an informational
document to be used in the solicitation of consents from the creditors to the
compromise or conversion of their debt as specified in the Term Sheet, including
a prospectus which complies with the disclosure requirements of the SEC for
solicitation of such conversion in a voluntary plan and a disclosure statement
describing the recapitalization plan specified in the Term Sheet, complying with
all requirements of the United States Bankruptcy Code.
iii. Radius and the Committee, acting in concert, shall, within five (5)
days from delivery of the above described informational document mail said
informational document to the creditors of Radius and solicit the consents of
the creditors to the compromise or conversion of their debt as specified in the
Term Sheet. Radius shall have a period of thirty (30) days from the mailing of
said informational document to obtain the necessary consents.
iv. Radius will prepare and deposit with counsel for the Committee, within
forty five (45) days from the execution of the Term Sheet, all necessary
schedules to the petition, a plan of reorganization consistent with the terms of
the Term Sheet, any consents of creditors and shareholders to the plan obtained
and such other documents as are required to file a "pre-packaged" plan of
reorganization.
v. Counsel for the Committee is hereby authorized, upon the occurrence of
one of the events specified in paragraph B above, and upon two days notice to,
and consultation with, Radius and IBM Credit, to file said petition.
d. To facilitate the payment of the fees of counsel to the Committee for their
increased level of services related to communicating with the creditors and
soliciting their consent to the recapitalization plan set forth in the Term
Sheet, Radius shall pay to said counsel, on an accelerated basis and no less
favorable basis as counsel to Radius, the amount shown as owing on said
statement. This is not intended, however, to effect a subordination of any of
IBM Credit's claims, liens or other rights.
3
If the above correctly reflects your agreement, please have your respective
clients execute a copy of this letter at the place indicated and return it to us
with the executed Term Sheet. We will also obtain the signatures of the
Creditors Committee which will be binding on them not only as members of the
Committee but as individual creditors as well.
Very truly yours,
L. Morris Dennis
Agreed to:
RADIUS, INC. IBM CREDIT CORPORATION
by /s/Charles Berger by /s/Philip Morse
Charles Berger, President Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA SCI SYSTEMS
by by
Carl Carlson, Co-Chairman Michael Ledbetter, CoChairman
AVNET EMG MANUFACTURERS' SERVICES LTD.
by
by
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by
by
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by
David Vetter
4
EXHIBIT 3
ADDENDUM TO TERM SHEET
This is an Addendum to the Term Sheet executed by the parties hereto, to clarify
or change certain of the terms contained therein.
i. Paragraph II.B.1. of the Term Sheet is amended to add the following: "If the
determination of allowed and disputed claims is not completed by the Closing
Date, the shares reserved for the disputed claims shall be issued to the
Trustees of the Creditors' Trust referred to in paragraph II.B.4., to be
distributed by them to the Major Creditors and the members of the Convenience
Class electing to convert their debt into common stock, when the disputed claims
are resolved."
ii. Paragraph II.B.4. of the Term Sheet is amended to read as follows: "The
agreement of all of the Major Creditors and the members of the Convenience Class
electing to convert their debt into common stock, that the portion of their
shares attributable to disputed claims shall be held in a Creditors' Trust, to
be established by a trust agreement between Radius and the Committee, until the
disputed claims are resolved shall be a condition of the obligations of Radius,
IBM Credit and the Committee under this Term Sheet." Radius, IBM Credit and the
Committee may elect to waive this requirement."
iii. Paragraph III.C. of the Term Sheet is amended to read as follows:
"Creditors in the Convenience Class, who do not accept the offer described in
sub-paragraph III.B. above and who are 'Accredited Investors', as defined in
Rule 501 to Regulation D promulgated by the Securities and Exchange Commission
("SEC"), may exchange their claim for common stock on the same terms set forth
in paragraph II.B."
iv. Paragraph IV.A.6. of the Term Sheet is amended to read as follows: "The
preferred stock, the common stock into which it is convertible, the warrants to
IBM Credit referred in paragraph VII.A., the common stock issuable in connection
with the exercise of said warrants and the common stock which may be issued as
dividends on the preferred stock (the "IBM Credit Securities"), shall be in
compliance with all applicable federal and state securities laws. The IBM Credit
Securities shall initially be issued pursuant to the exemption from the
registration requirements of the Securities Act of 1933 (the "Act") provided by
Regulation D promulgated by the SEC. As soon as permitted by the SEC after the
Closing Date, (estimated to be approximately 30 days following the Closing
Date), the resale by IBM Credit of the IBM Credit Securities shall be registered
under the Act, by the filing with the SEC of a registration statement on Form
S-1 and the diligent prosecution of said registration statement by Radius until
it becomes effective. Thereafter, Radius shall file all statements and take
all actions necessary to maintain said registration as "evergreen" for a period
of 2 years following the Closing Date so that said securities may be freely
traded unless earlier tradeable without restriction pursuant to Rule 144
promulgated by the SEC. Thereafter, IBM Credit shall have the right to demand
registration of any common stock issued to it by Radius once per year for two
years after the last such issuance. At IBM Credit's request, Radius shall file a
form S-3 registration statement with the SEC as soon as permitted by the SEC and
shall use its best efforts to make such registration statement effective as soon
as practicable after notice by IBM Credit of its intention to sell common stock.
Radius shall remain current in all of its required filings pursuant to the Act,
the Securities Exchange Act of 1934 and all applicable state securities laws."
v. Paragraph V.A. of the Term Sheet is amended to read as follows: "The issuance
of the common stock to be issued to the Major Creditors and the members of the
Convenience Class electing to convert their debt into common stock shall be in
compliance with all applicable federal and state securities laws. Said common
stock shall initially be issued pursuant to the exemption from the registration
requirements of the Act provided by Regulation D promulgated by the SEC. As soon
as permitted by the SEC after the Closing Date, (estimated to be approximately
30 days following the Closing Date), the resale by the Major Creditors and the
members of the Convenience Class electing to convert their debt into common
stock shall be registered under the Act, by the filing with the SEC of a
registration statement on Form S-1 and the diligent prosecution of said
registration statement by Radius until it becomes effective. Thereafter, Radius
shall file all statements and take all actions necessary to maintain said
registration as "evergreen" for a period of 2 years following the Closing Date
so that said securities may be freely traded, unless earlier tradeable without
restriction pursuant to Rule 144 promulgated by the SEC. Thereafter, it is
contemplated that the Major Creditors and the members of the Convenience Class
electing to convert their debt into common stock shall be permitted to resell
their shares pursuant to Rule 144 promulgated by the SEC. Radius shall remain
current in all of its required filings pursuant to the Act, the Securities
Exchange Act of 1934 and all applicable state securities laws."
vi. Paragraph VI. of the Term Sheet is amended to read as follows: "Upon
execution of all agreements, documents and instruments (relating to the
restructuring, recapitalization and related transactions referenced herein) to
be negotiated and documented and executed pursuant to, or to carry out the
purposes of, the Term Sheet, and for so long as the parties shall continue to
pursue their efforts to carry out the terms of the Term Sheet, each of the
members of the Committee who have continued to supply product to Radius, on
condition that Radius pay to them an amount equal to 110% of the price of the
new product shipped, shall cease said
2
requirement for payment of said override."
vii. Paragraph VII. of the Term Sheet is amended to add to said paragraph a new
sub-paragraph E. which shall read as follows: The warrants to be issued pursuant
to the provisions of paragraph VII.B. and the common stock issuable in
connection with the exercise of said warrants shall be in compliance with all
applicable federal and state securities laws. Said warrants and common stock
shall initially be issued pursuant to exemption from registration under the Act
and thereafter registered under the Act in the same manner as provided in
paragraph V.A. of the Term Sheet." Except as expressly modified herein, all of
the terms and conditions of the Term Sheet shall continue in full force and
effect.
Executed effective this _ day of July, 1996.
RADIUS, INC. IBM CREDIT CORPORATION
by /s/Charles Berger by /s/Philip Morse
Charles Berger, President Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA SCI SYSTEMS
by by
Carl Carlson, Co-Chairman Michael Ledbetter, Co-Chairman
AVNET EMG
MANUFACTURERS' SERVICES LTD.
by
by
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS by
by
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by
David Vetter
3
EXHIBIT 4
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set forth below,
by and between RADIUS INC., a California corporation, with headquarters located
at 215 Moffett Park Drive, Sunnyvale, California 94089 (the "Company"), and the
undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer maintains that the Company is delinquent to Buyer in certain
accounts or other claims in the amount of $4,030,136.07 (the "Obligation") which
Obligation represents all amounts owed to Buyer for whatever reason by the
Company other than current trade payables of $-0- as specified in a schedule
attached to this Agreement ("Buyer's Schedule of Current Accounts");
WHEREAS, as a result of the Company's current financial condition, the Company
is unable to repay the Obligation along with approximately $45 million of claims
of other unsecured creditors of the Company;
WHEREAS, the Company, its secured creditor and an unofficial committee of its
largest unsecured creditors have proposed a plan pursuant to which unsecured
creditors will release their claims against the Company in exchange for a number
of shares of the Company's Common Stock, no par value ("Common Stock"), equal to
60% of the issued and outstanding shares of Common Stock;
WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
WHEREAS, the Buyer wishes to subscribe for and purchase shares of Common Stock
in full satisfaction of the Obligation and the release the Company from any and
all liability relating to the Obligation upon the terms and subject to the
conditions of this Agreement, subject to acceptance of this Agreement by the
Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
a. Subscription. The Buyer hereby subscribes for and agrees to purchase the
number of shares of Common Stock set forth on the signature page of this
Agreement (the "Shares") in full satisfaction of the Obligation. Subscriber
understands that the number of shares of Common Stock to be received will
represent its pro rata share of the 60% of the outstanding shares of the
Company's Common Stock to be issued to the Company's unsecured creditors as of
the Closing Date (defined below).
b. Release. Buyer accepts the Common Stock as full satisfaction of the
Obligation, and upon receipt of the Common Stock and an executed Registration
Rights Agreement, Buyer forever fully releases and discharges the Company, its
predecessors, successors, subsidiaries, officers, directors, agents, attorneys,
employees, lenders, creditors, shareholders and assigns ("Releasees") from any
and all causes of action, claims, suits, demands or other obligations or
liabilities (except those set forth in the attached Buyer's Schedule of Current
Accounts, if any), whether known or unknown, that Buyer ever had, now has, or
may in the future have, that may be alleged to arise out of or in connection
with the Obligation or its satisfaction ("Claims"). Buyer also agrees not to sue
or otherwise institute or cause to be instituted or in any way participate in
legal or administrative proceedings against the Releasees with respect to the
Claims (except at the reasonable request of the Company). This release extends
to all claims of every nature and kind, known or unknown, suspected or
unsuspected, past, present, or future, arising from or related to the Obligation
or its satisfaction, and any and all rights granted to us under Section 1542 of
the California Civil Code or any analogous state law or federal law or
regulation hereby expressly waived. Section 1542 of the Civil Code of the State
of California states: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IS KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR.
Buyer understands that other creditors and the Company will rely on its
agreement to accept the Common Stock in full satisfaction of the Obligation and
in consideration of the release described above. The adequacy of this
consideration is acknowledged and will never be challenged.
2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:
a. The Buyer is purchasing the Shares for its own, account for investment only
and not with a view towards the public sale or distribution thereof;
b. The Buyer is an "Accredited Investor" as that term is defined in Rule 501 of
the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3)
and is experienced and knowledgeable in investing in equity and other
securities;
c. All subsequent offers and sales of the Shares by the Buyer shall be made
pursuant to registration under the 1933 Act and qualification under the
applicable state securities laws or pursuant to an exemptions from registration
and qualification;
d. The Buyer understands that the Shares are being offered and sold to it in
reliance on specific exemptions from the registration and qualification
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares and the Warrants which have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's Confidential Private Placement Memorandum dated August 9, 1996
relating to the offering of the shares of Common Stock to be issued to the
Company's unsecured creditors (the "Memorandum") and the exhibits to the
Memorandum. The Buyer understands that its investment in the Shares involves a
high degree of risk;
f. The Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Shares; and
g. This Agreement has been duly and validly authorized, executed and delivered
on behalf of the Buyer and is a valid and binding
3
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. The Shares, when issued, delivered and paid for in
accordance with this Agreement, will be duly and validly authorized and issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive
rights of any shareholder of the Company, as such, to acquire the Shares.
b. Subscription Agreement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
c. Non-contravention. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the issuance of the Shares and
the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
by-laws of the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, or any existing applicable law,
rule or regulation or any applicable decree, judgment or order of any court,
United States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets.
d. Approvals. The Company is not aware of any authorization, approval or consent
of any governmental body which is required to be obtained by the Company for the
issuance and sale of the Shares as contemplated by this Agreement.
4
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the shares to be
issued to it hereunder have not been and are not being registered under the
provisions of the 1933 Act or qualified under applicable state securities laws
(except to the extent provided for in the Registration Rights Agreement referred
to in Section 4(c) of this Agreement), and may not be transferred unless and
until (A) such transfer is registered under the 1933 Act and qualified under
applicable state securities laws or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities may be sold or
transferred pursuant to exemptions from such registration and qualification; (2)
any sale of such securities made in reliance on Rule 144 promulgated under the
1933 Act may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of such securities under circumstances
in which the seller, or the person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the 1933 Act, may require
compliance with some other exemption under the 1993 Act or the rules and
regulations of the SEC thereunder; and (3) neither the Company nor any other
person is under any obligations to register the securities under the 1933 Act or
qualify them under state securities laws (other than pursuant to the
Registration Rights Agreement referred to in Section 4(c) of this Agreement) or
to comply with the terms and conditions of any exemption under the 1933 Act or
applicable state securities laws.
b. Restrictive Legend. The Buyer acknowledges and agrees that, except during
such time as the securities sold hereby are registered under the 1933 Act and
qualified under applicable state securities laws as provided in the Registration
Rights Agreement referred to in Section 4(c) of this Agreement, or after such
securities have been sold pursuant to such registration and qualification or
pursuant to exemptions (such as Rule 144) that do not require further
restrictions on transfer, the certificates for such securities may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such securities):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), or applicable state
securities laws. The shares have been acquired for investment and may not be
sold, transferred, assigned or hypothecated unless registered under the 1933 Act
and qualified under applicable state securities laws or unless such sale,
transfer, assignment or hypothecation is exempt from the registration
requirements of the 1933 Act and the qualification requirements of applicable
state securities laws and, at the Company's election, unless the Company
receives an opinion of counsel satisfactory to the Company that such
registration and qualification are not required.
5
c. Registration Rights Agreement. The parties hereto agree to enter into a
Registration Rights Agreement in form acceptable to the Company and the
Unofficial Creditors Committee on or before the Closing Date.
d. Form D. The Company agrees to file a Form D with respect to the shares sold
hereby as required under Regulation D.
e. Reporting Status. So long as the Buyer beneficially owns any of the shares
sold hereby or until the third anniversary of the Closing Date, whichever first
occurs, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the Closing, the Company will instruct its transfer agent to
issue one or more certificates for the Shares bearing the restrictive legend
specified in Section 4(b) of this Agreement, registered in the name of the Buyer
or its nominee and in such denominations to be specified by the Buyer prior to
the closing. The Company warrants that no instruction (other than such
instructions referred to in this Section 5, instructions consistent with this
Agreement, including Sections 4(a) and 4(b) hereof, or with the Registration
Rights Agreement and stop transfer instructions to give effect to Section 4(a)
hereof) will be given by the Company to the transfer agent with respect to the
Shares and that the Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Shares. If the Buyer sells the Shares under an effective Registration Statement
or if Buyer provides the Company with an opinion of counsel that registration
and qualification of a resale by the Buyer of any of the Shares in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall permit the transfer of such shares and promptly
instruct the Company's transfer agent to issue one or more share certificates in
such name and in such denominations as specified by the Buyer (provided that
such specification is consistent with such opinion).
6
6. CLOSING DATE.
The date and time of the issuance and sale of the Share (the "Closing Date")
shall be 12:00 noon, California time, on the date which: (i) the Company has
received Subscription Agreements from all unsecured creditors with claims in
excess of $50,000; (ii) the Company has executed and delivered an amended loan
agreement with IBM Credit Corporation in form acceptable to the Unofficial
Creditors Committee; and (iii) unsecured creditors other than those described in
(i) above holding claims representing 95% of the remaining unsecured claims
against the Company have received a discounted cash payment or have agreed to
receive shares of Common Stock in satisfaction of their claims. The foregoing
conditions may be waived or modified with the consent of each of the Company,
IBM Credit Corporation and the Unofficial Creditors Committee. The closing shall
occur on the Closing Date at the offices of the Company and is expected to occur
at the end of August 1996. Unless Buyer is issued Common Stock by October 31,
1996, however, Buyer reserves the right to cancel this agreement by written
notice to the Company. Buyer also understands that the Company may be forced to
seek bankruptcy protection in order to implement the transactions contemplated
by this Agreement. In such event, additional documentation will be sent to
Buyer.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares to the
Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of the Buyer's subscription for the
Shares as evidenced by execution and delivery of this Agreement by the Company;
b. Satisfaction of the conditions referred to in Section 6 hereof;
c. The accuracy on the Closing Date of the representations and warranties of the
Buyer contained in this Agreement and the performance by the Buyer on or before
the Closing Date of all covenants and agreements of the Buyer required to be
performed on or before such Closing Date; and
d. Execution and delivery of a Registration Rights Agreement by Buyer. The
foregoing conditions may be waived by the Company at its discretion.
7
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Shares is
conditioned upon:
a. Delivery by the Company of one or more certificates for the Shares in
accordance with this Agreement;
b. The accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement and the performance by the Company on or
before the Closing Date of all covenants and agreements of the Company required
to be performed on or before such Closing Date; and
c. Execution and delivery of the Registration Rights Agreement by the Company.
The foregoing conditions may be waived by the Buyer at its discretion.
9. GOVERNING LAW; MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California. A facsimile transmission of this signed agreement
shall be legal and binding on all parties hereto. The headings of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. In the event of
any inconsistency between any provision of this Agreement and the Loan
Agreement, the provisions of the Loan Agreement shall govern. Any notices
required or permitted to be given under the terms of this Agreement shall be
sent by mail or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier to such party's office, in each case addressed to a
party at such party's address shown in the introductory paragraph or on the
signature page of this Agreement or such other address as a party shall have
provided by notice to the other party in accordance with this provision.
8
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or one of
its officers thereunto duly authorized as of the date set forth below.
AGGREGATE AMOUNT OF ALL RELEASED CLAIMS: $4,030,136.07
NAME OF BUYER: AVNET, INC.
SIGNATURE: /s/Dennis E. Losik
Title: VP of Credit
Date: August 28, 1996
Address: 3030 Salt Creek Lane
Suite 124
Arlington Heights, IL 60005
This Agreement has been accepted as of the date set forth below.
RADIUS INC.
By: /s/Cherrie L. Fosco
Title: Vice President, Controller
Date: August 30, 1996
NUMBER OF SHARES: 3,188,966 PLUS 970,555
Such number of shares will be computed by the Company and confirmed by the
Unsecured Creditors Committee. Each unsecured creditor shall receive such number
of shares of Common Stock as represents its pro rata share of the 60% of the
outstanding shares of Common Stock as of the Closing Date.
9
EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 30, 1996 (this
"Agreement"), is made by and between RADIUS INC., a California corporation (the
"Company"), and the person named on the signature page hereto (the "Initial
Investor").
W I T N E S S E T H:
WHEREAS, in connection with each of the Subscription Agreements, between certain
unsecured creditors of the Company ("Creditors") and the Company (the
"Subscription Agreements"), the Company has issued and sold to the Creditors
shares (the "Shares") of Common Stock, no par value (the "Common Stock") and
certain Common Stock Purchase Rights ("Rights") in satisfaction of certain
claims of such Creditors as set forth in the Subscription Agreements;
WHEREAS, the Company has issued to IBM Credit Corporation ("IBM Credit") shares
of Series A Convertible Preferred Stock (the "Series A Preferred") and Warrants
("Warrants") to purchase 600,000 shares of Common Stock in satisfaction of
certain outstanding indebtedness of the Company to IBM Credit and extension by
IBM Credit of an advance of up to $500,000 as well as the restructuring of the
Company's remaining indebtedness to IBM Credit (such transactions with IBM
Credit are collectively referred to herein as the "Restructuring");
WHEREAS, the Company has issued or will issue to certain unsecured creditors
("Key Suppliers") Warrants to purchase an aggregate of 600,000 shares of Common
Stock;
WHEREAS, to induce (i) the Creditors to execute and deliver the Subscription
Agreements, (ii) IBM Credit to enter into the Restructuring and, (iii) the Key
Suppliers to accept Warrants to ensure favorable credit and supply terms, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), and applicable
state securities laws with respect to the Registrable Securities (defined
below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Demand Securities" means the Warrant Shares and the Dividend Shares.
(b) "Demand Registration" means a registration effected pursuant to Section
2(b) hereof.
(c) "Dividend Shares" means any shares of Common Stock issuable in lieu of cash
dividends paid or to be paid on the Series A Preferred.
(d) "Effectiveness Period" means with respect to (i) the Shelf Registration, a
period of 24 consecutive months from the effective date of the Registration
Statement relating to the Initial Registration and (ii) any Demand
Registration, a period of 90 consecutive days from the effective date of
the Demand Registration and excluding any period of time in which the
Effectiveness Period may be suspended pursuant to the provisions of clauses
(i)-(iv) of Section 3(a).
(e) "Form S-3" means such form under the Securities Act as is in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the
Company with the SEC.
(f) "Holdover Securities" means Registrable Securities which are held by an
Investor after the end of the Effectiveness Period for the Shelf
Registration and which Investor also holds Demand Securities.
(g) "Initial Registration" means a registration effect pursuant to Section 2(a)
hereof.
(h) "Investor" means the Initial Investor and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(i) "register," "registered" and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and, to the extent required hereunder,
pursuant to Rule 415, and the declaration or ordering of effectiveness of
such Registration Statement by the SEC.
2
(j) "Registrable Securities" means the Shares, the Warrant Shares, the Dividend
Shares, the Rights Shares, the Series A Shares, the Series A Preferred and
the Warrants.
(k) "Registration Statement" means a registration statement of the Company
under the Securities Act with respect to the Shelf Registration or the
Demand Registration, as the case may be.
(1) "Registration Termination Date" means the date on which the Company's
obligation to register or maintain any registration with respect to any
Registrable Securities terminates as provided in Section 11 hereof.
(m) "Rights Shares" means shares of Common Stock issued or issuable pursuant to
the Rights issued to the Creditors pursuant to the Subscription Agreements.
(n) "Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(o) "Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(p) "SEC" means the U.S. Securities and Exchange Commission.
(q) "Securities Act" means the Securities Act of 1933, as amended.
(r) "Series A Shares" means shares of Common Stock issued or issuable upon
conversion of the Series A Preferred.
(s) "Shelf Registration" means the Initial Registration and any Subsequent
Registration.
(t) "Subsequent Registration" has the meaning specified in Section 2 hereof.
(u) "Target Effective Date" means 60 days after the issuance of the Shares.
(v) "Target Filing Date" means 10 days after the issuance of the Shares.
(w) "Underwritten Offering" means an underwritten public offering on a firm
commitment basis.
(x) "Warrant Shares" means shares of Common Stock issued or issuable upon
exercise of the Warrants issued to IBM Credit and the Key Suppliers.
3
2. Registration.
(a) Initial Registration.
(i) The Company shall prepare and file with the SEC a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Registrable Securities. The Initial Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Securities
for resale by such holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). Such filing
shall be made on or before the Target Filing Date. The Company shall use its
best efforts to have such Initial Registration declared effective on or before
the Target Effective Date and to keep the Initial Registration continuously
effective under the Securities Act until the earlier to occur of the date that
is 24 months from the effectiveness date of the Initial Registration (the
"Initial Effectiveness Period") or the Registration Termination Date.
(ii) If the Initial Registration or a Subsequent Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the occurrence of the Registration Termination Date with respect to
the Registrable Securities covered thereby), the Company shall use its best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness file an amendment to the Initial Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a) "Subsequent
Registration"). If a Subsequent Registration is filed, the Company shall use its
best efforts to cause the Subsequent Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective until the earlier to occur of the end of the
Effectiveness Period or the Registration Termination Date.
(iii) The Company shall supplement and amend the Shelf Registration if required
by the rules, regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration, if required by the Securities
Act.
(b) Demand Registration.
(i) If the Company shall receive at any time after the end of the Effectiveness
Period for the Shelf Registration, a written request from the Investors of at
least thirty-three percent (33%) of the Demand Securities then outstanding that
the Company file a registration statement under the Securities Act covering the
registration of the Demand Securities pursuant to this Section
4
2(b), then the Company shall, within ten (10) business days of the receipt of
such written request, give written notice of such request ("Request Notice") to
all Investors, and file within thirty (30) days and use its best efforts to
cause such Registration Statement to become effective within an additional
thirty (30) days, the Registration Statement covering all Demand Securities
which Investors request to be registered and included in such registration by
written notice given such Investors to the Company within twenty (20) days after
receipt of the Request Notice; provided that the Registrable Securities
requested by all Investors to be registered pursuant to such request must be at
least thirty-three percent (33%) of all Demand Securities then outstanding;
provided further, that in the event the proposed offering described in the
Request Notice is an Underwritten Offering, then additional Holdover Securities
(other than Warrants and Series A Preferred) held by Investors may be included
in the registration described in the Request Notice, subject to compliance with
subsection (ii) below.
(ii) If the Investors initiating the registration request under this Section
2(b) ("Initiating Investors") intend to distribute the Demand Securities covered
by their request by means of an Underwritten Offering, then they shall so advise
the Company as a part of their request made pursuant to this Section 2(b) and
the Company shall include such information in the Request Notice referred to in
subsection (i) of this Section 2(b). In such event, the right of any Investor to
include his Demand Securities and, if applicable, Holdover Securities in such
registration shall be conditioned upon such Investor's participation in such
Underwritten Offering and the inclusion of such Investor's Demand Securities in
the Underwritten Offering (unless otherwise mutually agreed by a majority in
interest of the Initiating Investors and such Investor) to the extent provided
herein. All Investors proposing to distribute their securities through such
Underwritten Offering shall enter into an underwriting agreement in customary
form with the managing underwriter or underwriters selected for such
Underwritten Offering by the Company. Notwithstanding any other provision of
this Section 2(b), if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Investors owning Demand
Securities and, if applicable, Holdover Securities, which would otherwise be
registered and underwritten pursuant hereto, and the number of Demand Securities
and, if applicable, Holdover Securities, that may be included in the
Underwritten Offering shall be reduced as required by the underwriter(s) and
allocated among the Investors owning Demand Securities and, if applicable,
Holdover Securities, on a pro rata basis according to the number of Demand
Securities and, if applicable, Holdover Securities, then outstanding held by
each Investor requesting registration (including the Initiating Investors).
5
(iii) Maximum Number of Demand Registrations. The Company is obligated to effect
only two (2) such registrations pursuant to this Section 2(b) in any calendar
year.
(iv) Deferral. Notwithstanding the foregoing, if the Company shall furnish to
Investors requesting a Demand Registration, a certificate signed by the
President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for a period of not more than one hundred twenty (120) days after receipt
of the request of the Initiating Investors; provided, however, that the Company
may not utilize this right more than once in any twelve (12) month period.
(v) Form S-3 Registration. In lieu of the Company's obligation to effect Demand
Registrations pursuant to this Section 2(b), the Company may, at its election,
at any time after the Effectiveness Period of the Shelf Registration, prepare,
file and cause to be effective a Registration Statement on Form S-3, and subject
to the provisions of Section 3(a), keep such Registration Statement effective
pursuant to Rule 415 until the Registration Termination Date. Upon the
effectiveness of such Registration Statement on Form S-3, the Investors shall no
longer be permitted to effect a Demand Registration.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to this Agreement, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event later than
as is set forth in Section 2 hereof) a Registration Statement with respect to
all Registrable Securities to be included therein, and thereafter use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 (except in the case of an underwritten offering,
for which Rule 415 will not be used) at all times during the Effectiveness
Period or until the Registration Termination Date, whichever occurs first, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading provided, however, that each Investor shall have
complied with its obligations under Section 4 with respect to the Registrable
Securities of such Investor to be included in the Registration Statement.
Notwithstanding the foregoing, in the event that (i) any request is made by the
SEC or any other federal or
6
state governmental authority during the Effectiveness Period for amendments or
supplements to a Registration Statement or related prospectus, (ii) any event
occurs that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement or prospectus so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, (iii) during
the Effective Period for the Shelf Registration, the Company becomes eligible to
utilize From S- 3 (in which case, the Company shall be permitted to terminate
the effectiveness of the Initial Registration and file a Registration Statement
on Form S-3 and use its best efforts to cause such Registration Statement to
become effective within thirty (30) days with respect to the Registrable
Securities), or (iv) in the judgment of the Company, it is advisable to suspend
use of the prospectus included in such Registration Statement for a discrete
period of time due to pending corporate developments (including the pending
automatic conversion of the Series A Shares referred to in Section 7.2(a) of
Article III of the Company's Articles of Incorporation, as amended, in which
case such discrete period shall be one day), public filings with the SEC or
similar events, then the Company shall deliver a certificate in writing to the
Investors whose Registrable Securities are included in the Registration
Statement to the effect of the foregoing and, upon receipt of such certificate,
the use of the Registration Statement and prospectus will be deferred or
suspended and will not recommence until such Investor's receipt of copies of the
supplemented or amended prospectus, or until such Investors are advised in
writing by the Company that the prospectus may be used, and until such Investors
have received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus. The Company
will use its best efforts to ensure that the use of the Registration Statement
and prospectus may be resumed, as soon as practicable and, in the case of a
pending development, filing or event referred to in (iv) above, as soon, in the
judgment of the Company, as disclosure of the material information relating to
such pending development, filing or event would not have a materially adverse
effect on the Company's ability to consummate the transaction, if any, to which
such development, filing or event relates. Notwithstanding the foregoing or any
other provision of this Agreement, the period during which the Company shall be
required to maintain the effectiveness of a Registration Statement with respect
to a Demand Registration shall be extended by 1 day for each full or partial day
during which the use of such Registration Statement or prospectus is deferred or
suspended by
7
the Company in accordance with this Section 2(b);
(b) prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Shelf Registration or Demand Registration effective at all times until the
end of the Effectiveness Period or the Registration Termination Date, whichever
occurs first, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in the
Registration Statement, such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Shelf Registration or Demand Registration under such
other securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Securities or Demand Securities,
as applicable, being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until the end of the
Effectiveness Period or the Registration Termination Date, whichever occurs
first, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities or Demand Securities, as applicable, for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (I) quality to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) subject itself to general taxation in any such
jurisdiction, (III) file a general consent to service of process in any such
jurisdiction, (IV) provide any undertakings that cause more than nominal expense
or burden to the Company or (V) make any change in its charter or by-laws;
(e) as promptly as practicable after becoming aware of such event, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Shelf Registration or Demand
Registration, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
8
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
Underwritten Offering, the managing underwriters) of the issuance by the SEC (or
any state agency) of any stop order or other suspension of effectiveness of any
Registration Statement (or state qualification) at the earliest possible time;
(g) permit a single firm of counsel designated as selling shareholders' counsel
by the Investors to review a Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, provided, however, any such objection to the filing of any Registration
Statement or amendment thereto or any prospectus or supplement thereto shall be
made by written notice (the "Objection Notice") delivered to the Company no
later than three (3) Business Days after the party or parties asserting such
objection receives draft copies of the documents that the Company proposes to
file. The Objection Notice shall set forth the objections and the specific areas
in the draft documents where such objections arise, and shall not file any
document in a form to which such counsel reasonably objects, provided that the
Company shall be permitted to take such actions that are required to comply with
applicable law;
(h) make generally available to its security holders as soon as practical, but
not later than ninety (90) days after the close of the period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under
the Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
any Registration Statement and any post effective amendment thereto;
(i) make available for inspection by any Investor, any underwriter participating
to any Underwritten Offering, and any attorney, accountant or other agent
retained by any such Investor or underwriter (collectively, the "Inspectors"),
all pertinent documents of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable each Inspector to exercise its due diligence
responsibility, if and to the extent it has any such responsibility under the
Securities Act, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an
9
Investor) of any Record or other non-public information relating to the Company
received by such Inspector unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or (iii)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement; and
provided further, however, that in the event any Investor obtains material
nonpublic information concerning the Company pursuant to this Section 3(i) or
Section 3(a) or 3(e) or otherwise, such Investor shall not purchase or sell or
otherwise trade in any securities of the Company in violation of applicable law
until such information is made public by the Company. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(i). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction, given prompt notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential;
(j) use its best efforts either to (i) cause all the Registrable Securities
covered by any Registration Statement to be listed on a national securities
exchange, if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure the quotation of the Registrable
Securities on the Nasdaq National Market if such quotation is then permitted
under the rules of the Nasdaq;
(k) provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of any Registration
Statement;
(1) cooperate with the Investors who hold Registrable Securities being sold and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be sold pursuant to the Shelf
Registration or Demand Registration, as the case may be, and enable such
certificates to be in such denominations or amounts as the case may be, and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may reasonable request; and
(m) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
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4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement with respect to any Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to the effect
the registration of the Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least fifteen (15) days prior to the first anticipated filing date of the Shelf
Registration or the Demand Registration, as the case may be, the Company shall
notify each Investor of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration Statement.
If within five (5) business days prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Shelf Registration or the Demand
Registration, as the case may be, without including Registrable Securities of
such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of any kind described in Section 3(e) or 3(f), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(d) No Investor may participate in any Underwritten Offering hereunder unless
such Investor (i) agrees to sell such Investor's Registrable Securities on the
basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
11
agreements and other documents reasonably required under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discount. and commissions and other fees and expenses of investment
bankers and any manager or managers of such underwriting and legal expenses of
the underwriters applicable with respect to its Registrable Securities, in each
case to the extent not payable by the Company pursuant to the terms of this
Agreement;
(e) No Investor shall include the Investor's Registrable Securities in any
Registration Statement relating to a Demand Registration unless the Investor has
at such time a current intent to sell such Registrable Securities, and by
including such Registrable Securities in such Registration Statement, the
Investor will be deemed to represent to the Company that the Investor has such
intent. Any sale of any Registrable Securities by any Investor under any
Registration Statement will constitute a representation and warranty by such
Investor that the information relating to such Investor and its plan of
distribution is as set forth in the prospectus prepared by the Company and
furnished to such Investor for use in connection with such disposition, and such
prospectus does not as of the time of such sale contain any untrue statement of
a material fact relating to such Investor or its plan of distribution and that
such prospectus does not as of the time of such sale omit to state any material
fact relating to such Investor or its plan of distribution necessary to make the
statements in such Prospectus, in light of the circumstances under which they
were made, not misleading;
(f) Each Investor agrees that, in disposing of any Registrable Securities
pursuant to any Registration Statement, the Investor will cause the disposition
to be made in accordance with the terms of the Registration Statement, including
the plan of distribution described therein, and will comply with all applicable
securities laws, including Rules lOb-2, lOb-5, lOb-6 and lOb-7 promulgated under
the Exchange Act. Each Investor agrees that in selling any Registrable
Securities under any Registration Statement, the Investor will deliver the
current prospectus contained in the Registration Statement, as amended and
supplemented, to all persons as required by the Securities Act and the
regulations thereunder and will comply with any applicable "blue sky" laws and
regulations in connection with the disposition of such shares.
(g) Each Investor hereby agrees that it shall not, to the extent requested by an
underwriter of securities of the Company, sell or otherwise transfer or dispose
of any Registrable Securities or other securities of the Company then owned by
such Investor (other than to donees or affiliates of the Investor who agree to
be similarly bound) for up to one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that all executive officers and directors of
the Company then holding Common Stock of
12
the Company enter into similar agreements. In order to enforce the foregoing
covenant, the Company shall have the right to place restrictive legends on the
certificates representing the shares subject to this Section and to impose stop
transfer instructions with respect to the Registrable Securities and such other
shares of stock of each Investor (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
5. Expenses of Registration. All expenses, other than underwriting discounts and
commissions and brokerage commissions and other fees and expenses of investment
bankers, incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company and counsel for the Investors as
provided in Section 3(g), shall be borne by the Company; provided, however, that
the Investors shall bear the fees and out-of-pocket expenses of their legal
counsel, if any, selected by the Investors pursuant to Subsection (ii) of
Section 2(b) hereof in the case of an Underwritten Offering. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2(b) if the registration
request is subsequently withdrawn at the request of the Investors of a majority
of the Demand Securities to be registered, unless the Investors of a majority of
the Demand Securities then outstanding agree to forfeit their right to one (1)
demand registration pursuant to this Section 2(b) (in which case such right
shall be forfeited by all Investors holding Demand Securities).
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Investor who holds such Registrable Securities, the directors, if any, of
such Investor, the officers, if any, of such Investor, each person, if any, who
controls any Investor within the meaning of the Securities Act or the Exchange
Act, and, in the case of a Demand Registration, if the Registration Statement is
for an underwritten offering, any underwriter (as defined in the Securities Act)
for the Investors, the directors, if any, of such underwriter and the officers,
if any, of such underwriter, and each person, if any, who controls any such
underwriter within the meaning of the Securities Act or the Exchange Act (each,
an "Indemnified Person"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively, "Claims"): to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in any Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Registration
13
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, any state securities law or any
rule or regulation by the Company of the Securities Act, the Exchange Act or any
state securities law (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(d) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Persons, promptly as such expense are incurred and are
due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (I) shall not apply to a Claim arising
out of or based upon (A) a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person (to the extent
such information was provided by or on behalf of such Indemnified Person)
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof or (B) any violation by an Investor of the Investor's obligations under
this Agreement; (II) with respect to any preliminary prospectus shall not inure
to the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld, provided, however, that if such claim is settled
without the consent of the Company and such claim is subsequently reduced to a
final, nonappealable judgment or settlement which is adverse to the Company,
then the provisions of this clause III shall be of no effect. Such indemnity
14
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, any other shareholder and, in the case of a
Demand Registration, any underwriter selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such shareholder or underwriter within the meaning of the Securities
Act or the Exchange Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon (i) any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim or (ii) any
violation by any Investor of such Investor's obligations under this Agreement;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any
15
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interests between such Indemnified Person or Indemnified Party and
any other party represented by such it counsel in such proceeding. The Company
shall pay for only one separate legal counsel for the Indemnified Persons; such
legal counsel shall be selected by the Investors holding a majority in interest
of the Registrable Securities and shall be approved by the Company, such
approval not to be unreasonably withheld. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC
16
that may at any time permit the Investors to sell securities of the Company to
the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are understood
and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities other than Rights Shares pursuant to this
Agreement shall be automatically assigned by the Investors to transferees or
assignees of all of any portion of such securities only if: (a) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein and (e) the transfer or assignment is made in
compliance with the transfer restrictions in any Subscription Agreement, Rights
Agreement, Warrant Agreement, or Series A Preferred Purchase Agreement, as
applicable.
10. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities with each share of Series A Preferred and each Series
A Share being treated as one security and each Warrant and each Warrant Share
being treated as one security. Any
17
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. Term. The term of this Agreement and the obligations of the parties
hereunder (other than their obligations under Sections 5, 6 and 7, which will
continue) will end (the "Registration Termination Date") (i) with respect to
Registrable Securities other than Demand Shares or Holdover Securities, on the
earlier to occur of (A) the sale of the Registrable Securities, or (B) at the
end of the Effectiveness Period for the Shelf Registration, and (ii) with
respect to the Demand Shares and Holdover Securities, on the earlier to occur of
(A) the sale of the Demand Securities and Holdover Securities, or (B) 24 months
from the date of issuance of such securities. In no event will the Company be
required to register hereunder or maintain any registration hereunder of any
Registrable Securities that are then eligible for resale under Rule 144.
12. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered (by hand, by
courier or overnight delivery service, by telephone, facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage prepaid (i) if to the Company, at Radius Inc.,
215 Moffett Park Drive, Sunnyvale, California 94089, Attention: President, (ii)
if to the Initial Investor, at the address set forth under its name in the
Subscription Agreement and (iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 12(b), and shall be effective, when personally delivered, upon receipt
and, when so sent by certified mail, four days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a wavier thereof.
(d) This Agreement shall be enforced, governed by and construed in accordance
with the laws of the State of California applicable to agreements made and to be
performed entirely within such State. In
18
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
(g) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers "hereunto duly authorized as of the day and year
first above written.
RADIUS INC.
By: /s/Charles W. Berger
Name: Charles W. Berger
Title: Chairman and CEO
INITIAL INVESTOR:
Name: AVNET, INC.
By: /s/Dennis E. Losik
Name: Dennis E. Losik
Title: VP of Credit
19