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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13(d) OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 0-18690
RADIUS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 68-0101300
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
460 E. MIDDLEFIELD ROAD
MOUNTAIN VIEW, CA 94043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(650) 404-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK ON AUGUST 7,
1998 WAS 5,522,816.
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RADIUS INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998 (unaudited) and
September 30, 1997 3
Consolidated Statements of Operations for the Three and Nine Months Ended
June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
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</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RADIUS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997 (1)
--------- -------------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 1,188 $ 773
Receivable from sale of shares of Splash Technology Holdings, Inc. 728 -
Accounts receivable, net 2,008 2,168
Inventories 1,081 805
Investment in Splash Technology Holdings, Inc. 532 22,093
Prepaid expenses and other current assets 200 184
-------- -------
Total current assets 5,737 26,023
Property and equipment, net 110 249
-------- -------
$ 5,847 $26,272
-------- -------
-------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY (Net capital deficiency):
Current liabilities:
Accounts payable $ 4,404 $ 4,511
Accrued payroll and related expenses 440 1,320
Accrued warranty costs 216 538
Other accrued liabilities 1,949 2,690
Deferred Income 500 -
Accrued income taxes 2,122 2,111
Accrued restructuring and other charges 497 2,033
Short-term borrowings 1,597 4,638
Obligation under capital leases - 273
-------- -------
Total current liabilities 11,725 18,114
Shareholders' equity (Net capital deficiency):
Common stock 169,102 168,994
Unrealized gain on available-for-sale securities 532 22,093
Accumulated deficit (175,560) (182,972)
Accumulated translation adjustment 48 43
-------- -------
Total shareholders' equity (Net capital deficiency) (5,878) 8,158
-------- -------
$ 5,847 $26,272
-------- -------
-------- -------
</TABLE>
(1) The balance sheet at September 30, 1997 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
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<PAGE>
RADIUS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ------------------------
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 3,823 $ 4,816 $ 13,514 $ 23,867
Commissions and royalties 47 1,225 911 4,418
-------- -------- --------- ---------
Total net sales 3,870 6,041 14,425 28,285
Cost of sales 2,223 5,472 9,283 20,907
-------- -------- --------- ---------
Gross profit 1,647 569 5,142 7,378
-------- -------- --------- ---------
Operating expenses:
Research and development 737 1,633 2,051 3,534
Selling, general and administrative 1,661 5,986 5,474 15,307
-------- -------- --------- ---------
Total operating expenses 2,398 7,619 7,525 18,841
-------- -------- --------- ---------
Loss from operations (751) (7,050) (2,383) (11,463)
Other income (expense), net 4,715 (10) 10,211 (22)
Interest expense (78) (757) (416) (2,251)
-------- -------- --------- ---------
Income (loss) before income taxes 3,886 (7,817) 7,412 (13,736)
Provision for income taxes - - - 316
-------- -------- --------- ---------
Net income (loss) $ 3,886 $ (7,817) $ 7,412 $ (14,052)
-------- -------- --------- ---------
-------- -------- --------- ---------
Preferred stock dividend - 75 - 225
Net income (loss) applicable to
common shareholders $ 3,886 $ (7,892) $ 7,412 $`(14,277)
-------- -------- --------- ---------
-------- -------- --------- ---------
Net income (loss) per share:
Basic net income (loss) per share applicable
to common shareholders $ 0.70 $ (1.43) $ 1.34 $ (2.60)
-------- -------- --------- ---------
-------- -------- --------- ---------
Diluted net income (loss) per share applicable
to common shareholders $ 0.70 $ (1.43) $ 1.33 $ (2.60)
-------- -------- --------- ---------
-------- -------- --------- ---------
Shares used in per share computations:
Shares used in computing basic net
income (loss) per share 5,529 5,521 5,519 5,491
-------- -------- --------- ---------
-------- -------- --------- ---------
Shares used in computing diluted net
income (loss) per share 5,546 5,521 5,566 5,491
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
See accompanying notes.
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<PAGE>
RADIUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(in thousands, unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,412 (14,052)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 115 769
Gain on the sale of Splash and UCC Common Stock (9,016) -
Loss on the disposal of fixed assets 25 446
(Increase) decrease in assets:
Accounts receivable 165 (151)
Inventories (276) 9,210
Prepaid expenses and other current assets (16) -
Income tax receivable - 514
Increase (decrease) in liabilities:
Accounts payable (107) 1,671
Accrued payroll and related expenses (880) (1,294)
Accrued warranty costs (322) (132)
Other accrued liabilities (741) (770)
Accrued restructuring costs (1,536) (394)
Accrued income taxes 11 (112)
-------- ------
Total adjustments (12,578) 9,757
-------- ------
Net cash used in operating activities (5,166) (4,295)
Cash flows from investing activities:
Capital expenditures (1) (55)
Deposits and other assets - 50
Payment from KDS 500 -
Net proceeds from the sale of Splash and UCC Common Stock 8,288 -
-------- ------
Net cash provided by (used in) investing activities 8,787 (5)
Cash flows from financing activities:
Short-term borrowings, net (3,041) 2,919
Principal payments of long-term debt and capital leases (273) (875)
Issuance of common stock 108 48
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Net cash (used in) provided by financing activities (3,206) 2,092
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Net increase (decrease) in cash and cash equivalents 415 (2,208)
Cash and cash equivalents, beginning of period 773 2,974
-------- ------
Cash and cash equivalents, end of period $ 1,188 $ 766
-------- ------
-------- ------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 427 $ 2,254
-------- ------
-------- ------
Income taxes $ - $ 1
-------- ------
-------- ------
Non-cash financing activity:
Dividend paid on preferred stock $ - $ 225
-------- ------
-------- ------
Non-cash investing activity:
Receivable from sale of shares of Splash Technology Holdings, Inc. $ 728 $ -
-------- ------
-------- ------
</TABLE>
See accompanying notes.
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<PAGE>
RADIUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements of Radius Inc. ("Radius" or the
"Company") as of June 30, 1998 and for the three and nine months ended June
30, 1998 and 1997 are unaudited. In the opinion of management, the
consolidated financial statements reflect all adjustments (consisting only of
normal recurring items) necessary for a fair presentation in conformity with
generally accepted accounting principles. Preparing financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. Examples
include provisions for returns and bad debts and the length of product life
cycles. The information included in this Form 10-Q should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997.
For clarity of presentation, all fiscal periods are reported as ending on a
calendar month end.
NOTE 2. INVENTORIES
Inventories, stated at the lower of cost or market, consist of (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
----------- -------------
(unaudited)
<S> <C> <C>
Work in process $144 $176
Finished goods 937 629
------- -------
$ 1,081 $ 805
------- -------
------- -------
</TABLE>
NOTE 3. COMMITMENTS AND CONTINGENCIES
(a) On November 16, 1995, Electronics for Imaging, Inc. ("EFI") filed a suit
in the United States District Court in the Northern District of California
alleging that the Company infringes a patent allegedly owned by EFI.
Although the complaint does not specify which of the Company's products
allegedly infringe the patent, subsequent pleading indicates that EFI alleges
that the Company's Color Server products infringe. In January 1996, the
Company completed the divestiture of the Color Server Group.
The Company has filed an answer denying all material allegations, and has
filed counterclaims against EFI alleging causes of action for interference
with prospective economic benefit, antitrust violations, and unfair business
practices. EFI's motion to dismiss or sever the Company's amended
counterclaims was granted in part and the ruling permitted the Company to
file an amended counterclaim for antitrust violations. The Company has filed
an amended antitrust claim. The Company believes it has meritorious defenses
to EFI's claims and is defending them vigorously. In addition, the Company
believes it may have indemnification rights or additional immunity with
respect to elements of EFI's claims. A motion for summary judgment based on
these indemnification rights disposing of EFI's claims was filed, and the
court granted this motion finding the Company immune from suit under the
patent after February 22, 1995. In March 1998, EFI and the Company agreed to
dismiss their remaining claims against each other pending the outcome of
EFI's appeal of this summary judgment finding. If the Company prevails on
appeal, the remaining claims will be dismissed. On the other hand, if EFI
prevails on appeal, then EFI can refile its claims and the Company would
intend to continue to vigorously defend against such claims and prosecute its
own claims against EFI. In such event, neither the Company nor Splash
Technology Holdings, Inc. would be able to advance the immunity defense ruled
on in the summary judgment motion, which would require the Company to defend
EFI's claims based upon their merits. EFI filed its notice of appeal on
April 7, 1998, and each party has submitted opening briefs. Oral argument
and a determination of this appeal are expected during the 1999 fiscal year.
While the Company believes it has meritorious defenses, the costs of
defending any litigation could adversely affect the Company's results of
operations and cash flows.
(b) The Company was named as one of approximately 42 defendants in Shapiro
et al. v. ADI Systems, Inc. et al., Superior Court of California, Santa Clara
County, case no. CV751685, filed August 14, 1995. Radius was named as one
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<PAGE>
of approximately 32 defendants in Maizes & Maizes et al. v. Apple Computer et
al., Superior Court of New Jersey, Essex County, case no. L-13780-95, filed
December 15, 1995. Plaintiffs in each case purport to represent alleged
classes of similarly situated persons and/or the general public, and allege
that the defendants falsely advertised that the viewing areas of their
computer monitors are larger than in fact they are. The Company was served
with the Shapiro complaint on August 22, 1995 and was served with the Maizes
complaint on January 5, 1996. Defendants' petition to the California State
Judicial Council to coordinate the Shapiro case with similar cases brought in
other California jurisdictions was granted in part and the coordinated
proceedings are being held in Superior Court of California, San Francisco
County. An amended consolidated complaint was filed on March 26, 1996.
Although the Company believes it has meritorious defenses to the plaintiffs'
claims, due to the costs of defense, on March 11, 1997, the Company along
with all but two of the other named defendants agreed to settle the suits,
subject to final court approval. The settlement has been approved by the
court. The settlement provides that class members are eligible for a $13
rebate per monitor purchased during the class period on applicable new
purchases over a three year period, subject to specific limitations. Class
members who are consumers and do not elect to use the rebate fully can
thereafter elect to receive a $6 refund per monitor (up to a maximum of $30
per consumer class member) during the following six months. The Company is
responsible only to class members who purchased Radius branded monitors
during the class period of May 1, 1991 to May 1, 1995. Additionally, the
Company will pay its share of publication and administration costs associated
with the implementation of the settlement, pay its share of plaintiffs'
stipulated attorneys' fees and will agree to abide by certain limitations in
the description of its monitors.
(c) On July 18, 1997, Intelligent Electronics, Inc. and its affiliates filed
a suit in the United States District Court for the District of Colorado
alleging a breach of contract and related claims in the approximate amount of
$800,000, maintaining that the Company failed to comply with various return,
price protection, inventory balancing and marketing development funding
undertakings. In 1997, the Company filed an answer to the complaint and cross
claimed against the plaintiffs and in October 1997 additionally cross claimed
against Deutsche Financial, Inc., a factor in the account relationship
between the Company and the plaintiffs, seeking the recovery of approximately
$2 million. The Company continues to investigate these claims as well as
cross claims and expects to vigorously defend and prosecute them as
applicable.
(d) The Company is involved in a number of other judicial and administrative
proceedings incidental to its business. The Company intends to defend such
lawsuits vigorously and although adverse decisions (or settlements) may occur
in one or more of such cases, the final resolution of these lawsuits,
individually or in the aggregate, is not expected to have a material adverse
effect on the financial position of the Company. However, depending on the
amount and timing of an unfavorable resolution of these lawsuits, it is
possible that the Company's future results of operations or cash flows could
be materially adversely affected in a particular period. In addition, the
costs of defense, regardless of the outcome, could have a material adverse
effect on the results of operations and financial condition of the Company.
(e) In September 1992, the Company and certain of its officers and directors
were named as defendants in a securities class action litigation brought in
the United States District Court for the Northern District of California that
sought unspecified damages, prejudgment and postjudgment interest, attorneys'
fees, expert witness fees and costs, and equitable relief. In July 1994,
SuperMac and certain of its officers and directors, several venture capital
firms and several of the underwriters of SuperMac's May 1992 initial public
offering and its February 1993 secondary offering were named as defendants in
a class action litigation brought in the same court that sought unspecified
damages, prejudgment and postjudgment interest, attorneys' fees, experts'
fees and costs, and equitable relief (including the imposition of a
constructive trust on the proceeds of defendants' trading activities).
In June 1995, the Court approved the settlement of both litigations and
entered a Final Judgment and Order of Dismissal. Under the settlement of the
litigation brought in 1992 against the Company, the Company's insurance
carrier paid $3.7 million in cash and the Company is required to issue 12,869
shares of its Common Stock to a class action settlement fund. In the
settlement of the litigation brought in 1994 against SuperMac, the Company
paid $250,000 in cash and is required to issue into a class action settlement
fund 70,761 shares of its Common Stock. The number of shares required to be
issued by the Company increased by 10,000 since the price of the Common Stock
was below $120 per share during the 60-day period following the initial
issuance of shares. In connection with these settlements, the Company
recorded a charge of $12.4 million in the Consolidated Statement of
Operations in 1995 reflecting settlement costs not covered by insurance as
well as related legal fees.
As of June 30, 1998, the Company had issued 83,630 of its Common Stock due to
the settlement and approximately 10,000 shares remained to be issued.
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NOTE 4. INVESTMENT IN SPLASH TECHNOLOGY HOLDINGS, INC.
In January 1996, the Company completed the sale of its Color Server Group
("CSG") to Splash Merger Company, Inc. (the "Buyer"), a wholly owned
subsidiary of Splash Technology Holdings, Inc. ("Splash"), a corporation
formed by various investment entities associated with Summit Partners. In
fiscal 1996, the Company received approximately $21.0 million in cash and, as
of June 30, 1998, an additional $2.0 million is being maintained in escrow to
secure certain indemnification obligations relating to the EFI litigation.
The Company also received 4,282 shares of Splash's 6% Series B Redeemable and
Convertible Preferred Stock (the "Series B Preferred Stock"). The shares of
Series B Preferred Stock were converted into shares of Splash's Common Stock
in connection with the initial public offering of Splash. In June 1996, the
Company granted IBM Credit, its secured lender, an option to purchase 428
shares of Series B Preferred (now 174,113 shares of Splash Common Stock) in
connection with the restructuring of the terms of its loan agreement with IBM
Credit. As of July 16, 1998, IBM Credit had exercised all its option of
Splash Common Stock.
During the fourth quarter of fiscal 1997 and the nine months ended June 30,
1998, the Company sold an aggregate of 996,875 and 537,411 shares,
respectively, of the 1,741,127 shares of Splash Common Stock owned by the
Company. The investment, which is available for sale, subject to certain
market trading restrictions, is accounted for in accordance with FASB
Statement No. 115. The unrealized gain of $0.5 million relating to the
remaining 32,728 shares held (net of the option to buy 174,113 shares held by
IBM Credit exercisable at a nominal price), based upon the closing price of
$16.25 per share at June 26, 1998 is recorded as a component of shareholders'
equity at June 30, 1998. Since June 30, 1998, the Company has sold the
remaining 32,728 shares of Splash Common Stock and has repaid in full its
working line of credit with IBM Credit. See Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources.
NOTE 5. UMAX DATA SYSTEMS, INC.
In February 1996, the Company sold its MacOS compatible systems business to
UMAX Computer Corporation ("UCC"), a company formed by UMAX Data Systems,
Inc. ("UMAX"). The Company received approximately $2.3 million in cash and
debt relief and 1,492,500 shares of UCC's Common Stock, representing
approximately 19.9% of UCC's then outstanding shares of UCC Common Stock.
The cash proceeds were paid to IBM Credit. In March 1998, due to Apple
Computer's recent reversal in MacOS licensing policy, the Company sold the
common stock of Umax Computer Corporation held by it to Umax Data Systems,
Inc. for $550,000.
NOTE 6. EARNINGS PER SHARE
On March 9, 1998, the Company effected a one-for ten reverse stock split.
All per share data and number of common shares, where appropriate, have been
retroactively adjusted to reflect the stock split.
Basic earnings per share is computed using the weighted average number of
common shares. Diluted earnings per share is computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the period. Dilutive common share equivalents consist of
employee stock options using the treasury stock method.
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<PAGE>
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ------------------------
1998 1997 1998 1997
---------- -------- --------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NUMERATOR:
Net income (loss) $ 3,886 $(7,817) $ 7,412 $(14,052)
Preferred stock dividends - (75) - (225)
---------- -------- --------- --------
Numerator for basic and diluted earnings per share -
income (loss) available to common stockholders $ 3,886 $ (7,892) $ 7,412 $(14,277)
---------- -------- --------- --------
---------- -------- --------- --------
DENOMINATOR:
Denominator for basic earnings per share - weighted-average
shares outstanding 5,529 5,521 5,519 5,491
Effect of dilutive securities:
Employee stock options 17 - 47 -
---------- -------- --------- --------
Dilutive potential common shares 17 - 47 -
Denominator for diluted earnings per share - adjusted
weighted-average shares outstanding 5,546 5,521 5,566 5,491
---------- -------- --------- --------
---------- -------- --------- --------
Basic earnings (loss) per share $ 0.70 $ (1.43) $ 1.34 $ (2.60)
---------- -------- --------- --------
---------- -------- --------- --------
Diluted earnings (loss) per share $ 0.70 $ (1.43)(1) $ 1.33 $ (2.60)(1)
---------- -------- --------- --------
---------- -------- --------- --------
</TABLE>
(1) Diluted earnings per share does not reflect any potential shares
relating to employee stock options or the convertible preferred stock due to
a loss reported for the period, in accordance with FAS 128. The assumed
issuance of any additional shares would be antidilutive.
For additional disclosure regarding the employee stock options and
convertible preferred stock, see Note 4 in the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1997.
NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 establishes standards for reporting
comprehensive income in a financial statement. Comprehensive income items
include changes in equity (net assets) not included in net income. Examples
are foreign currency translation adjustments and unrealized gains/losses on
available for sale securities. This disclosure prescribed by SFAS 130 is
required beginning with the quarter ending December 31, 1998.
In June 1997, FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards
for the way companies report information about operating segments in
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company has not yet determined the impact, if any, of adopting this standard.
The disclosures prescribed by SFAS 131 are required in fiscal year 1999.
In October 1997, FASB approved the new American Institute of Certified Public
Accountants Statements of Position, "Software Revenue Recognition" ("SOP
97-2"). SOP 97-2 will be effective for the Company beginning in the first
quarter of fiscal 1999. The Company is evaluating this pronouncement and the
effects, if any, on the Company's current policies.
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NOTE 8. SUBSEQUENT EVENTS
On August 7, 1998, the Company agreed to sell certain significant assets
related to its monitor business to Korea Data Systems (America), Inc.
("KDS"). Under the agreement, Radius will transfer its Radius, Supermac,
PressView and certain other trademarks to KDS and will license certain
intellectual property pertaining to PressView and PrecisionView monitors to
KDS. KDS has not agreed to purchase any inventory or other tangible assets
of Radius. The expected value of the transaction is $6.2 million, including
$1.0 million payable in August 1998 under the related license agreement. The
remaining amount is payable in installments over the next twelve months. Two
affiliates of KDS have guaranteed KDS' performance of its obligations. The
agreement is expected to close in February 1999 if KDS elects to have the
agreement submitted to Radius' shareholders for approval and such approval is
obtained and certain other contingencies are satisfied. In the interim,
Radius has licensed KDS the use of its monitor trademarks and specific
technology and expects to wind down its monitor business activities as
current supplies of monitors are sold, whether or not the asset purchase
agreement is completed. In the event that the asset purchase agreement is
not completed, the license agreement will continue as a perpetual license and
KDS will pay an additional $5.2 million under the extended license over
fifteen months instead of twelve. Radius will continue to use the
transferred trademarks and technology until the transition is completed over
the next several months and expects to focus on its digital video line of
business during this transition period.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: The following
discussion contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934 that are subject to risks and
uncertainties. Statements indicating that the Company or management
"intends", "plans", "expects," "estimates" or "believes" are forward-looking,
as are all other statements concerning future financial results, product
offerings or other events that have not yet occurred. There are several
important factors that could cause actual results or events to differ
materially from those anticipated by the forward-looking statements contained
in this discussion and other sections of this Form 10-Q. Such factors
include, but are not limited to: the Company's ability to achieve
profitability; the Company's ability to successfully conclude or settle its
patent infringement litigation with EFI; the success of the Company's digital
video software products on which the Company expects to be substantially
dependent; the success of the Apple Macintosh computer line and operating
system, the success of Apple as well as the Company's ability to compete
successfully with Apple in its market; the Company's ability to successfully
develop, introduce and market new software products, including products for
Windows operating system, and to keep pace with technological innovation,
particularly in light of its limited financial resources; the ability of the
Company's manufacturers and suppliers to deliver components and manufacture
the Company's products; the Company's reliance on international sales and the
effect of its partially exclusive distributor arrangements with respect to
Europe and Japan; and the Company's ability to attract and retain its key
personnel.
Each forward-looking statement should be read in conjunction with the entire
consolidated interim financial statements and the notes thereto in Part I,
Item 1 of this Quarterly Report, with the information contained in Item 2,
including, but not limited to, "Certain Factors That May Affect Future
Results," and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1997, including, but not
limited to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Certain Factors That May Affect the Company's Future
Results of Operations."
OVERVIEW
The Company designs, develops, assembles, markets and supports color
publishing and digital video computer products for creative professionals.
The Company's current product line includes: multimedia authoring and
editing video systems and software that can acquire and manipulate video and
audio information; high resolution color reference displays that allow users
to view text, graphics, images and video.
To date, substantially all of the Company's products have been designed for
and sold to users of Macintosh computer products (the "Macintosh")
manufactured by Apple Computer, Inc. ("Apple") as Apple products have been
the preferred platform in the Company's target markets. Furthermore,
substantially all of the Company's historic revenues have been attributed to
hardware/monitors. The Company's current product development plans include
adding cross platform (Windows) capabilities to some of the Company's
products in order to market these products to users of the Windows operating
system. There can be no assurance that the Company will be successful in
developing and marketing products for the Windows operating system,
particularly in light of the Company's current financial condition. The
Company has released and shipped its second product for the Windows operating
system, MotoDV for Windows in the third quarter of fiscal 1998.
On August 7, 1998, the Company agreed to sell certain significant assets
related to its monitor business to KDS, see Notes to the Financial
Statements, Note 8 - Subsequent Events. The monitor business accounts for
substantially all of the revenues of the color publishing product line. The
two companies are in the process of defining the transition timetable, but at
the completion of the transition the Company will no longer realize any
revenues from the sale of monitors. The primary focus of the Company at that
time will be its digital video product line, which includes multimedia
authoring and editing video systems and software that can acquire and
manipulate video and audio information. The Company has also agreed with KDS
to continue to support the sale of the monitors through the Company's sales
force during August and September in return for $55 thousand a month and a
sharing of the gross margin from the sale of the monitor products during this
period.
As shown in the accompanying consolidated financial statements, the Company
has incurred substantial operating and net losses and currently has
liabilities in excess of assets. During fiscal 1996, 1997 and 1998,
management implemented a number of actions to address its cash flow and
operating issues including: restructuring its outstanding indebtedness to
trade
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<PAGE>
creditors and its secured creditor; refocusing its efforts on providing
solutions for high end digital video and graphics customers; discontinuing
sales of mass market and other low value added products; divesting a number
of businesses and product lines, including most recently the agreement for
the sale and related license of significant assets of its monitor business to
Korea Data Systems (America), Inc. (See Notes to Consolidated Financial
Statements - Subsequent events - Note 8); significantly reducing expenses and
headcount; and reducing its lease obligations for its current facility lease
given its reduced occupancy requirements. There can be no assurance that
these measures will be sufficient to allow the Company to achieve
profitability.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operational
data as a percentage of net sales (may not add due to rounding).
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 57.4 90.6 64.4 73.9
------ ------ ------ ------
Gross profit 42.6 9.4 35.6 26.1
------ ------ ------ ------
Operating expenses:
Research and development 19.1 27.0 14.2 12.5
Selling, general and administrative 42.9 99.1 37.9 54.1
------ ------ ------ ------
Total operating expenses 62.0 126.1 52.1 66.6
------ ------ ------ ------
Loss from operations (19.4) (116.7) (16.5) (40.5)
Other income(expense), net 121.8 (0.2) 70.8 (0.1)
Interest Expense (2.0) (12.5) (2.9) (8.0)
------ ------ ------ ------
Income (loss) before income taxes 100.4 (129.4) 51.4 (48.6)
Provision for income taxes 0.0 - 0.0 1.1
------ ------ ------ ------
Net income (loss) 100.4% (129.4)% 51.4% (49.7)%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
NET SALES
The Company's total net sales decreased 35.9% to $3.9 million in the third
quarter of fiscal 1998 from $6.0 million for the same quarter in fiscal 1997.
Net sales for the first nine months of fiscal 1998 decreased 49.0% to $14.4
million from $28.3 million in the same period of fiscal 1997. The decline is
due primarily to the following factors: the Company's decision to focus its
efforts on its digital video software product lines while discontinuing the
development of its color publishing, accelerated color graphics products and
its DOS on Mac products; a decline in the sales of its color publishing
products; reduced commissions paid by its international distributors due to
the Company's change in product focus; and reduced royalties paid by Umax
Computer Corporation under its license agreement for the MacOS compatible
systems signed in February 1996.
As a result of the planned sale by the Company of significant monitor
business assets to KDS, the Company anticipates lower overall net sales in
the immediate future. Future sales will be predominately attributable to
sales of software products since in the Company's digital video product line,
the sales of the systems products have been declining while the sale of the
software products for digital video camcorders (PhotoDV introduced in April
1997, MotoDV introduced in September 1997 and EditDV introduced in November
1997) have increased during fiscal 1998. Additionally, the Company
introduced PhotoDV for Windows in March 1998 and MotoDV for Windows in June
1998. There can be no assurance that sales of these software products will
continue to increase or that they will increase to a sufficient extent to
offset the anticipated decline in hardware sales. Moreover, the royalties
from Umax have ended due to the expiration of this obligation in March 1998.
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<PAGE>
Effective January 1, 1998, the Company has modified its relationships with
its distributors in Japan and Europe for its digital video software products
and will instead purchase products from the Company at a discount from the
price list. Sales will now be made for these products based upon a price
list and they will no longer pay commissions upon their sale of these
products. Commissions will still be paid on the sales of the Company's other
products sold through these distributors, although the Company believes that
these sales will not be material.
Sales to Ingram Micro and Microage Computer Center accounted for 57.2% and
3.6% of net sales for the third quarter of fiscal 1998, respectively. For
the corresponding period of fiscal 1997, the same customers accounted for
42.5% and 15.9% of the Company's net sales. For the nine month period ended
June 30, 1998, Ingram Micro accounted for 55.8% of the Company's net sales as
compared to 63.7% for the corresponding period of fiscal 1997.
GROSS PROFIT
The Company's gross profit margin was 42.6% and 35.6% for the three and nine
month periods ended June 30, 1998, as compared with 9.4% and 26.1% for the
corresponding periods in fiscal 1997. The gross profit margin for the three
month period ended June 30, 1997 included higher start-up manufacturing cost
for the DOS on Mac products. The gross profit margin for the nine month
period ended June 30, 1997 reflects a net charge of $3.6 million relating to
inventory write downs. Excluding this charge, the gross profit margin would
have been 38.8%. The increase in gross profit margin for the three and nine
month periods ended June 30, 1998 was due primarily to increased sales of
higher gross margin software products.
The Company anticipates the gross profit margins will be higher in the future
due to the impact of the planned sale of significant monitor business assets
and the increase in sales of higher gross margin software products that are
expected to become a focus of the Company's sales and marketing efforts in
the coming periods, although there can be no assurance that the Company will
be successful in marketing these products. Additionally, the Company is
taking further steps to reduce product costs and controlling expenses. There
can be no assurance that the Company's gross margins will improve or remain
at current levels.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased to $0.7 million or 19.0% of net
sales in the third quarter of fiscal 1998 from $1.6 million or 27.0% of net
sales in the same quarter of fiscal 1997. Research and development expenses
decreased from $3.5 million or 12.5% of net sales for the first nine months
of fiscal 1997 to $2.1 million or 14.2% of net sales for the corresponding
period of fiscal 1998. The increase in research and development expenses
expressed as a percentage of net sales for the nine month period were
primarily attributed to the decrease in net sales. The decrease in research
and development expenses in absolute dollars is primarily the result of
reducing expenses related to headcount resulting from the efforts to refocus
its business. The Company expects that decreases in its research and
development expenses due to the planned sale of significant monitor business
assets will be offset by increases in the expenses for the digital video
product line and therefore, expects research and development to remain at
third quarter levels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to $1.7 million or
42.9% of net sales in the third quarter of fiscal 1998 from $6.0 million or
99.1% of net sales in the same quarter of fiscal 1997. Selling, general and
administrative expenses decreased from $15.3 million or 54.1% of net sales
for the first nine months of fiscal 1997 to $5.5 million or 37.9% of net
sales for the corresponding period in fiscal 1998. Included in the selling,
general and administrative expenses for the three and nine months ended June
30, 1997 is an increase of $1.1 million to the allowance of doubtful
accounts. The Company decreased its selling, general and administrative
expenses primarily by reducing expenses related to headcount resulting from
the efforts to refocus its business. As a result of the planned sale of
significant monitor business assets, the Company expects selling, general and
administrative expenses to decrease slightly over the next several quarters.
After that the Company expects selling, general and administrative expenses
to increase gradually over time, however, the Company does not expect them to
approach historical levels in absolute amount.
OTHER INCOME (EXPENSE), NET
Other income was $4.7 million and $10.2 million for the three and nine month
periods ended June 30, 1998, respectively, and was not material in the same
periods of fiscal 1997. Other income resulted from the sale of 537,411 shares
of Splash Common Stock during the nine month period ended June 30, 1998.
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<PAGE>
INTEREST EXPENSE
Interest expense was $0.1 million and $0.4 million for the three and nine
month periods ended June 30, 1998, as compared with $0.8 and $2.3 million for
the corresponding periods in fiscal 1997. This decrease was due to lower
average borrowings primarily as a result of the repayment of the IBM Credit
term loan in August 1997.
NET PROFIT
As a result of the above factors, the Company had a net profit of $3.9
million and $7.4 million for the three and nine months ended June 30, 1998,
respectively, as compared to a net loss of $7.8 million and $14.1 million
for the three and nine months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased to $1.2 million at June 30,
1998, as compared with $0.8 million for the same quarter in fiscal 1997.
However, as of June 30, 1998, the Company's liabilities exceeded its assets.
The value of the Company's investment in Splash Technology Holdings, Inc.
also declined from $22.1 million at the end of fiscal year 1997 to $0.5
million at the end of the third quarter of fiscal 1998 due to the sale of
537,411 shares of Splash Common Stock, and due to the substantial decline in
the trading price of the Splash Common Stock from $38.75 to $16.25 during
that period of time. Since June 30, 1998, the Company has sold the remaining
32,728 shares of Splash Common Stock and has repaid in full its working line
of credit with IBM Credit. The planned sale of significant monitor business
assets and the related license is expected to generate improved liquidity for
the Company, if installment payments are timely made, other things equal.
Under the agreement with KDS, see Notes to consolidated Financial Statements,
Note 8 - Subsequent Events, the $6.2 million is due to be paid in monthly
installments over the next twelve months. Additionally, the Company has
agreed with KDS to continue to support the sale of the monitors through the
Company's sales force during August and September in return for $55 thousand
a month and a sharing of the gross margin from the sale of the monitor
products during this period. It is anticipated that these funds will provide
the working capital that the Company needs to offset the operating losses
during the coming months. However, there can be no assurances that the sale
of software products will continue to increase to a sufficient extent to
offset the loss of revenues and gross margin from the monitor business. The
Company may need to further reduce its operating expenses or seek additional
sources of working capital if the sale of the software products does not
increase at the rate that it has assumed in its operating plans.
CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS OF OPERATIONS
A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, the following:
CONTINUING OPERATING LOSSES
The Company experienced operating losses in each of its prior five fiscal
years and currently has liabilities in excess of assets. In the future, the
Company's ability to achieve and subsequently sustain profitable operations
will depend upon a number of factors, including the Company's ability to
control costs; the Company's ability to generate sufficient cash from
operations or obtain additional funds to fund its operating expenses; the
Company's ability to successfully market its software products; the Company's
ability to develop innovative and cost-competitive new products and to bring
those products to market in a timely manner; the commercial acceptance of
Apple computers and the MacOS and the rate and mix of Apple computers and
related products sold; the Company's ability to successfully develop and
market products for the Microsoft Windows and NT operating systems in a
timely manner; competitive factors such as new product introductions, product
enhancements and aggressive marketing and pricing practices; general economic
conditions; the Company's ability to negotiate a settlement or other
favorable conclusion of the EFI litigation; and other factors. For these and
other reasons, there can be no assurance that the Company will be able to
achieve or subsequently maintain profitability in the near term, if at all.
-14-
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced substantial fluctuations in operating results.
The Company's customers generally order on an as-needed basis, and the
Company has historically operated with relatively small backlogs. Quarterly
sales and operating results depend heavily on the volume and timing of
bookings received during the quarter, which are difficult to forecast. A
substantial portion of the Company's revenues are derived from sales made
late in each quarter, which increases the difficulty in forecasting sales
accurately. Since the end of the Company's 1995 fiscal year, shortages of
available cash have restricted the Company's ability to purchase inventory
and have delayed the Company's receipt of products from suppliers and
increased shipping and other costs. Furthermore, because of its financial
condition, the Company believes that many suppliers are hesitant to continue
their relationships with or extend credit terms to the Company and potential
new suppliers are reluctant to provide goods to the Company. The Company
recognizes sales upon shipment of product, and allowances are recorded for
estimated uncollectable amounts, returns, credits and similar costs,
including product warranties and price protection. Due to the inherent
uncertainty of such estimates, there can be no assurance that the Company's
forecasts regarding bookings, collections, rates of return, credits and
related matters will be accurate. A significant portion of the operating
expenses of the Company are relatively fixed in nature, and planned
expenditures are based primarily on sales forecasts which, as indicated
above, are uncertain. Any inability on the part of the Company to adjust
spending quickly enough to compensate for any failure to meet sales forecasts
or to receive anticipated collections, or any unexpected increase in product
returns or other costs, could also have an adverse impact on the Company's
operating results. As a strategic response to a changing competitive
environment, the Company has elected, and, in the future, may elect from time
to time, to make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company also
completed a variety of business divestitures during fiscal 1996 and 1997,
restructured the terms of its indebtedness to IBM Credit and issued a
substantial amount of equity in the Company to its creditors in satisfaction
of approximately $45.9 million in claims and indebtedness during the fourth
quarter of fiscal 1996 and agreed to sell its monitor business in August,
1998. In addition, the Company has focused its efforts on developing and
marketing software products, an area in which it has limited experience. As
a result, the Company believes that period-to-period comparisons of its
results of operations will not necessarily be meaningful and should not be
relied upon as any indication of future performance. Due to all of the
foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts
and investors. In such event, the price of the Company's Common Stock would
be likely to be materially adversely affected.
NEED FOR ADDITIONAL FINANCING
The Company intends to finance its working capital needs through cash
generated by operations and proceeds from the planned sale of significant
monitor business assets and the related license to KDS America. Because the
Company has experienced operating losses in each of its prior five fiscal
years and has liabilities in excess of assets, the Company must significantly
reduce operating expenses and/or significantly increase net sales in order to
finance its working capital needs with cash generated by operations.
Accordingly, there can be no assurance that the Company will be able to
successfully fund its working capital needs internally. Furthermore, there
can be no assurance that the Company will be able to raise additional capital
on commercially reasonable terms or at all.
DEPENDENCE ON AND COMPETITION WITH APPLE
Historically, substantially all of the Company's products have been designed
for and sold to users of Apple personal computers. Although the Company has
begun to market certain products for the Windows environment, it is expected
that sales of products for Apple computers will continue to represent
substantially all of the sales of the Company for fiscal 1998. Apple has
lost significant market share over the past couple of years and is
experiencing declining sales in an absolute sense. The Company's operating
results would be adversely affected if these trends should continue or if
other developments were to adversely affect Apple's business. Furthermore,
any continued difficulty that may be experienced by Apple in the development,
manufacturing, marketing or sale of its computers, or other disruptions to,
or uncertainty in the market regarding, Apple's business, resulting from
these or other factors could result in further reduced demand for Apple
computers, which in turn could materially and adversely affect sales of the
Company's products.
As software applications for the multimedia markets become more available
on platforms other than Macintosh, it is likely that these other platforms
will continue to gain acceptance in these markets. For example, newer
versions of the Windows operating environment support high performance
graphics and video applications similar to those offered on the Macintosh.
There is a risk that this trend will reduce the support given to Macintosh
products by third party developers and could substantially reduce demand for
Macintosh products over the long term.
-15-
<PAGE>
A number of the Company's products compete with products marketed by Apple.
As a competitor of the Company, Apple could in the future take steps to
hinder the Company's development of compatible products and slow sales of the
Company's products. The Company's business is based in part on supplying
products that meet the needs of high-end customers that are not fully met by
Apple's products. As Apple improves its products or bundles additional
hardware or software into its computers, it reduces the market for Radius
products that provide those capabilities. In the past, the Company has
developed new products as Apple's progress has rendered existing Company
products obsolete. However, in light of the Company's current financial
condition there can be no assurance that the Company will continue to develop
new products on a timely basis or that any such products will be successful.
In order to develop products for the Macintosh on a timely basis, the Company
depends upon access to advance information concerning new Macintosh products.
A decision by Apple to cease sharing advance product information with the
Company would adversely affect the Company's business.
COMPETITION
The markets for the Company's products are highly competitive, and the
Company expects competition to intensify. Many of the Company's current and
prospective competitors have significantly greater financial, technical,
manufacturing and marketing resources than the Company. The Company believes
that its ability to compete will depend on a number of factors, including the
amount of financial resources available to the Company, success and timing of
new product developments by the Company and its competitors, product
performance, price and quality, breadth of distribution and customer support.
There can be no assurance that the Company will be able to compete
successfully with respect to these factors, particularly in light of its
financial condition. In addition, the introduction of lower priced
competitive products could result in price reductions that would adversely
affect the Company's results of operations.
DEPENDENCE ON LIMITED NUMBER OF MANUFACTURERS AND SUPPLIERS
The Company outsources the manufacturing and assembly of its products to a
third party manufacturer. The failure of the manufacturer to ship the
quantities of a product ordered by the Company could cause a material
disruption in the Company's sales of that product. In the past, most
recently in the fourth quarter of fiscal 1996, the Company has experienced
substantial delays in its ability to fill customer orders for displays and
other products, due to the inability of certain manufacturers to meet their
volume and schedule requirements and, more recently, due to the Company's
shortages in available cash. Such shortages have caused some manufacturers
to put the Company on a cash or prepay basis and/or to require the Company to
provide security for their risk in procuring components or reserving
manufacturing time, and there is a risk that manufacturers will discontinue
their relationship with the Company.
The Company is also dependent on sole or limited source suppliers for certain
key components used in its products, including certain cables, digital video
integrated circuits, and other products. The Company purchases these sole or
limited source components primarily pursuant to purchase orders placed from
time to time in the ordinary course of business and has no guaranteed supply
arrangements with sole or limited source suppliers. Therefore, these
suppliers are not obligated to supply products to the Company for any
specific period, in any specific quantity or at any specific price, except
as may be provided in a particular purchase order. Although the Company
expects that these suppliers will continue to meet its requirements for the
components, there can be no assurance that they will do so, particularly in
light of the Company's financial condition. The Company's reliance on a
limited number of suppliers involves a number of risks, including the absence
of adequate capacity, the unavailability or interruption in the supply of key
components and reduced control over delivery schedules and costs. The
Company expects to continue to rely on a limited number of suppliers for the
foreseeable future. If these suppliers became unwilling or unable to
continue to provide these components the Company would have to develop
alternative sources for these components which could result in delays or
reductions in product shipments which could have a material adverse effect on
the Company's business, operating results and financial condition. Certain
suppliers, due to the Company's shortages in available cash, have put the
Company on a cash or prepay basis and/or required the Company to provide
security for their risk in procuring components or reserving manufacturing
time, and there is a risk that suppliers will discontinue their relationship
with the Company.
TECHNOLOGICAL CHANGE; CONTINUING NEED TO DEVELOP NEW PRODUCTS
The video applications within the industry, are characterized by rapidly
changing technology, often resulting in short product life cycles and rapid
price declines. The Company believes that its success will be highly
dependent on its ability to develop innovative and cost-competitive new
products and to bring them to the marketplace in a timely manner. Should the
Company fail to introduce new products or enhancements to existing products
on a timely basis, the Company's operating results could be adversely
affected. As a result of the Company's financial condition, it has had to
significantly reduce its research and development expenditures. For the 1997
fiscal year, the Company spent approximately $5.0 million on research and
development as compared with approximately $7.5 million for the 1996 fiscal
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<PAGE>
year and $19.3 for the 1995 fiscal year. Research and development was $2.1
million in the nine months ended June 30, 1998 compared to $3.5 million for
the same period in 1997. The Company's financial condition could result in
the interruption or cancellation of research and product development efforts,
which would have a material adverse effect on the business, operating results
and financial condition of the Company.
The Company anticipates that the video editing industry will follow the
pattern of the professional publishing industry in which desktop publishing
products, including those produced by Radius, replaced more expensive,
proprietary products, and the Company also anticipates that this evolution
will lead to an increase in the purchase and use of video editing products,
in particular digital video editing products for use with digital video
camcorders. As a result, the Company has devoted significant resources to
this product line. There can be no assurance that this evolution will occur
in the digital video editing industry as expected by the Company, or that
even if it does occur that it will not occur at a slower pace than
anticipated. There can also be no assurance that any digital video editing
products developed or marketed by the Company will achieve consumer
acceptance or broad commercial success. In the event that the increased use
of such video editing products does not occur or in the event that the
Company is unable to successfully develop and market such products, the
Company's business, operating results and financial condition would be
materially adversely affected, particularly in light of the fact that the
Company has agreed to sell its remaining hardware product line.
DEPENDENCE ON INDIRECT DISTRIBUTION CHANNELS
The Company's primary means of distribution is through a limited number of
third-party distributors and master resellers that are not under the direct
control of the Company. Furthermore, the Company relies on one exclusive or
primary distributor for its sales in each of Japan and Europe. The Company
does not maintain a direct sales force. As a result, the Company's business
and financial results are highly dependent on the amount of the Company's
products that is ordered by these distributors and resellers. Such orders
are in turn dependent upon the continued viability and financial condition of
these distributors and resellers as well as on their ability to resell such
products and maintain appropriate inventory levels. Furthermore, many of
these distributors and resellers generally carry the product lines of a
number of companies, are not subject to minimum order requirements and can
discontinue marketing the Company's products at any time. Accordingly, the
Company must compete for the focus and sales efforts of these third parties.
The future growth and success of the Company will continue to depend in large
part upon its indirect distribution channels, including its reseller
channels. If its resellers or other distributors were to experience
financial difficulties, the Company's results of operations could be
adversely affected.
INTERNATIONAL SALES
Prior to the second fiscal quarter of 1996, the Company's international sales
were primarily made through distributors and the Company's subsidiary in
Japan. Effective April 1, and July 1, 1996 the Company appointed an exclusive
distributor for Japan and Europe, respectively. The Company expects that
international sales, particularly sales to Japan, will represent a
significant portion of its business activity and that it will be subject to
the normal risks of international sales such as currency fluctuations, longer
payment cycles, export controls and other governmental regulations and, in
some countries, a lesser degree of intellectual property protection as
compared to that provided under the laws of the United States. Sales in
Japan could be affected by the economic conditions in that region, which are
currently unstable. Sales in Asian markets have not been, and the Company
does not expect them to be, material in the future outside of Japan which is
currently unstable. Furthermore, a reduction in sales efforts or financial
viability of the distributors could adversely affect the Company's net sales
and its ability to provide service and support to Japanese and European
customers. Additionally, fluctuations in exchange rates could affect demand
for the Company's products. If for any reason exchange or price controls or
other restrictions on foreign currencies are imposed, the Company's business,
operating results and financial condition could be materially adversely
affected. Net sales could also be adversely affected in the future as a
result of the exclusive distributor relationships for Japan and Europe
because the Company only recognizes as net sales a portion of the sales price
of any product sold through such distributor arrangements. Accordingly, even
if sales for such regions increase or remain similar to historic levels, the
Company would recognize a lesser amount of net sales for such regions as
compared to historic levels.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of its key management, marketing, product development and
operational personnel and the Company's ability to retain and continue to
attract highly skilled personnel. The Company does not carry any key person
life insurance with respect to any of its personnel. Competition for
employees in the computer industry is intense, and there can be no assurance
that the Company will be able to attract and retain qualified employees.
Many members of the Company's management have departed within the past year,
including its former President and Chief Executive Officer and four other
Vice Presidents, including its former Senior
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<PAGE>
Vice President on March 31, 1998. The Company has also had substantial
layoffs and other employee departures. Because of the Company's financial
difficulties and the very tight labor market for technical personnel, it has
become increasingly difficult for it to hire new employees and retain key
management and current employees. The failure of the Company to attract and
retain key personnel would have a material adverse effect on the Company's
business, operating results and financial condition.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company has been studying this issue but has not yet completed the process.
As a result, the Company currently has no reasonable basis to conclude that the
Year 2000 Issue will not materially affect future financial results, or cause
reported financial information not to be indicative of future operating results
or future financial condition.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 3 to Consolidated Financial Statements - Commitments and
Contingencies.
ITEM 5. OTHER INFORMATION
Possible Delisting from Nasdaq SmallCap Market.
As of June 30, 1998, the Company had assets of $5.8 million and total
liabilities of $11.7 million and therefore had net tangible assets of $(5.9
million). In order for the Company's Common Stock to continue to be listed on
the Nasdaq SmallCap Market, the Company will be required to maintain net
tangible assets of at least $2.0 million, or must have net income in its most
recently completed fiscal year or in two of the three prior fiscal years.
The Company had net income in its most recently completed fiscal year.
However, in the event that the Company does not increase its net tangible
assets to greater than $2.0 million, the Company's Common Stock would be
subject to delisting if it also failed to achieve net income for its current
fiscal year.
On August 7, 1998, the Company agreed to sell certain significant assets
related to its monitor business to Korea Data Systems (America), Inc.
("KDS"). Under the agreement, Radius will transfer its Radius, Supermac,
PressView and certain other trademarks to KDS and will license certain
intellectual property pertaining to PressView and PrecisionView monitors to
KDS. KDS has not agreed to purchase any inventory or other tangible assets
of Radius. The expected value of the transaction is $6.2 million, including
$1.0 million payable in August 1998 under the related license agreement. The
remaining amount is payable in installments over the next twelve months. Two
affiliates of KDS have guaranteed KDS' performance of its obligations. The
agreement is expected to close in February 1999 if KDS elects to have the
agreement submitted to Radius' shareholders for approval and such approval is
obtained and certain other contingencies are satisfied. In the interim,
Radius has licensed KDS the use of its monitor trademarks and specific
technology and expects to wind down its monitor business activities as
current supplies of monitors are sold, whether or not the asset purchase
agreement is completed. In the event that the asset purchase agreement is
not completed, the license agreement will continue as a perpetual license and
KDS will pay an additional $5.2 million under the extended license over
fifteen months instead of twelve. Radius will continue to use the
transferred trademarks and technology until the transition is completed over
the next several months and expects to focus on its digital video line of
business during this transition period.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed with this Quarterly Report:
<TABLE>
<CAPTION>
<S> <C>
10.01 Asset Purchase Agreement dated as of August 7, 1998 between Korea Data
Systems (America), Inc. and the Registrant.
10.02 Amended and Restated License Agreement dated as of August 7, 1998
between Korea Data Systems (America), Inc. and the Registrant.
27.01 Financial Data Schedule (EDGAR version only).
</TABLE>
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the three months ended June 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 10, 1998 RADIUS INC.
By: /s/ Henry V. Morgan
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Henry V. Morgan
Chief Financial Officer
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EXHIBIT 10.01
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT"), dated August 7, 1998, is
made between Radius Inc. ("SELLER"), a California corporation doing business at
460 East Middlefield Road, Mountain View, CA 94043, and Korea Data Services
(America), Inc. ("BUYER"), a California corporation doing business at 12300
Edison Way, Garden Grove, CA 92841, with reference to the following facts:
A. Seller is engaged in the business of designing, developing,
assembling, marketing and selling PressView and PrecisionView computer monitor
and graphics displays (the "Products") under the Radius-Registered Trademark-
mark (the "DISPLAY BUSINESS"). (Although Seller does not develop or distribute
flat panel devices, for purposes of this Agreement use of the word "Display"
includes such devices.) Seller has licensed Buyer's use of such mark, other
marks and other intellectual property for use in the Display Business pursuant
to a License Agreement dated June 5, 1998, which license has been amended and
restated by license agreement of even date (the "Original License").
B. Buyer desires to buy, and Seller desires to sell to Buyer, certain
assets used in the Display Business, including, without limitation, all of
Seller's right, title and interest in and to the Radius-Registered Trademark-
trademark and related goodwill and certain other intellectual property and other
intangible assets of Seller related to the Display Business, on the terms and
conditions set forth in this Agreement.
The parties, therefore, agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the following meanings:
1.1 "BUYER'S LICENSE" has the meaning set forth in Section 2.5.
1.2 "CLOSING" means the day upon which the conditions to
concluding this Agreement are met and the parties exchange the deliveries
specified in Section 2 below.
1.3 "DISCLOSURE SCHEDULE" means SCHEDULE B to this Agreement.
1.4 "INTANGIBLE ASSETS" means all rights, title and interest of
Seller in and to the trademarks, copyrights, intellectual property and other
intangible assets described on SCHEDULE A to this Agreement, including without
limitation, all trade and service mark registrations and applications therefor
and rights of Seller thereto in any and all jurisdictions worldwide and all
goodwill associated therewith. Buyer's License is not included in the
Intangible Assets. Seller's "Radius" corporate name is not included in
Intangible or Purchased Assets and is subject to the provisions set forth in
Section 9 below.
1.5 "INTELLECTUAL PROPERTY RIGHTS" means any and all patents,
patents pending and other patent rights, copyright rights (including but not
limited to rights in audiovisual works), Moral Rights, trade secret rights,
trade and service marks and any other intellectual property rights recognized by
the law of any jurisdiction.
1.6 "MORAL RIGHTS" means any right to claim authorship of a
work, any right to object to any distortion or other modification of a work, and
any similar right, existing under the law of any country in the world, or under
any treaty.
1.7 "PRESSVIEW IP" means the intellectual property and other
intangible assets (including certain documentation for Products) of Seller
described in "Buyer's License" (see Section 2.5 and Exhibit A to this
Agreement).
1.8 "PURCHASE PRICE" means the purchase price payable to Seller
for the Purchased Assets and Buyer's License as specified in Section 3.2 below.
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1.9 "PURCHASED ASSETS" means the Intangible Assets . Purchased
Assets shall not include Buyer's License.
1.10 "SELLER'S LICENSE" has the meaning set forth in Section 2.6.
1.11 "SITE" means the address of Seller set forth in the
introductory paragraph of this Agreement.
1.12 "THIRD-PARTY INTANGIBLES" means the Intellectual Property
Rights of third parties specifically identified on SCHEDULE B to this Agreement.
2. PURCHASE, SALE AND LICENSE.
2.1 PURCHASE AND SALE On the Closing, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and
accept from Seller, all right, title and interest of Seller in and to the
Purchased Assets, free and clear of all liens, claims, encumbrances, security
interests, restrictions and rights of any third parties other than Seller's
License and Third-Party Intangibles, except as set forth in the Disclosure
Schedule.
2.2 TRANSFER OF PURCHASED ASSETS. On or before the Closing,
Seller shall, at its expense, tender possession of the Purchased Assets to Buyer
at the Site or such other locations and times and by such means as have been
agreed by the parties.
2.3 FURTHER ACTION. On the Closing, Seller will execute and
deliver to Buyer such documents and instruments of transfer and take such
further action as may be reasonably requested by Buyer to transfer to Buyer the
Purchased Assets and vest or perfect in Buyer good and marketable title in and
to the Purchased Assets subject to the terms of this Agreement.
2.4 NO ASSUMPTION OF LIABILITY. Buyer has not and will not, by
the execution, delivery or performance for this Agreement, or otherwise, assume
or otherwise become responsible for any liability or obligation of any nature of
Seller, including without limitation: (i) any liability or obligation under
contracts of Seller arising during any period on or prior to the Closing ; (ii)
any tax liabilities related to the Purchased Assets arising prior to the
Closing; (iii) any taxes, wage claims or liabilities for employment-related
contributions or liabilities; (iv) any liabilities arising from a failure to
properly withhold from employees or a failure to file required tax returns or
reports with respect to employees or consultants, and (v) any compensation or
benefits to which the Seller's employees are entitled from Seller (sometimes
collectively referred to as "PRE-CLOSING RISKS"); and Seller hereby agrees to
indemnify, defend and hold Buyer harmless from and against all loss, liability,
claims and expenses (including reasonable attorneys' fees) related to such
Pre-Closing Risks.
2.5 BUYER'S LICENSE. On the Closing, Seller and Buyer shall
enter into a license agreement, substantially in the form attached as Exhibit A
to this Agreement (the "BUYER'S LICENSE"), pursuant to which Seller grants to
Buyer a license as provided therein to the PressView IP.
2.6 SELLER'S LICENSE. On the Closing, Seller and Buyer shall
enter into a license agreement, substantially in the form attached as Exhibit B
to this Agreement (the "SELLER'S LICENSE"), pursuant to which Buyer shall grant
to Seller a license as provided therein to the Intangible Assets solely for the
purposes specified therein. Except for the Seller's License and the Security
Agreement (defined below), following the Closing, Seller shall have no right or
license whatsoever in or to any of the Purchased Assets.
3. PURCHASE PRICE AND MANNER OF PAYMENT.
3.1 PURCHASE PRICE. As consideration for the sale of the
Purchased Assets and grant of Buyer's License, Buyer will prepay the final three
payments required under the $5,200,000 promissory note of Buyer delivered to
Seller on the date hereof pursuant to the Original License.
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3.2 EXPENSES AND TAXES. Each party will bear its own costs in
preparing this Agreement and for taxes in connection with this Agreement and the
transactions contemplated hereby, except as set forth below. Buyer agrees that
it shall be responsible for the timely payment of any applicable sales and use
taxes on the transfer of the Purchased Assets and will indemnify Seller from all
loss, liability, claim, risk and expense (including reasonable attorneys' fees)
occasioned by Buyer's failure to pay such taxes.
3.3 SURVIVAL OF ORIGINAL LICENSE. Until the Closing, the
Original License shall remain in full force and effect. Thereafter, it shall be
terminated and superseded by this Agreement. The promissory note, security
agreement and guaranties delivered to Seller in connection with the Original
License shall survive by their terms, however.
4. DUE AUTHORIZATION. As of the date of this Agreement and as of the
Closing:
4.1 BUYER. Buyer hereby represents and warrants to Seller that
Buyer has the full right, power, legal capacity and authority to execute and
delivery this Agreement and to perform its obligations hereunder, and that no
approval and consent of any other person, entity or governmental authority is
necessary to such performance hereof, except as shall be validly and timely
obtained before such performance is required.
4.2 SELLER. Seller hereby represents and warrants to Buyer that
Seller has the full right, power, legal capacity and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and no approval
or consent of any other person, entity or governmental authority is necessary to
such performance thereof, except as shall be validly and timely obtained before
such performance is required; provided however, that no representation or
warranty is being made with respect to shareholder approval.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer that, except as set forth the Disclosure Schedule, the
matters set forth in the following subsections of this Section 5 are true and
correct as of the date hereof and the Closing.
5.1 CORPORATE ORGANIZATION AND GOOD STANDING. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of California. The nature of the business conducted or properties owned by
Seller do not require Seller to be qualified in any other jurisdiction. Seller
has all corporate power and authority to own, lease and operate its properties
and to conduct its business as such is presently conducted.
5.2 AUTHORIZATION FOR AGREEMENT. The execution, delivery and
performance of this Agreement by Seller has been duly authorized by all
necessary actions of its Board of Directors, and this Agreement, when executed
and delivered by Seller, will constitute the valid and binding obligation of
Seller, enforceable according to its terms; provided however, that no
representation or warranty is being made with respect to shareholder approval.
5.3 NO BREACH OF STATUTE OR CONTRACT. Neither the execution nor
delivery by Seller of this Agreement nor compliance by Seller with the terms and
provisions hereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, the Articles of Incorporation or Bylaws of Seller, any judgment or
award of any court or arbitrator or any other agreement (including any agreement
with shareholders) or any applicable law to which Seller or any of the Purchased
Assets is subject, nor will such execution or delivery result in the creation of
any lien or charge upon the Purchased Assets. Seller is not a party to, or
otherwise subject to any provision contained in, any instrument evidencing
indebtedness, any agreement relating thereto or any other contract or agreement
(including its Articles of Incorporation) which restricts or otherwise limits
Seller's power or authority to transfer the Purchased Assets. Seller is not a
party to any joint venture or similar affiliation involving the Purchased
Assets.
5.4 TITLE AND CONDITION OF PROPERTY. To Seller's knowledge,
Seller owns all right, title and interest in and to the Purchased Assets free
and clear of all claims, mortgages, liens, security interests or encumbrances of
any nature and the transfer of the Purchased Assets to Buyer and Buyer's use
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thereof does not infringe upon any Intellectual Property Rights of any third
party.
5.5 LITIGATION. There are no actions, suits, investigations or
proceedings pending, or, to the knowledge of Seller, threatened (i) against
Seller or any properties or rights of Seller before any court, arbitrator or
administrator or governmental body which arose out of or are based upon the
ownership or use of the Purchased Assets, and there is no judgment, order, writ
or decree of any governmental authority applicable to Seller which might result
in any material adverse change in the value of the Purchased Assets or Buyer's
ability to design, develop, assemble, market and sell the Products, (ii)
challenging the ownership or use, in any respect, of the Purchased Assets, or
(iii) asserting the invalidity of this Agreement or seeking to prevent any of
the transactions contemplated hereby. To the knowledge of Seller, no valid
basis for any successful action, suit, investigation or proceeding of the nature
referred to above exists, which if so asserted would have a material adverse
effect on the value of the Purchased Assets or Buyer's ability to design,
develop, assemble, market and sell the Products.
5.6 FINANCIAL RECORDS. On or before the date hereof, Seller has
made available to Buyer access to all records of Seller pertaining to the
Display Business ("FINANCIAL RECORDS").
5.7 UNDISCLOSED LIABILITIES. To Seller's knowledge, Seller has
no obligations or liabilities related to the Display Business of any material
nature, including but not limited to employees or consultants, whether absolute,
accrued, contingent or otherwise, except and to the extent disclosed in the
Disclosure Schedule, this Agreement or in the public filings of Seller. Buyer
is not assuming any Seller obligations hereunder except as set forth in Section
2.4.
5.8 PROPRIETARY INFORMATION AGREEMENTS. To Seller's knowledge,
all persons who have had access to the confidential and proprietary information
related to the Purchased Assets have executed a non-disclosure agreement and
assignment with Seller. Concurrently with the execution of this Agreement, the
rights to enforce these agreements with respect to the Purchased Assets and the
confidential and proprietary information contained therein is being assigned to
Buyer to the extent necessary to preserve Buyer's Intellectual Property Rights
in the Purchased Assets.
5.9 SCOPE OF PURCHASED ASSETS. To Seller's knowledge, the
Purchased Assets and the Buyer's License constitute all or substantially all
intangible assets and rights necessary for Buyer's continued conduct of the
Display Business as currently conducted by Seller (except for research and
development capability (i.e., employees), distribution rights and channel and
related goodwill, equipment, inventory, spare parts and warranty coverage for
historical sales). To Seller's knowledge, other than the Purchased Assets and
Buyer's License being acquired hereunder, Seller and its affiliates own no other
intangible assets or Intellectual Property Rights necessary for the continued
conduct of the Display Business as currently conducted by Seller (other than any
rights associated with the previous parenthetical expression).
5.10 NO OTHER WARRANTIES. Seller makes no other warranties in
connection with the Purchased Assets or Buyer's License, express or implied,
INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. The Intangible Assets and the PressView IP may not be error free and
may not satisfy Buyer's needs.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to Seller that the matters set forth in the following subsections
of this Section 6 are true and correct as of the date hereof and the Closing.
6.1 CORPORATE ORGANIZATION AND GOOD STANDING. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Buyer has all corporate power and authority to own,
lease and operate its properties and to conduct its business as such is
presently conducted.
6.2 AUTHORIZATION FOR AGREEMENT. The execution and performance
of this Agreement by Buyer has been duly authorized by all necessary actions of
its Board of Directors and shareholders, and this Agreement, when executed and
delivered by Buyer, will constitute the valid and binding obligation of Buyer,
enforceable against Buyer according to its terms.
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6.3 ABILITY TO PERFORM. Buyer represents that the financial
statements of Buyer attached as SCHEDULE C to this Agreement fairly reflect
Buyer's financial condition as of the dates indicated.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. As of the Closing,
the following conditions have been satisfied, unless waived by BUYER in
accordance with Section 9:
7.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by Seller in Sections 4 and 5 above shall be
true and correct in all material respects on the Closing Date.
7.02 BOARD APPROVAL. On or prior to the Closing, this Agreement
and all transactions contemplated hereby shall have been duly and validly
authorized and adopted by the Board of Directors.
7.03 CONSENTS. Seller will have used commercially reasonable
efforts to obtain all consents, permits and waivers and made all filings
necessary or appropriate for the consummation of the transactions contemplated
hereby, including but not limited to the approvals of parties to the Contracts
identified in Schedule C.
7.04 CLOSING CERTIFICATE. On the Closing Date, Seller shall have
delivered to BUYER a certificate signed by the chief financial officer of
Seller, dated the Closing Date and certifying to the fulfillment of the
conditions set forth in Sections 7.01, 7.02, and 7.03 above.
7.05 SHAREHOLDER APPROVAL OR SATISFACTORY OPINION OF COUNSEL.
Prior to the Closing, Seller shall have secured the approval of Seller's
shareholders to this Agreement or provided an opinion of counsel satisfactory to
Buyer's counsel that all corporate action necessary to authorize the Agreement
has been taken by Seller; provided however, that Buyer must give written notice
of its desire for shareholder approval to Seller by December 15, 1998 or within
ten business days after any earlier request of Seller (in order to supplement
relevant proxy materials).
7.06 DELIVERIES OBTAINED. All deliveries to Buyer required to be
made by Seller under Section 2 hereof shall have been tendered.
7.07 CONDITION OF TITLE. Buyer's counsel is reasonably satisfied
that the liens of IBM Credit Corporation and Mitsubishi Electronics America,
Ltd. have been released and that any rights of Seller's European and Japanese
distributors referred to in the Disclosure Scheduledo not present material legal
risks to Buyer's ability to use the Purchased Assets in view of the terms of
such agreements and any amendments to them entered into prior to Closing..
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. As of the
Closing, all of the following conditions shall have been satisfied, unless
waived by Seller in accordance with Section 9:
8.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by BUYER in Sections 4 and 6 above shall be
true and correct in all material respects on the Closing.
8.02 CORPORATE APPROVAL. On or prior to the Closing Date, this
Agreement and all transactions contemplated hereby shall have been duly and
validly authorized and adopted by the Board of Directors of BUYER, and BUYER
shall have delivered to Seller certified copies of the resolutions of its Board
of Directors authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
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8.03 CLOSING CERTIFICATE. On the Closing Date, BUYER shall have
delivered to Seller a certificate signed by the chief financial officer of
BUYER, dated the Closing Date and certifying to the fulfillment of the
conditions set forth in Sections 8.01 and 8.02 and that there have been no
material adverse changes to BUYER's financial conditions or business.
8.04 DELIVERIES. The payments specified in Section 3.01 have
been received.
8.05 GOODSTANDING UNDER ORIGINAL LICENSE. All required payments
have been received from Buyer under, and Buyer is not in default of, the
Original License.
9. Waivers of Conditions; TERMINATION; CERTAIN COVENANTS..
9.01 WAIVERS OF CONDITIONS. Either party can elect to waive any
condition for its benefit on prior written notice to the other party and upon
such waiver will not thereafter be able to seek any legal recourse against the
other party for the failure to satisfy such condition. In any event, Seller
shall have no liability to Buyer if the conditions identified in Sections 7.03.
7.05 or 7.07 are not satisfied, provided that commercially reasonable efforts
are made to satisfy them during the term of this Agreement.
9.02 TERMINATION OF THIS AGREEMENT. This Agreement may be
terminated upon the mutual written consent of Seller and BUYER, and will be
terminated in any event if the Closing has not occurred within thirty days after
the next regular shareholders meeting of Seller (expected in February 1999)
(unless extended by agreement of the parties), in which case only the
obligations of Articles 10 and 12 shall survive.
9.03 CERTAIN COVENANTS.
(a) Prior to Closing, Seller agrees to use commercially
reasonable efforts to secure as soon as practicable following the date of this
Agreement a full termination or release of the liens of IBM Credit Corporation
and Mitsubishi Electronics America referred to in the Disclosure Schedule.
(b) In connection with Closing, if Buyer is reasonably
disatisfied with the status of the rights of the Europe master distributor (see
the Disclosure Schedule), i.e., if Buyer reasonably believes that such
distributor may present material legal risks to Buyer's ability to use the
Purchased Assets in Europe, then in connection with the satisfaction of part of
the conditions referred to in Section 7.07 above and upon Buyer's request, at
Closing, (i) Seller will assign all of Seller's claims against such distributor
to Buyer, including all rights under the master distributor agreement dated July
1, 1996 and related documentation (the "Documentation") , and (ii) Seller will
assign the Documentation to Buyer, subjec to the terms of the Documentation;
provided that Buyer indemnifies, defends and holds Seller harmless from any
claims of such distributor in a form reasonably satisfactory to Seller's
counsel.
(c) Prior to Closing, Seller shall not renew or extend, nor
permit the renewal or extension of, the Documentation or of Seller's master
distributor agreement with its Japanese master distributor (see the Disclosure
Schedule) beyond the existing expiration dates of such arrangements.
(d) After Closing and except as otherwise permitted in
Seller's License, Seller will limit its use of its corporate name ("Radius
Inc.") as legally necessary to identify itself with various levels of government
and regulatory agencies and as otherwise required by law. If at any time after
the full and timely satisfaction of the Note, Buyer reasonably determines that
it requires the corporate name for purposes of continuing the Display Business
as a California corporation or a
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foreign corporation doing business in California, then Radius will consent to
the use of similar corporate names (with the Secretary of State or other
appropriate official), and if such consent is not sufficient for Buyer to
secure the right to use a variation of "Radius" in its corporate name, e.g.,
"Radius Displays, Inc.", then Seller will use commercially reasonable efforts
to change its legal name by seeking shareholder approval for the amendment of
its articles of incorporation at the next regular meeting of shareholders (or
earlier at the election of Seller or at the time Seller seeks shareholder
approval of this Agreement, if Buyer elects to submit this Agreement to such
process pursuant to Section 7.05). Such efforts shall include the
preparation of appropriate proxy materials and good faith efforts to obtain
regulatory and shareholder approval of such materials. Seller shall have no
liability to Buyer if Seller's shareholders do not approve such name change,
provided that Seller timely use commercially reasonable efforts to secure
such change. However, Buyer can elect to terminate this Agreement within ten
days after the failure of Seller shareholders to approve of this Agreement,
in which case, only the provisions of Articles 10 and 12 shall survive.
10. Survival, INDEMNIFICATION AND EXCULPATION.
10.1 INDEMNIFICATION OF SELLER. Buyer will defend, indemnify and
hold Seller (including Seller's officers, directors, shareholders, employees,
distributors and agents) harmless from all loss, liability, claims and expenses
(including reasonable attorneys' and experts' charges) (collectively "LOSSES")
occasioned by Buyer's breach of any of its representations and warranties herein
or its use of the Purchased Assets or Buyer's License, or any breach of Buyer's
License, except to the extent such Losses are caused by Seller's intentional
misconduct, gross negligence or breach of Seller's representations and
warranties contained in Articles 4 and 5 above prior to the beginning of the
thirteenth month after the Closing. In no event will Seller be liable to Buyer
for more than the Purchase Price payments received and actually receivable from
Buyer in connection with the breach of or performance of this Agreement, except
for the intentional or grossly negligent breach of Seller's License. .
10.2 INDEMNIFICATION OF BUYER. Seller will defend, indemnify
and hold Buyer (including Buyer's officers, directors, shareholders, employees,
distributors and agents) harmless from all Losses occasioned by Seller's breach
of any of its representations and warranties herein or its use of the Purchased
Assets or Seller's License, or any breach of Seller's License, except to the
extent such Losses are caused by Buyer's intentional misconduct, gross
negligence or breach of Buyer's representations and warranties contained in
Articles 4 and 6 above prior to the beginning of the thirteenth month after the
Closing.
10.3 SURVIVAL. The representations and warranties of Seller and
Buyer pursuant to Articles 4, 5 and 6 respectively will survive through the end
of the twelfth month after the Closing. Any action for breach must therefore
accrue prior to such expiration.
11. NONCOMPETITION AND NONSOLICITATION As an inducement to enter into
this Agreement and consummate the transactions contemplated hereby, the parties
agree as follows:
(a) During the period from the Closing until the first
anniversary of the Closing (the "NONCOMPETE PERIOD"), Seller shall not (I)
engage in the Display Business, except as authorized by Seller's License or as
incidental to Seller's digital video business, nor (II) knowingly induce any
employee of Buyer to leave the employ of Buyer in order to provide services to
Seller without Buyer's written approval. Notwithstanding the foregoing, no
successor in interest to substantially all of Seller or its business or assets,
whether by merger, combination, liquidation, distribution, law, assignment,
purchase, or change in effective control, shall be bound by the provisions of
this Article 11.
(b) During the Noncompete Period, Buyer and its affiliates shall
not (I) use the "Radius" brand name in connection with the development,
manufacture, marketing or sale of any digital video product nor (II) knowingly
induce any employee of Seller to leave the employment of Seller in order to
provide services to Buyer without Seller's written approval.
(c) The parties acknowledge and agree that money damages may not
be an
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adequate remedy for any breach or threatened breach of the provisions of
subparagraph (a) or (b) and that, in such event, the aggrieved party or its
successors or assigns may, in addition to any other rights and remedies
existing in its favor, apply to any court of competent jurisdiction for
specific performance, injunctive and other relief in order to enforce or
prevent any violations of the provisions of this Section 11 (including the
extension of the Noncompete Period by a period equal to the length of court
proceedings necessary to stop such violation). Any injunction shall be
available without the posting of any bond or other security. In the event of
an alleged breach or violation of any of the provisions of this Section 11,
the Noncompete Period will be tolled until such alleged breach or violation
is resolved; PROVIDED, HOWEVER, that if it is found that the provisions of
this Section 8 have not been violated, then the Noncompete Period will not be
deemed to have been tolled. The parties agree that the restrictions contained
in this Section 11 are reasonable in all respects in light of all
circumstances.
12. MISCELLANEOUS
12.1 NO ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement may
not be assigned by Seller or Buyer and any attempt to do so will be void.
Seller may use this Agreement as security for any borrowing, however.
Furthermore, either party may assign this Agreement in connection with a merger
or sale of substantially all of its assets or similar reorganization. This
Agreement and the terms and conditions contained herein are binding upon, and
will inure to the benefit of, the parties hereto and their respective
representatives, executors, administrators, heirs, successors and assigns.
12.2 SEVERABILITY. If any provision of this Agreement is found to
be invalid, illegal or unenforceable, then it will be enforced to the maximum
extent possible and the remaining provisions of this Agreement will continue
unaffected to the extent equitable.
12.3 WAIVERS. No waiver by any party hereto of any term or
condition of this Agreement will be effective unless set forth in a writing
signed by such party. No waiver of any provision of this Agreement will be
deemed a waiver of any other provision, or constitute a continuing waiver unless
otherwise expressly provided in writing by the waiving party. No failure or
delay on the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will a single or partial
exercise thereof preclude any other or further exercise of any other rights,
powers or privileges.
12.4 CONFIDENTIALITY. Each party acknowledges that it will
receive information which is confidential and proprietary to the other party.
Each party agrees not to use such information except in performance of this
Agreement and not to disclose such information to third parties. Neither party
will issue a press release in connection with the entry into or Closing of this
Agreement without the prior approval of the other party, except as may be
required by law.
12.5 NOTICES. All notices which are required to be given
hereunder shall be in writing and shall be addressed (i) if to Seller, at
Seller's address set forth in the introductory paragraph of this Agreement, or
(ii) if to Buyer, at the address as set forth in the introductory paragraph of
this Agreement (each to the attention of the chief executive officer or chief
financial officer), or at such other address as the relevant party furnishes to
the other party hereto in writing pursuant to this Section. Any such notice may
be delivered personally, by commercial overnight courier or facsimile
transmission which shall be followed by a hard copy (U.S. mail prepaid, first
class or better) and shall be deemed to have been served if by hand when
delivered, if by commercial overnight courier 48 hours after deposit with such
courier, and if by facsimile transmission when transmission has been confirmed.
12.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts (original or facsimile), each of which shall be deemed an
original and all of which together shall constitute but one instrument.
12.7 BROKER'S FEES/EXPENSES. Each party represents that it has
not engaged the services of any broker or finder, other than Michael Kuehn, in
connection with the transactions contemplated by this Agreement and jointly and
severally agree to indemnify the other and hold it harmless from and against any
claims for broker's or finder's fees or other compensation in connection with
such transactions. Otherwise, each party will bear its own expenses in
connection with this
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Agreement, and Seller will be solely responsible for its obligations to
Michael Kuehn.
12.8 DISPUTES. If any dispute arising out of or in connection
with this Agreement cannot be resolved by the parties consensually or through
mutually agreeable forms of mediation or arbitration, then such dispute shall be
adjudicated in any court of competent jurisdiction applying California law. The
parties agree that the state or federal courts of Santa Clara County California
are competent to hear any such dispute and consent to service there.
12.9 NO ADDITIONAL REPRESENTATIONS. Buyer and Seller each
acknowledge that the other has not made any representations or warranties, of
any kind, either express or implied, except as expressly set forth in this
Agreement, Buyer's License and Seller's License.
12.10 ATTORNEYS' FEES. If any action at law or in equity or
arbitration or mediation proceeding is necessary to enforce or interpret the
provisions of this Agreement, then the prevailing party shall be entitled to
reasonable attorneys' and experts' charges in addition to any other relief to
which such prevailing party may be entitled.
12.11 INTEREST. Except as otherwise provided in the Note, any
obligation under the Agreement which can be reduced to a monetary sum and which
is not satisfied when due under this Agreement will bear interest at the rate of
one percent per month or any lower legal maximum until satisfied.
12.12 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together
with the schedules and exhibits attached hereto, each of which is incorporated
herein by this reference, constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes in its entirety
all prior agreements, understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the subject matter hereof. No
supplement, modification or amendment to this Agreement will be binding unless
executed in writing by all parties hereto. There are no intended third party
beneficiaries of this Agreement. An ambiguity or inconsistency in this
Agreement shall not be construed against its drafter. "Including" and "for
example" are used inclusively, without limitation. The adequacy of
consideration is acknowledged by each party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written:
Korea Data Systems (America), Inc. RADIUS INC.
By: By:
----------------------------------- --------------------------------
Name: John Hui Name: Mark Housley
Title: Chief Executive Officer Title: Chief Executive Officer
9
<PAGE>
SCHEDULES AND EXHIBITS TO ASSET PURCHASE AGREEMENT
Schedule A Intangible Assets
Schedule B Disclosure Schedule
Schedule C Financial Records
Exhibit A Buyer's License
Exhibit B Seller's License
10
<PAGE>
Schedule A Intangible Assets
The following trademarks and applications (and the goodwill associated with
each) are included:
1. Precisionview, as filed March 17, 1995.
2. The stylized "S" (for Supermac), reg. No. 1,869,309.
3. Intellicolor, reg. No. 1,858,443.
4. Pressview, reg No. 1,865,214.
5. Precisioncolor, reg. No. 1,799,104.
6. Radius, reg. No. 1,816,667.
7. Supermac Platinum, reg. No. 1,849,010.
8. Supermac, reg. No. 1,898,615.
9. Prosense, reg. No. 2,032,840
10. Supermatch, reg. No. 1,829,245
Along with the rights to the "Radius" internet domain name, subject to Seller's
License.
11
<PAGE>
Schedule B Disclosure Schedules
The following agreements and matters are germane to the Sections noted, among
others:
0. 5.03 The Letter Agreement dated January 26, 1989 with Radius Systems,
Ltd and related correspondence.
1. 5.03 The Consent and Coexistence Agreement with Motorola dated April 11,
1996.
2. 5.03 The license to Umax of "Supermac" and the stylized "S" in the Asset
Transfer Agreement dated January 9, 1996.
3. 5.03 The master distributior agreement for Japan with QMS KKdated April
1, 1996, as amended July 1, 1997.
4. 5.03 The master distributior agreement for Europe with Gradeup, Ltd.
dated July 1, 1996 and related documentary materials pertaining to
Abacus Technology Europe, Ltd..
5. 5.03 The Splash license dated January 30, 1996.
6. 5.03 The Purchase Agreement with Sequel dated October 10, 1996.
7. 5.03 The CRA Agreement dated May 1, 1997 and related agreements, as
amended.
8. 5.03 The Sun Java Developer's License.
9. 5.04 The lien of IBM Credit Corporation for sums paid in full.
10. 5.04 The lien of Mitsubishi Electronics, America on PressView IP and
related trademarks for component risk in the manufacture of
PressView and PrecisionView monitors pursuant to Security Agreement
dated June 1996. (Radius believes that this lien should be
released in due course.)
11. 5.05 The Electronics for Imaging litigation.
12. 5.05 The Monitor Class Action Suit and related Attorney General matter.
13. 5.07 The potential claim of Mitsubishi Electronics, America for
inventory.
14. 5.07 Claims related to warranties for previously sold products.
15. 5.07 The potential claim of Finnegan et al related to monitors generally
as described in correspondence dated March 17, 1998 and responsive
correspondence
16. 5.07 The matters raised with respective to foreign trademark rights in
correspondence from Anita Ersoy of Fenwick & West LLP to James
12
<PAGE>
Given.
17. 5.03 The patent license dated March 8, 1996 between Radius and the
inventor Waintroob for Pressview hoods.
Items 0,1,2,11,15,16 and 17 are considered Third Party Intangibles.
Schedule C Financial Records of Buyer (see attached)
13
<PAGE>
EXHIBIT A
(Buyer's License)
LICENSE AGREEMENT
This License Agreement (this "Agreement") is made and entered into as of
______, 199__, by and between Radius Inc., a California corporation having its
principal office at 460 East Middlefield Road, Mountain View, California 94043
("Licensor"), and Korea Data Systems (America), Inc., a California corporation
having its principal office at 12300 Edison Way, Garden Grove, California 92841
("Licensee"), with reference to the following facts:
R E C I T A L S:
A. Licensee is engaged in the business of designing, developing,
assembling, marketing, selling, servicing and supporting computer monitors and
similar displays (the "Display Business").
B. Licensor and Licensee are parties to an Asset Purchase Agreement dated
as of _____________, 1998 (the "Purchase Agreement"), pursuant to which Licensee
has acquired from Licensor the registered marks and associated goodwill of
Licensor described therein (the "Purchased Assets").
C. As contemplated by the Purchase Agreement, Licensee desires to acquire
from Licensor, and Licensor is willing to grant to Licensee, the perpetual,
fully-paid, nonexclusive right and license to use the technology described on
Exhibit 1 to this Agreement (the "Technology") on the terms set forth herein.
Now, therefore, in consideration of the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, it is
understood and agreed between the parties hereto as follows:
SECTION GRANT OF LICENSE.
1.
1.1 Licensor hereby grants to Licensee, on the terms set forth herein, the
nonexclusive perpetual, fully-paid right and license (the "License") to use,
sublicense and make use of the Technology, and all associated goodwill generated
by Licensee, and to make enhancements, improvements, inventions and additions
thereto (collectively, "Licensee Improvements") worldwide in connection with the
manufacturing, marketing, advertising, selling and servicing of computer
<PAGE>
hardware (other than digital video hardware) and all business and activities
related to or incidental thereto.
1.2 Licensee shall have the right and license hereunder to make Licensee
Improvements, and all such Licensee Improvements shall be encompassed by the
License. Licensee hereby assigns to Licensor all of its right, title and
interest in and to any such Licensee Improvements and agrees to execute such
documents and take such other actions as are necessary to effectuate such
assignment.
1.3 Licensee shall have the right to grant to any party sublicenses with
respect to all or any part of the License, provided only that each sublicensee
shall agree in writing, as a condition to such sublicense, to be bound by all of
the restrictions and obligations under this Agreement.
1.4 Licensee covenants and agrees to use the Technology strictly in
accordance with the terms of this Agreement and shall not engage in any
activities in circumvention of this Agreement.
SECTION TERM OF LICENSE.
1.
2.1 The License is terminable only as follows:
(a) by Licensee, for any or no reason, upon 30 days' prior notice to
Licensor;
(b) by Licensor, if Licensee breaches any material provision of the
License and fails to cure the breach within 60 days after notice thereof from
Licensor; and
(c) by Licensor, if Licensee breaches any material provision of the
Purchase Agreement, including the "Note" (as defined therein), and fails to cure
such breach within 30 days after notice thereof from Licensor.
In the event this License is terminated as aforesaid, Licensee and any
sublicensees shall promptly cease all production and distribution of products
that incorporates the Technology or any Licensee Improvements and other uses of
the Technology and shall so certify to Licensor; provided, however, that
Licensee and any sublicensees shall be entitled thereafter to continue to use
the Technology and any Licensee Improvements solely in connection with their
service and support of products previously sold or distributed by them, and
provided further, that the rights of end-users of products manufactured prior to
such termination that incorporate the Technology or Licensee Improvements shall
not be impaired by the termination. The foregoing rights do not limit any other
rights and remedies of any party hereto, including the right to injunctive or
other equitable relief.
SECTION CERTAIN COVENANTS OF LICENSEE.
1.
3.1 Licensee disclaims any right or interest in the Technology and
Licensee Improvements, other than as specifically provided in this Agreement.
<PAGE>
3.2 Without limiting the exercise of Licensee's right and license under
the License, Licensee shall not, directly or indirectly, infringe upon, harm,
dissipate or contest Licensor's ownership of or rights in and to the Technology.
Licensee, moreover, will not contest, directly or indirectly, Licensor's rights
to use or license others to use the Technology in connection with the Display
Business or any other business or activity.
3.3 Licensee shall not permit any trademarks or trade names, service marks
or other registrations included as part of the Technology to be or become
abandoned, unless it first gives Licensor not less than 60 days written notice
thereof and the right to assume or continue such trademark, trade name, service
mark or other registration in Licensor's name and for its sole benefit.
Licensee shall cooperate with Licensor with respect to Licensor's assumption or
continuation of any such trademark, trade name, service mark or other
registration hereunder.
SECTION REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR.
1.
Licensor makes the following representations, warranties and covenants to
Licensee, each of which is subject to the Disclosure Schedule provisions of the
Purchase Agreement and shall survive the execution and delivery of this
Agreement for one year from the date of this Agreement:
4.1 Licensor is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
4.2 The execution and delivery by Licensor of this Agreement, the
performance and observance by Licensor of its obligations hereunder and the
consummation by Licensor of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Licensor. This
Agreement has been duly executed and delivered by a duly authorized officer of
Licensor and constitutes the valid and legally binding obligation of Licensor,
enforceable against Licensor in accordance with its terms.
4.3 The execution and delivery of this Agreement by Licensor will not
violate or result in the breach of, constitute a default under, or accelerate
the performance required by, any term, provision, covenant, condition, warranty
or representation contained in any agreement, contract, document, writing or
understanding to which Licensor is a party, or any decision, judgment, order,
decree, law, rule, regulation, policy or interpretation to which Licensor is
subject. No consents or agreements of any third party or governmental body are
necessary for the execution, delivery, performance or observance by Licensor of
its obligations under this Agreement.
[ADD EXCEPTION WITH RESPECT TO SHAREHOLDER APPROVAL, IF NECESSARY.]
SECTION REPRESENTATIONS AND WARRANTIES OF LICENSEE.
1.
<PAGE>
Licensee makes the following representations, warranties and covenants to
Licensor, each of which shall survive the execution and delivery of this
Agreement for one year from the date of this Agreement:
5.1 Licensee is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
5.2 The execution and delivery of this Agreement, the performance of
Licensee's obligations hereunder and the consummation by Licensee of the
transactions contemplated hereby have been duly authorized by all necessary
actions on the part of Licensee. This Agreement has been duly executed and
delivered by a duly authorized officer of Licensee and constitutes the valid and
legally binding obligation of Licensee, enforceable against Licensee in
accordance with its terms.
5.3 The execution and delivery of this Agreement by Licensee will not
violate or result in the breach of, constitute a default under, or accelerate
the performance required by, any term, provision, covenant, condition, warranty
or representation contained in any agreement, contract, document, writing or
understanding to which Licensee is a party, or any judgment, order, decree, law,
rule, regulation, policy or interpretation to which Licensee is subject. No
consents or agreements of any third party or governmental body are necessary for
the performance or observation by Licensee of its obligations under this
Agreement.
SECTION INDEMNIFICATION.
1.
6.1 To the fullest extent allowed by law, Licensee agrees to indemnify and
hold harmless Licensor from any and all loss, liability (including strict
liability in tort), costs and expenses (including reasonable attorneys' and
experts' fees and disbursements) resulting from any claims for damages
(including incidental and consequential damages), suits, actions, proceedings,
recoveries, judgments or executions, which may be threatened, made, sought, had,
brought or recovered against Licensor by reason of or on account of injury
(including death resulting therefrom), to any person whomsoever or for damage to
the property of any person whomsoever, caused by, arising from, incident to,
connected with or growing out of, directly or indirectly, (i)Efailure of
Licensee to observe or perform any term, provision, covenant or condition,
contained in this Agreement to be performed by it, (ii)Ethe breach of any
warranty or representation made or given by Licensee, or (iii) any use by
Licensee of the Technology, whether or not in accordance with the terms of this
Agreement.
6.2 Licensor agrees to give Licensee written notice of any event or
assertion of which it has knowledge concerning any loss, liability, damage,
cost, expense, claim, lien or other obligation as to which it may request
indemnification under this Agreement within 20 days after acquiring such
knowledge; provided, however, that failure to give such notice shall not affect
Licensee's indemnification obligations hereunder except to the extent of any
actual prejudice to Licensee caused thereby. Licensee shall have the right to
cure, within a reasonable time and in a manner reasonably satisfactory to the
other, any matter giving rise to liabilities under this ArticleE6;
<PAGE>
provided, however, that any such cure shall not relieve Licensee of its
obligation under this ArticleE6 arising prior to, during or because of such
cure or to the extent that such cure is inadequate.
6.3 In the case of any third-party suit, proceeding, claim or assertion
being made against Licensor, Licensee will cooperate with Licensee in
determining the validity of such claim or assertion. Licensee shall have the
right to control the conduct of such defense with counsel of its choice who
shall be reasonably satisfactory to Licensor, provided that Licensor shall have
the right to participate in such defense with counsel of its choice, at its sole
cost and expense. Licensor agrees not to settle or compromise any such
third-party suit, proceeding, claim or assertion for which such party will seek
or has sought indemnification hereunder from Licensee without the prior written
consent of Licensee (which consent shall not be unreasonably withheld). A
settlement or compromise of any such third-party suit without such consent shall
operate as a forfeiture of Licensor's right to seek indemnification hereunder
with respect to such suit, proceeding, claim or assertion, and any monies
previously paid over to Licensor by Licensee with respect thereto shall
forthwith be refunded to Licensee, together with simple interest at the rate of
7% per annum calculated from the date of payment to the date of refund. In the
event that Licensor has a right against any third party with respect to any
matter to which this indemnity applies, the indemnity shall be net of any
amounts recovered from third parties and any amounts paid to Licensor by
Licensee shall entitle Licensee to the extent of such indemnity, to be
subrogated to the rights of Licensor to the extent Licensee can legally do so.
SECTION FURTHER ASSURANCES; COOPERATION.
1.
7.1 From and after the date hereof, without further consideration,
Licensor shall take all such other actions and shall execute, acknowledge and
deliver all such writings, formulas, consents and other documents as Licensee or
its counsel may reasonably request to vest more fully in Licensee, and perfect,
Licensee's right to use the Technology and any Licensee Improvements in
accordance with this Agreement.
7.2 From time to time after the date hereof, without further
consideration, the parties hereto shall deliver to each other such information
and data concerning the transactions contemplated hereby as any party may
reasonably request including that required in order to enable such requesting
party to complete and file all federal, state and local forms which may be
required to be filed by it and to complete all customary tax and accounting
procedures.
SECTION ASSIGNMENT.
1.
8.1 This Agreement may be assigned, in whole or in part, by either party
upon not less than ten days prior notice to the other party. This Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns.
SECTION DEFAULT; REMEDIES.
1.
<PAGE>
9.1 In the event Licensee shall violate or default under any of the
provisions of this Agreement and fail within a reasonable time to cure such
violation or default, Licensor shall have the following rights and remedies,
each of which is independent of the other and jointly or severally enforceable,
and all of which are in addition to, and not in lieu of, any other rights or
remedies available to Licensor under this Agreement or under law or equity:
a) the right to sue Licensee in any court of competent jurisdiction
for money damages suffered by Licensor as a result of Licensee's breach of or
default under any of the provisions of this Agreement; and
a) the right to have this Agreement enforced by injunction, specific
performance or other equitable remedy by any court having jurisdiction, it being
acknowledged and agreed that any such breach or default will cause irreparable
injury to Licensor and that money damages will not provide adequate remedy to
Licensor.
SECTION RELATIONSHIP BETWEEN PARTIES.
1.
10.1 This Agreement does not in any way create the relationship of
principal and agent between Licensor and Licensee, and in no circumstances shall
Licensee be considered the agent of Licensor, or Licensor be considered the
agent of Licensee. Licensee shall not act or attempt to act or represent
itself, directly or by implication, as agent of Licensor, or in any manner
assume or create or attempt to assume or create any obligation or make any
contract, agreement, representation or warranty on behalf or in the name of
Licensor, nor shall Licensee act or represent itself as an affiliate of any
other authorized licensee of Licensor. Licensor shall not act or attempt to act
or represent itself, directly or by implication, as agent of Licensee, or in any
manner assume or create or attempt to assume or create any obligation to make
any contract, agreement, representation or warranty on behalf or in the name of
Licensee, nor shall Licensor act or represent itself as an affiliate of any
other authorized licensee of Licensee.
SECTION MISCELLANEOUS.
1.
11.1 Each party to this Agreement shall pay its own expenses in connection
with the preparation of this Agreement and the consummation of the transactions
contemplated hereby, including the fees of any attorneys, accountants and other
representatives and agents engaged by such party.
11.2 This Agreement contains the entire Agreement of the parties with
respect to the License granted herein and no representation, inducements,
promises or agreements, oral or otherwise, between the parties relative thereto
not embodied herein shall be of any force or effect. No failure of any party to
exercise any power given it hereunder or to insist upon strict compliance by any
other party of any obligation hereunder, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver by such
party of its right to demand exact compliance with the terms hereof. Waiver by
any party of any particular violation or default under this Agreement shall not
affect or impair such party's rights with respect to any subsequent violation or
default of the same or of a different nature, nor shall any delay or
<PAGE>
omission on the part of the party to exercise any rights arising from any
violation or default affect or impair such party's rights as to such
violation or default or any subsequent violation or default of the same or of
a different nature.
11.3 If any covenant or other provision of this Agreement is invalid or
incapable of being enforced by reason of any rule of law or public policy, all
other conditions and provisions of this Agreement shall, nevertheless, remain in
full force and effect, and no covenant or provision shall be deemed dependent
upon any other covenant or provision unless expressly stated herein.
11.4 Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
11.5 Unless otherwise specifically provided, all notices required or
permitted to be given hereunder shall be in writing and (i)Esent by certified or
registered mail, with postage thereon prepaid, or (ii)Esent by U.S. Express Mail
or Federal Express or other reputable overnight delivery service, as follows:
if to Licensor, addressed to its President at the address set forth in the
introductory paragraph of this Agreement, and if to Licensee, addressed to its
President at the address set forth in the introductory paragraph of this
Agreement, or at such other address as any of the parties shall designate by
written notice to the others from time to time. Such notice shall be deemed
given upon delivery one business day after mailing, if by overnight delivery
service, and two business days after mailing, if by certified or registered
mail.
11.6 This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to agreements made and performed
solely within such State.
11.7 This Agreement shall be binding upon the parties and their respective
permitted successors and assigns.
11.8 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but which
counterparts together shall constitute but one and the same instrument.
11.9 All terms and words used in this Agreement, regardless of the number
and gender in which they are used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context or sense of this Agreement or any paragraph or clause
herein may require, as if such words had been fully and properly written in the
appropriate number and gender.
11.10 The various titles of the Sections herein are used solely for
convenience and shall not be used for interpreting or constructing any word,
clause, paragraph or section of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date set forth below.
<PAGE>
LICENSOR:
RADIUS INC.
Date: ___________, 199__ By:
, President
LICENSEE:
KOREA DATA SYSTEMS (AMERICA),EINC.
Date: ___________, 199__ By:
, President
<PAGE>
EXHIBIT 1 TO LICENSE AGREEMENT
DATED AS OF _________, 199___
Description of Technology
1) The "C" language version of the PressView software that runs only
under the MacOS from Apple computer.
1) The "java" language version of the software that runs under Microsoft (MS)
Windows-95. This software also runs under MS Windows NT 4.0 with specific
code for each graphics adapter. The code may also work under MS Windows-98
and MS Windows NT 5.0 but this has not been fully tested. The java code
used to support the N and G chassis of Mitsubishi.
1) The foregoing includes both source and object code (to be transmitted
electronically).
1) The 12 ICC color profiles listed below and the corresponding PhotoShop
separation tables, subject to any rights of Splash Technology Holdings,
Inc. The profiles are identified by their names on the Macintosh partition
of the ColorMatch-Registered Trademark- 3.01 CD-ROM. The ISO-9660 names
are similar:
1. Agfa Euroscale
2. Agfa Japan Color
3. DIC Japan Coated
4. DIC Japan Matte
5. DIC Japan Uncoated
6. Fuji Japan C1
7. Fuji Japan C2
8. Fuji US Coated
9. 3M MatchPrint III Publication Base Japan
10. 3M MatchPrint III Publication Base US
11. SWOP Coated
12. SWOP Uncoated
5) Diagrams documentation, samples and other information needed to make the
cables assemblies necessary for PressView for Macintosh and PressView for
Windows.
6) Machine-readable and hard copy versions of the current documentation for
the PressView for Macintosh, if available, and PressView for Windows manuals.
7) Artwork for the current CD silk screen labels and manual covers.
<PAGE>
8) Claim #'s 1 and 4 of United States Patent #54 99 040 filed June 27, 1994
for front panel lockout feature.
9) Information relating to sourcing the Radius ProSense-Registered Trademark-
Colorimeter from the OEM supplier.
10) All written specifications and documents owned by Radius necessary for or
specifically related to the sale, use and maintenance of Radius' PressView and
PrecisionView monitors, including but not limited to, user guides, installation
guides, narrative descriptions, design files, file layouts, logic flow diagrams,
source and loud modules, output reports, test data, test programs,
advertisements and promotional material, and all camera ready copy and/or media
masters of such product documentation, in whatever forms they exist (i.e.,
electronic or physical).
<PAGE>
EXHIBIT B
(Seller's License)
LICENSE AGREEMENT
__________
This License Agreement (this "Agreement") is made and entered into as of
________, 199_, by and between Karla Data Systems (America), Inc., a California
corporation having its principal office at 12300 Edison Way, Garden Grove,
California 92841 ("Licensor"), and Radius Inc., a California corporation having
its principal office at 460 East Middlefield Road, Mountain View, California
94043 ("Licensee"), with reference to the following facts:
R E C I T A L S:
A. Licensor and Licensee are parties to an Asset Purchase Agreement,
dated _________, 1998 (the "Purchase Agreement"), pursuant to which Licensor has
acquired from Licensee all proprietary and other property rights and interests
in and to the corporate and trade name "Radius" and the marks and trademarks
specified on ExhibitE1 hereto under which Licensee has previously conducted its
business of designing, developing, assembling, marketing and selling computer
displays (the "Display Business").
B. As contemplated by the Purchase Agreement, Licensee now desires to
acquire from Licensor, and Licensor is willing to grant back to Licensee, the
nonexclusive right and license for the period specified herein to use the
foregoing corporate and trade name, marks and trademarks (collectively, the
"Marks"), worldwide, solely in connection with certain activities of Licensee as
specifically provided herein.
Now, therefore, in consideration of the mutual covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, it is
understood and agreed between the parties hereto as follows:
SECTION GRANT OF LICENSE.
1.
1.1 Licensor hereby grants to Licensee, on the terms and subject to the
conditions herein contained, the nonexclusive right and license (the "License")
to use the Marks, and all associated goodwill generated by Licensee before or
after the date of this Agreement, worldwide solely in connection with the
service and support by Licensee or its sublicenses or distributors.
1.2 The License shall include, without limitation, the right and license
of Licensee to continue to use the word "Radius" in Licensee's corporate and
internet domain name, subject to the provisions of SectionE3 below.
<PAGE>
1.3 It is expressly understood and agreed that Licensee's right and
license under the License to use the Marks as provided in Section 1.1 shall
terminate upon Licensee's fulfillment of the last of its obligations referred to
in Section 1.1, and Seller shall thereafter have no right or license under the
License to service or support any computer displays. It is further understood
and agreed that the License does not extend to any other business application.
SECTION TERM OF LICENSE.
1.
[Intentionally omitted].
SECTION CERTAIN COVENANTS OF LICENSEE.
1.
3.1 At Licensee's request, Licensee shall use its best efforts during the
term of this Agreement to change its corporate name and internet domain name to
one that omits any use of or reference to the Marks and, if necessary, to submit
and recommend such name change for approval by its shareholders; provided,
however, that Licensee shall not be obligated to call or convene an special
meeting of shareholders solely for this purpose. Licensee further agrees in
that event to cooperate with Licensor in effecting an assignment to Licensor of
Licensee's current corporate name.
3.2 In the event that, notwithstanding Licensee's best efforts as provided
in Section 3.1, the shareholders of Licensee fail to approve a change in
Licensee's name so as to comply with Section 3.1, Licensee shall take all
commercially reasonable steps necessary or appropriate to do business under a
fictitious business name which does not include any of the Marks.
SECTION SERVICE MARKS AND TRADE MARKS.
1.
4.1 Licensee disclaims any right or interest in the Marks, other than as
provided in this Agreement, or to any goodwill derived therefrom.
4.2 In the event Licensee shall learn of any unauthorized use of the Marks
(an "Infringement") or other unfair competitive act ("Unfair Competition") by
any third party related to the Marks, it shall promptly notify Licensor thereof.
Licensor shall have the sole and exclusive right, in its discretion, at its own
cost and expense and for its own use and benefit, to institute suit or to take
such other action as it may deem proper (collectively, an "Action") to restrain
or to recover damages for any such Infringement or Unfair Competition.
Notwithstanding the foregoing, Licensee, at its own cost and expense, shall be
entitled to join or be represented in any Action instituted or taken by Licensor
under this SectionE4.2, provided that the Infringement or Unfair Competition
that is the subject of such Action has damaged Licensee or otherwise adversely
affects its interest under the License in and to the Marks. If Licensee so
joins in any such Action, Licensor and Licensee shall share in any recovery
therefrom, whether by judgment, settlement or otherwise,
<PAGE>
to the extent that the amount so recovered represents the damages suffered by
each of them in respect to the Infringement or Unfair Competition that is the
subject of such Action, or in proportion to which the amount recovered
otherwise relates to their respective interests in and to the Marks. In any
Action under this SectionE4.2, Licensee, whether or not it is a participant
therein, shall fully cooperate with Licensor, if so requested, provided that
it is reimbursed for its actual costs and expenses for doing so.
4.3 Without limiting the exercise of Licensee's right and license under
the License, Licensee shall not, directly or indirectly, infringe upon, harm,
dissipate or contest Licensor's ownership of or rights in and to the Marks.
Licensee, moreover, will not contest, directly or indirectly, Licensor's rights
to use or license others to use the Marks in connection with the Display
Business or any other business or activity, including, without limitation, any
business or activity competitive with the Non-Display Business, or the Purchase
Agreement. Licensee's obligations under this Section 4.3 shall survive the
expiration or earlier termination of this Agreement.
4.4 After one year following the date hereof, Licensor shall have no
obligations hereunder, or otherwise, to continue the registration of the Marks
in any territory or jurisdiction. Prior thereto, Licensor shall use
commercially reasonable efforts to preserve the registration rights associated
with the [Marks worldwide].
SECTION STANDARDS OF OPERATION; COVENANTS OF LICENSEE.
1.
5.1 Licensee covenants and agrees to use the Marks strictly in accordance
with the terms of this Agreement and shall not engage in any activities in
circumvention of this Agreement.
5.2 Licensee will comply with all guidelines provided by Radius with
respect to the reproduction and use of the Marks and will protect the goodwill
of the Marks by maintaining the highest quality and integrity for all products
utilizing the Marks Licensor will have the right to inspect all such products to
verify compliance with this Section 5.2.
Section REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR.
1.
Licensor makes the following representations, warranties and covenants to
Licensee, each of which shall survive the execution and delivery of this
Agreement:
6.1 Licensor is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
6.2 The execution and delivery by Licensor of this Agreement, the
performance and observance by Licensor of its obligations hereunder and the
consummation by Licensor of the transactions contemplated hereby have been duly
authorized by all necessary
<PAGE>
corporate action on the part of Licensor. This Agreement has been duly
executed and delivered by a duly authorized officer of Licensor and
constitutes the valid and legally binding obligation of Licensor, enforceable
against Licensor in accordance with its terms.
6.3 The execution and delivery of this Agreement by Licensor will not
violate or result in the breach of, constitute a default under, or accelerate
the performance required by, any term, provision, covenant, condition, warranty
or representation contained in any agreement, contract, document, writing or
understanding to which Licensor is a party, or any decision, judgment, order,
decree, law, rule, regulation, policy or interpretation to which Licensor is
subject. No consents or agreements of any third party or governmental body are
necessary for the execution, delivery, performance or observance by Licensor of
its obligations under this Agreement.
SECTION REPRESENTATIONS AND WARRANTIES OF LICENSEE.
1.
7.1 Licensee is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.
7.2 The execution and delivery of this Agreement, the performance of
Licensee's obligations hereunder and the consummation by Licensee of the
transactions contemplated hereby have been duly authorized by all necessary
actions on the part of Licensee. This Agreement has been duly executed and
delivered by a duly authorized officer of Licensee and constitutes the valid and
legally binding obligation of Licensee, enforceable against Licensee in
accordance with its terms.
7.3 The execution and delivery of this Agreement by Licensee will not
violate or result in the breach of, constitute a default under, or accelerate
the performance required by, any term, provision, covenant, condition, warranty
or representation contained in any agreement, contract, document, writing or
understanding to which Licensee is a party, or any judgment, order, decree, law,
rule, regulation, policy or interpretation to which Licensee is subject. No
consents or agreements of any third party or governmental body are necessary for
the performance or observation by Licensee of its obligations under this
Agreement.
SECTION INDEMNIFICATION.
1.
8.1 To the fullest extent allowed by law, Licensee agrees to indemnify and
hold harmless Licensor from any and all loss, liability (including strict
liability in tort), costs and expenses (including reasonable attorneys' and
experts' fees and disbursements) resulting from any claims for damages
(including incidental and consequential damages), suits, actions, proceedings,
recoveries, judgments or executions, which may be threatened, made, sought, had,
brought or recovered against Licensor by reason of or on account of injury
(including death resulting therefrom), to any person whomsoever or for damage to
<PAGE>
the property of any person whomsoever, caused by, arising from, incident to,
connected with or growing out of, directly or indirectly, (i)Efailure of
Licensee to observe or perform any term, provision, covenant or condition,
contained in this Agreement to be performed by it, (ii)Ethe breach of any
warranty or representation made or given by Licensee, or (iii) any use by
Licensee of the Marks, whether or not in accordance with the terms of this
Agreement.
8.2 Licensor agrees to give Licensee written notice of any event or
assertion of which it has knowledge concerning any loss, liability, damage,
cost, expense, claim, lien or other obligation as to which it may request
indemnification under this Agreement within 20 days after acquiring such
knowledge; provided, however, that failure to give such notice shall not affect
Licensee's indemnification obligations hereunder except to the extent of any
actual prejudice to Licensee caused thereby. Licensee shall have the right to
cure, within a reasonable time and in a manner reasonably satisfactory to the
other, any matter giving rise to liabilities under this ArticleE8; provided,
however, that any such cure shall not relieve Licensee of its obligation under
this ArticleE8 arising prior to, during or because of such cure or to the extent
that such cure is inadequate.
8.3 In the case of any third-party suit, proceeding, claim or assertion
being made against Licensor, Licensee will cooperate with Licensee in
determining the validity of such claim or assertion. Licensee shall have the
right to control the conduct of such defense with counsel of its choice who
shall be reasonably satisfactory to Licensor, provided that Licensor shall have
the right to participate in such defense with counsel of its choice, at its sole
cost and expense. Licensor agrees not to settle or compromise any such
third-party suit, proceeding, claim or assertion for which such party will seek
or has sought indemnification hereunder from Licensee without the prior written
consent of Licensee (which consent shall not be unreasonably withheld). A
settlement or compromise of any such third-party suit without such consent shall
operate as a forfeiture of Licensor's right to seek indemnification hereunder
with respect to such suit, proceeding, claim or assertion, and any monies
previously paid over to Licensor by Licensee with respect thereto shall
forthwith be refunded to Licensee, together with simple interest at the rate of
7% per annum calculated from the date of payment to the date of refund. In the
event that Licensor has a right against any third party with respect to any
matter to which this indemnity applies, the indemnity shall be net of any
amounts recovered from third parties and any amounts paid to Licensor by
Licensee shall entitle Licensee to the extent of such indemnity, to be
subrogated to the rights of Licensor to the extent Licensee can legally do so.
8.4 The indemnification contained in this Article 8 shall survive the
termination or expiration of this Agreement for a period of one year thereafter.
SECTION FURTHER ASSURANCES; COOPERATION.
<PAGE>
1.
9.1 From and after the date hereof, without further consideration,
Licensor shall take all such other actions and shall execute, acknowledge and
deliver all such writings, formulas, consents and other documents as Licensee or
its counsel may reasonably request to vest more fully in Licensee, and perfect,
Licensee's right to use the Marks in accordance with this Agreement.
9.2 From time to time after the date hereof, without further
consideration, the parties hereto shall deliver to each other such information
and data concerning the transactions contemplated hereby as any party may
reasonably request including that required in order to enable such requesting
party to complete and file all federal, state and local forms which may be
required to be filed by it and to complete all customary tax and accounting
procedures.
SECTION ASSIGNMENT.
1.
10.1 This Agreement may be assigned, in whole or in part, by either party
upon not less than ten days prior notice to the other party. This Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns.
SECTION DEFAULT; TERMINATION; REMEDIES.
1.
11.1 In the event that Licensee fails to cure any violation or default by
Licensee of or under this Agreement within a reasonable time after written
notice thereof is received from Licensor, then, in any such event, Licensor, at
its option and without prejudice to any other rights or remedies provided for
hereunder or by law or equity, may terminate this Agreement as set forth below.
11.2 Any time after the occurrence of any violation or default and the
expiration of any applicable cure period without the violation or default being
cured, Licensor may terminate this Agreement by giving Licensee written notice
of such termination. Such notice shall specify a date, not less than 15 days
after the date of such notice, on which date this Agreement shall terminate as
if such date were a date herein specifically fixed for the expiration of this
Agreement, and during such period Licensee shall have no further right to cure
the violation or default giving rise to the right of termination; provided that
if Licensee has contested the grounds for termination by commencing a
proceeding, Licensor may not terminate this Agreement unless an order has been
entered therein in favor of Licensor and Licensee fails within 30 days to pay,
appeal or satisfy such order.
11.3 In the event Licensee shall violate or default under any of the
provisions of this Agreement and fail to cure such violation or default within
any applicable cure period, Licensor shall have the following rights and
remedies, each of which is independent of the other and jointly or severally
enforceable, and all of which are in addition to, and not in lieu of, any other
rights or remedies available to Licensor under this Agreement or under law or
equity:
<PAGE>
a) the right to sue Licensee in any court of competent jurisdiction
for money damages suffered by Licensor as a result of Licensee's breach of or
default under any of the provisions of this Agreement; and
a) the right to have this Agreement enforced by injunction, specific
performance or other equitable remedy by any court having jurisdiction, it being
acknowledged and agreed that any such breach or default will cause irreparable
injury to Licensor and that money damages will not provide adequate remedy to
Licensor.
11.4 Upon termination of this Agreement, Licensee's right to use in any
manner the Marks, or any confusingly similar trademark, service mark, trade name
or insignia, shall terminate forthwith. Licensee shall thereupon immediately
discontinue the use of the Marks. Licensee shall not thereafter directly or
indirectly identify itself in any manner as a licensee of Licensor or of the
Marks. Such termination, however, shall not affect the obligations of Licensee
to take action or abstain from taking action after the termination hereof as may
be provided elsewhere in this Agreement.
SECTION RELATIONSHIP BETWEEN PARTIES.
1.
12.1 This Agreement does not in any way create the relationship of
principal and agent between Licensor and Licensee, and in no circumstances shall
Licensee be considered the agent of Licensor, or Licensor be considered the
agent of Licensee. Licensee shall not act or attempt to act or represent
itself, directly or by implication, as agent of Licensor, or in any manner
assume or create or attempt to assume or create any obligation or make any
contract, agreement, representation or warranty on behalf or in the name of
Licensor, nor shall Licensee act or represent itself as an affiliate of any
other authorized licensee of Licensor. Licensor shall not act or attempt to act
or represent itself, directly or by implication, as agent of Licensee, or in any
manner assume or create or attempt to assume or create any obligation to make
any contract, agreement, representation or warranty on behalf or in the name of
Licensee, nor shall Licensor act or represent itself as an affiliate of any
other authorized licensee of Licensee.
SECTION MISCELLANEOUS.
1.
13.1 Each party to this Agreement shall pay its own expenses in connection
with the preparation of this Agreement and the consummation of the transactions
contemplated hereby, including the fees of any attorneys, accountants and other
representatives and agents engaged by such party.
13.2 This Agreement contains the entire Agreement of the parties with
respect to the License granted herein and no representation, inducements,
promises or agreements, oral or otherwise, between the parties relative thereto
not embodied
<PAGE>
herein shall be of any force or effect. No failure of any party to exercise
any power given it hereunder or to insist upon strict compliance by any other
party of any obligation hereunder, and no custom or practice of the parties
at variance with the terms hereof, shall constitute a waiver by such party of
its right to demand exact compliance with the terms hereof. Waiver by any
party of any particular violation or default under this Agreement shall not
affect or impair such party's rights with respect to any subsequent violation
or default of the same or of a different nature, nor shall any delay or
omission on the part of the party to exercise any rights arising from any
violation or default affect or impair such party's rights as to such
violation or default or any subsequent violation or default of the same or of
a different nature.
13.3 If any action at law or in equity, or any arbitration or mediation
proceeding, is necessary to enforce or interpret the provisions of this
Agreement, then the prevailing party shall be entitled to reasonable attorneys'
and experts' charges in addition to any other relief available to such
prevailing party.
13.4 If any covenant or other provision of this Agreement is invalid or
incapable of being enforced by reason of any rule of law or public policy, all
other conditions and provisions of this Agreement shall, nevertheless, remain in
full force and effect, and no covenant or provision shall be deemed dependent
upon any other covenant or provision unless expressly stated herein.
13.5 Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
13.6 Unless otherwise specifically provided, all notices required or
permitted to be given hereunder shall be in writing and (i)Esent by certified or
registered mail, with postage thereon prepaid, or (ii)Esent by U.S. Express Mail
or Federal Express or other reputable overnight delivery service, as follows:
if to Licensor, addressed to its President at the address set forth in the
introductory paragraph of this Agreement, and if to Licensee, addressed to its
President at the address set forth in the introductory paragraph of this
Agreement, or at such other address as any of the parties shall designate by
written notice to the others from time to time. Such notice shall be deemed
given upon delivery one business day after mailing, if by overnight delivery
service, and two business days after mailing, if by certified or registered
mail.
13.7 This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to agreements made and performed
solely within such State.
13.8 This Agreement shall be binding upon the parties and their respective
permitted successors and assigns.
<PAGE>
13.9 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but which
counterparts together shall constitute but one and the same instrument.
13.10 All terms and words used in this Agreement, regardless of the number
and gender in which they are used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context or sense of this Agreement or any paragraph or clause
herein may require, as if such words had been fully and properly written in the
appropriate number and gender.
13.11 The various titles of the Sections herein are used solely for
convenience and shall not be used for interpreting or constructing any word,
clause, paragraph or section of this Agreement.
13.12 As used herein, "Licensor" shall mean Licensor, its subsidiaries and
affiliates and "Licensee" shall mean Licensee, its subsidiaries and affiliates.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date set forth below.
KOREA DATA SYSTEMS
(AMERICA), INC.
Date: ___________, 1998 By:_____________________________
John Hui, President
RADIUS INC.
Date: ___________, 1998 By:_____________________________
Mark Housley, President
<PAGE>
EXHIBIT 2 TO LICENSE AGREEMENT
DATED AS OF _____ __, 199_
DATE
TYPE U.S. REG. NO. MARK GRANTED
<PAGE>
EXHIBIT 10.02
AMENDED AND RESTATED LICENSE AGREEMENT
This Amended and Restated License Agreement (this "License") is made as
of August 7, 1998 (the "Effective Date") between Radius Inc., a California
corporation, maintaining its principal place of business at 460 East
Middlefield Road, Mountain View, CA 94043 ("Radius"), and Korea Data Systems
(America), a California corporation, maintaining its principal place of
business at 12300 Edison Way, Garden Grove, CA 92841("KDS"). This License
replaces and supersedes in its entirety a License Agreement dated June 5,
1998 between the parties (and related guaranties).
1. Relationship. Radius and KDS recently concluded the negotiation of the
transfer of various Radius brand names and trademarks and related
intellectual property for use in connection with KDS' computer monitor
business (the "Transfer"). Pending the Closing (as defined in the Asset
Purchase Agreement of even date) of the Transfer, or in the event such
Agreement does not close for any reason, Radius will license the use of the
trademarks identified on Exhibit A to this License (the "Trademarks") and the
"PressView IP" (as defined on Exhibit B) to KDS on the terms and conditions
set forth below. During the term of this License, Radius will continue to
use the Trademarks and PressView IP and reserves all rights to such and
related goodwill; however, Radius shall not use, directly or indirectly, the
Trademarks with computer monitors and "graphics adapters" (which for purposes
of this License, include flat panel displays) with limited exceptions
described in Section 2. The parties are independent contractors. KDS will
comply with all reasonable criteria and policies developed and modified by
Radius from time to time in connection with the use of its trademarks by
licensees generally. Neither party will issue press releases referring to
the other or disclose the terms or existence of this License, without the
other's prior written approval, except as may be required by law.
2. License Grant. During the term of this License (or longer, subject to
the last sentence in Section 6) and subject to Radius' rights below, Radius
grants KDS (a) all of Radius' rights to use the Trademarks worldwide on an
exclusive basis solely for purposes of manufacturing, marketing, advertising,
selling and servicing computer monitors and graphics adapters manufactured by
or for KDS, and (b) all of Radius' rights to use the Trademarks and PressView
IP worldwide on a non exclusive basis solely for purposes of manufacturing,
marketing, advertising, selling and servicing computer hardware manufactured
by or for KDS other than digital video hardware; all provided that such
monitors, graphics adapters and computer hardware are of a quality acceptable
to Radius and KDS remains in good standing under this Agreement Subject to
the last sentence of Section 6, this License is nontransferable,
nonsublicensable and subject to early termination as set forth in Section 6
below. Radius reserves all rights and benefits associated with the
Trademarks and PressView IP and the use of same, including the right to use
and license the Trademarks and the PressView IP; however, Radius will not use
or authorize others to use the Trademarks during the term of this Agreement
in connection with the distribution, manufacturing, marketing, advertising,
selling and servicing of computer monitors and graphics adapters, except: (a)
in connection with the distribution of existing inventories of Radius branded
monitors (whether held by Radius or third parties), (b) in connection with
the service and support of previously sold Radius and Supermac monitors and
graphics adapters, and (c) as previously authorized to its Japanese and
European master distributors by existing agreements or applicable law. (The
parties acknowledge that third parties may continue
1
<PAGE>
to distribute, refurbish and resell previously sold monitors and graphics
adapters, subject to Radius' trademark rights.) KDS will not at any time
during or after this License do anything that may adversely affect the
validity or enforceability of or contribute to the infringement of the
Trademarks. During the term of this License (and thereafter, if the license
becomes perpetual as set forth in the last sentence to Section 6), Radius
will use commercially reasonable efforts to (i) maintain the effectiveness of
its trademark registrations in all countries where the Trademarks are
currently registered and in good standing as well as (ii) defend the
Trademarks from infringement by third parties. If KDS desires trademark
registration protection beyond what Radius considers reasonable or in any
other country during the term or desires more assertive trademark enforcement
against third parties, then Radius will reasonably cooperate in such efforts
after notice from KDS and at KDS' expense, provided that such registrations
and actions will be in Radius' name unless Radius elects otherwise.
3. Payment. In consideration of the license rights conferred above, KDS
has paid Radius $1,000,000 and tenders a note to Radius in the amount of
$5,200,000 in the form attached hereto (the "Note"). The Note is secured in
the form of the Security Agreement attached and is guarantied by Korea Data
Sytems Co., Ltd. and Korea Data Systems (USA), Inc. in the form attached (the
"Guaranties"), all duly executed and delivered to Radius in connection with
this License.
4. Miscellaneous. KDS may not refer to itself as an authorized Radius
Reseller or agent and is not authorized to use other Radius trademarks or
intellectual property pursuant to this License. KDS will not make any
representation, warranty or guarantee on behalf of Radius. KDS must disclaim
warranties and limit liability for Radius with respect to Radius branded
monitors and graphics adapters sold by or for KDS to the same extent that KDS
disclaims its own warranties and limits its own liability on other KDS
monitors and graphics adapters, and in any event, KDS must at least disclaim
all indirect, punitive, special and consequential damages. KDS will have the
exclusive responsibility to support purchasers of Radius branded monitors and
graphics adapters sold by or through KDS which utilize any of the Trademarks
or the PressView IP. KDS shall not refer its customers, distributors or
resellers to Radius for support. Each party acknowledges that it will have
access to certain information and materials concerning the other party's
business, plans, customers, technology and products that are confidential and
of substantial value to the other party, which value will be impaired if such
information and materials were disclosed to third parties. Each party
further agrees that it will not use such information (except in performance
of this License), or disclose such information to third parties, and that it
will not obtain any rights in such information except as specified in this
License. Each party will also take every reasonable precaution to protect
the confidentiality of such information, including but not limited to
executing confidentiality agreements in form and substance satisfactory to
the other party. KDS will indemnify, defend and hold Radius (including its
officers, directors, shareholders, employees, distributors and agents)
harmless from all loss, liability, expense (including reasonable attorneys'
and experts' charges) and claims ("Losses") occasioned by KDS' use of the
Trademarks and PressView IP or any breach by KDS of this Agreement, except to
the extent such Losses are caused by Radius' intentional misconduct or gross
negligence and except to the extent such Losses are caused by the Trademarks
or PressView IP's infringement or violation of the rights of any third
parties.
5. Limitations. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF
2
<PAGE>
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
LICENSE, EXCEPT THAT (I) EACH PARTY HAS AUTHORITY TO ENTER INTO THIS LICENSE
AND (II) TO EACH PARTY'S KNOWLEDGE ENTRY INTO THIS LICENSE DOES NOT VIOLATE
ANY DOCUMENT OR ORDER AND IS NOT SUBJECT TO LITIGATION. RADIUS' LIABILITY
UNDER THIS AGREEMENT, WHETHER RESULTING FROM STATUTE, TORT, STRICT LIABILITY,
BREACH OF CONTRACT OR OTHER FORM OF ACTION, SHALL BE LIMITED TO THE ACTUAL
AMOUNTS PAID BY KDS UNDER THIS LICENSE AND SHALL IN NO EVENT INCLUDE
INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND,
EVEN IF RADIUS IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. SIMILARLY, KDS'
LIABILITY TO RADIUS HEREUNDER SHALL BE LIMITED TO THE PAYMENTS DUE PLUS ANY
LIABILITY UNDER INDEMNIFICATION PROVISIONS OF SECTION 4 ABOVE.
6. Term. The term of this License will expire on any date the Transfer is
closed and the final three monthly Note payments are prepaid to Radius. (The
Note, Security Agreement and Guaranties will survive such termination,
however.) Prior to such time, either party may terminate this License prior
to its expiration if the other party fails to perform any material obligation
under this License and such failure continues unremedied for thirty business
days after written notice, in which event, KDS' right to use the Trademarks
and PressView IP shall immediately cease. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER AS A RESULT OF THE EXPIRATION OR TERMINATION OF THIS LICENSE
PURSUANT TO ITS TERMS, INCLUDING FOR ANY SUMS EXPENDED, DAMAGES SUFFERED OR
LIABILITIES INCURRED BY EITHER IN THE CONDUCTING OR PROMOTING OF THEIR
BUSINESS, OR FOR LOST PROFITS OR CONSEQUENTIAL DAMAGES OF ANY KIND. KDS'
obligations to pay Radius all amounts due under this License will survive the
expiration and any termination of this License except termination by Radius
without cause, along with the provisions of Sections 4, 5 and 7. In the
event there is no Transfer and KDS remains in good standing under this
License, then after the Note has been timely paid in full the license rights
conferred in Section 2 above will become fully paid up (subject to all
previously accrued obligations having been paid), perpetual, irrevocable,
transferable (after notice to Radius) and sublicensable (after notice to
Radius).
7. General. This License is not assignable by either party without the
prior written consent of the other party, which shall not be unreasonably
withheld, except in connection with a merger or disposition of substantially
all of the assignor's related assets or business. Any other attempted
assignment will be null and void. These provisions shall be binding upon and
inure to the benefit of the parties, their successors and permitted assigns.
All notices and demands hereunder shall be in writing and shall be served by
personal service or by first class certified or registered mail, or by any
return receipt express courier to the address indicated on the signature page
of this License, or to any other address of the receiving party designated by
written notice. The parties acknowledge that breaches of this License
warrant equitable or injunctive relief in addition to other remedies. This
License constitutes the entire agreement between the parties pertaining to
its subject matter and supersedes any prior or contemporaneous written or
oral agreements between the parties. The parties acknowledge that they are
not entering into this License on the basis of any representations not
expressly made in this License. Any modifications of this License must be in
writing and signed by both parties. The waiver by one party of any default of
the other party shall not waive subsequent defaults of the same or different
kind. This License shall become binding only after it has been signed
jointly by Radius and KDS. This License will be
3
<PAGE>
governed by and construed in accordance with the laws of the United States
and the State of California as applied to agreements entered into and to be
performed entirely within California between California residents. The
parties hereby submit to the jurisdiction of, and waive any venue objections
against, the United States District Court for the Northern District of
California and the Superior Court of the State of California for the County
of Santa Clara in any litigation arising out of or related to this License.
THE PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY IN ANY SUCH
LITIGATION. The parties and their respective counsel have negotiated this
License. Therefore, this License will be interpreted without any strict
construction in favor of or against either party. In the event any provision
of this License is determined to be invalid or unenforceable by a court of
competent jurisdiction, then the remaining provisions will remain effective.
In such event, the parties agree to negotiate in good faith to substitute a
valid and enforceable provision that preserves the intent and economic effect
of the original provision. If the parties cannot agree on such a substitute
provision, the court will establish a provision that is enforceable that
follows the parties expressed intent and economic effect of the unenforceable
clause as closely as possible. This License may be executed in two
counterparts by original or facsimile signature, each of which when so
executed shall be deemed an original, and both of which together shall
constitute one instrument. Use of the word "including" is inclusive, as if
"without limitation" followed each instance.
The parties execute this License on the dates specified below.
RADIUS INC. Korea Data Systems (America), Inc.
Signature and Date: Signature and Date:
- ----------------------------------- --------------------------------------
Name and Title: Name and Title:
-------------------- ----------------------
4
<PAGE>
PROMISSORY NOTE
Amount: $5,200,000.00 August 7, 1998 Mountain View, California
FOR VALUE RECEIVED, the undersigned "Maker" promises to pay to Radius
Inc., or order (the "Holder"), at Mountain View, California, or at such place
as the Holder of this Note may from time to time designate, the principal sum
of five million two hundred thousand and no hundredths dollars
($5,200,000.00), without offset or deduction in fourteen monthly installments
of principal of $350,000.00 each on beginning on the date of this Note and
continuing on the first business day of each month thereafter until October
1, 1999, on which date a final payment of $300,000 principal shall be made
.(all unless "accelerated" as set forth below). No interest will be due on
timely payments of principal; however, interest on delinquent or accelerated
principal will accrue at the monthly rate of one percent per month or any
lower legal maximum. This Note may be prepaid at any time without penalty.
No notice of payment due or made is required.
In the event that Maker fails to timely pay any sum due under this Note
after five days' notice from Holder, a late charge of the lesser of $10,000
or five percent of the delinquent amount will become immediately due and
payable in addition to such sum and Holder can elect on ten days' notice to
Maker to accelerate the entire outstanding balance due. In the latter event,
the entire indebtedness must be paid to Holder within fifteen days after
Holder sends its notice of acceleration election to Maker and will accrue
interest thereafter at the rate set forth above. Maker also promises to pay
Holder's costs of collection and reasonable attorneys' charges if Holder
seeks legal redress to recover the amount due under this Note.
This Note is governed by California law and forum and is intended to be
negotiable or assignable at Holder's election.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date written above.
Maker: Korea Data Systems (America), Inc.
By John Hui, President
- --------------------------------------- -------------------------
Please sign Date
5
<PAGE>
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is made and entered into as of
August 7, 1998 by Korea Data Systems (America), Inc., a California
corporation ("DEBTOR"), in favor of Radius Inc., a California corporation
(the "SECURED PARTY").
RECITALS
A. Secured Party has or will extend credit to Debtor in the amount of
$5.2 million (the "TOTAL PRINCIPAL") under the terms of a certain Amended and
Restated License Agreement, Asset Purchase Agreement and Promissory Note of
even date executed by Debtor in favor of the Secured Party (collectively, the
"Transfer Agreement"); and
B. Secured Party desires to obtain, and Debtor desires to give,
security for the full and punctual performance of the obligations created by
the Transfer Agreement and any substitutions or extensions thereof and any
expenses, fees or costs associated therewith (the "OBLIGATIONS"), all as more
fully set forth below;
NOW, THEREFORE, in consideration of the extension of credit by Secured
Party and the covenants and agreements set forth in the Transfer Agreement
and this Agreement, the parties agree as follows:
1. SECURITY AGREEMENT. To secure performance of the Obligations and
Debtor's obligations hereunder, Debtor hereby grants Secured Party a security
interest in the rights and property set forth on EXHIBIT A hereto (the
"COLLATERAL") with the security interest in the Collateral being senior to
all other security interest holders.
1.1 COVENANTS. The security interest created in this Section 1
is given to secure all of the Obligations and the obligations of Debtor
hereunder. While such security interest is in existence, Debtor will: (a)
promptly pay, when due, all taxes and assessments levied or assessed against
the Collateral, or any part thereof, or for its use or operation and (b)
notify Secured Party when requested from time to time of the physical
location of such Collateral if tangible. The physical location of any
tangible collateral is currently at the address of Debtor set forth below.
1.2 DEFAULT. In the event of default under the Transfer
Agreement or this Agreement:
1.2.1 Secured Party may exercise any or all of its rights
and remedies under California law, and any other applicable laws, and may
elect to offset, against any payment due from Secured Party to Debtor, the
whole or any part of any indebtedness of Debtor to the Secured Party.
1.2.2 While Debtor is in default, Debtor will: (a)
deliver to Secured Party from time to time, as requested by such Secured
Party, current lists of Collateral; (b) not dispose of Collateral except on
terms approved by Secured Party or in the ordinary course of Debtor's
business; and (c) assemble and deliver all Collateral to a designated
representative of Secured Party at a reasonably convenient place designated
by Secured Party. Debtor hereby consents to the entry of Secured Party (or a
Secured Party agent) following reasonable notice on Debtor's business
premises, between the hours of 8:00 a.m. and 5:00 p.m. on Monday through
Friday, in order to enforce the Secured Party's rights or remedies set forth
herein or given to Secured Party by law or in equity, all of which shall be
cumulative.
1.2.3 If required by law, Secured Party will give Debtor
reasonable notice of the time and place of any public sale of the Collateral,
or any part thereof, or of the time after which any private sale or any
intended disposition of the Collateral is to be made. Unless otherwise
provided by law, the requirement of reasonable notice shall be met if such
notice is delivered in accordance with Section 3.6 below at least thirty (30)
calendar days before the time of such intended sale or other disposition.
Upon such sale and to the extent permitted by law, Secured Party may bid for
and purchase all or any portion of the Collateral to the extent and for
purchase price agreed to by Secured Party may bid on its sole behalf
therefor. On compliance with the terms of sale, Secured Party may hold,
retain, possess and dispose of such Collateral in its own absolute right,
without further accountability. Debtor agrees to reimburse Secured
6
<PAGE>
Party, upon demand, for any and all costs (including, by way of example,
reasonable attorneys' fees and expenses) incurred or paid by Secured Party in
exercising its rights or remedies or protecting its interests under this
Agreement.
1.3 PERFECTION IN GENERAL. Debtor agrees to execute and deliver
all financing statements, PTO cover sheets, UCC-1s or other documents, or
procure any document reasonably deemed necessary by Secured Party to perfect
the security interest granted in this Section 1 and to confer a security
interest senior to all other security interests in the Purchased Assets
portion of the Collateral. The current form of UCC-1 is attached as Exhibit
B. The current form of PTO cover sheet is attached as Exhibit C. Upon
performance of all of Debtor's obligations under and secured hereby, Secured
Party agrees to execute and deliver such documents as may be reasonably
requested by Debtor in order to release the Collateral from the security
interest granted herein.
2. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor hereby
represents, warrants and agrees as follows:
2.1 LITIGATION. Debtor is neither a party to, nor, except as
disclosed in the Transfer Agreement, has it any notice or knowledge of, any
pending or threatened action, suit, proceeding or investigation involving it,
at law or in equity or otherwise, in, before or by a court or any
governmental board, commission, agency, department or officer, in which an
adverse determination would have a material adverse effect on the assets or
financial condition of Debtor or the Collateral described herein.
2.2 NO RESTRICTION OR TRANSACTION. Debtor is not subject to any
charter provision, bylaw, indenture, mortgage, lien, lease agreement,
instrument, law, rule, regulation, order, judgment or decree or any other
restriction which would interfere with the consummation of the transaction
contemplated by this Agreement. This Agreement is a valid and enforceable
obligation of Debtor, enforceable in accordance with its terms.
2.3 COLLATERAL. Debtor has good and marketable title to the
Collateral subject to no material mortgage, lien, pledge, claim, charge or
encumbrance, security interest or other defect in title, excluding those
which may have existed prior to the effective date of the Transfer Agreement
arising by or through Secured Party. Subject to such security interests and
to Secured Party's security interest in the Collateral, Debtor is, and will
remain while any Obligation is outstanding, the sole owner of the Collateral
with full right to transfer or encumber same without obtaining the consent or
approval of any other person or entity, except as disclosed in the Transfer
Agreement. Debtor hereby agrees, without the prior written consent of
Secured Party, other than in the ordinary course of business and other than
in a sale and leaseback transaction, not to sell, lend or transfer ownership
of a substantial portion of the Collateral while the Obligations, or any part
thereof, are outstanding.
3. GENERAL PROVISIONS.
3.1 AMENDMENT AND WAIVER. No failure or delay by Secured Party
in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or of any other right, power
or privilege. No waiver shall be deemed to be made by Secured Party of any
of its rights under this Agreement unless the same shall be in writing, and
each waiver, if any, shall be a waiver only with respect to the specific
instance involved and shall in no way impair the rights of Secured Party or
the obligations of Debtor to Secured Party in any other respect at any other
time. This Agreement may not be altered or amended except by an agreement in
writing signed by Debtor and Secured Party.
3.2 ASSIGNMENT. This Agreement shall be binding upon Debtor,
its representatives, successors and assigns and shall inure to the benefit of
Secured Party, its heirs, representatives, successors and assigns, except
that Debtor shall not voluntarily assign any or all of its obligations
hereunder. This Agreement shall continue in full force and be binding upon
Debtor, and its successors notwithstanding the merger, liquidation or
dissolution of Debtor.
3.3 SEVERABILITY. If any provision of this Agreement is held to
be unenforceable for any reason, such provision shall be adjusted, if
possible, to the extent necessary in order to achieve the intent of the
parties or shall be stricken from this Agreement if adjustment is not
possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable.
7
<PAGE>
3.4 ENTIRE AGREEMENT. This Agreement (in connection with the
Transfer Agreement) contains the entire agreement of the parties and
supersedes any and all prior negotiations, correspondence, understandings and
agreements between the parties regarding the subject matter hereof.
3.5 NOTICES. Any demand or other notice required or permitted
to be given to a party hereunder shall be deemed duly given or delivered if
personally delivered or if sent by certified mail, postage prepaid, addressed
to the receiving party at its address set forth under its signature or to
such other address as the receiving party shall duly notice the sending party
in writing (which demand or notice shall be effective on deposit in the
United States mail, if delivery is by mail, and on receipt, if personally
delivered).
3.6. TIME. Time is of the essence of this Agreement.
3.7 GOVERNING LAW AND FORUM. This Agreement shall be governed
by and construed and interpreted in accordance with the laws of the State of
California. Debtor, by its execution of this Agreement, hereby irrevocably
submits to the personal jurisdiction of the state courts of the State of
California and of the United States District Court for the Northern District
of California that are located in Santa Clara County, California for the
purpose of any suit, action or other proceeding arising out of or based upon
this Agreement.
3.8 COUNTERPARTS. This Agreement may be entered into in any
number of counterparts, each of which will be deemed an original and all of
which, taken together, will constitute one and the same Agreement.
3.9 ATTORNEYS' CHARGES. Debtor agrees to pay all reasonable
attorneys' fees, court costs and all other costs and expenses which may be
incurred by Secured Party in the enforcement of this Security Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by persons
duly authorized by or on behalf of the parties as of the date first above
written.
DEBTOR:
KOREA DATA SYSTEMS (AMERICA), Inc.
By:
----------------------------------
Its:
--------------------------------
Address:
SECURED PARTY:
RADIUS INC.
By:
----------------------------------
Its:
--------------------------------
Address:
8
<PAGE>
EXHIBIT A
COLLATERAL
This Financing Statement covers:
(a) the license under the Amended and Restated License Agreement dated
August 7, 1998, the Purchased Assets and the Buyer's License (as defined in
the Transfer Agreement) and all Intellectual Property Rights therein (as
defined in the Transfer Agreement);
(b) All proceeds and products of any and all of the foregoing
collateral and, to the extent not otherwise included, all payments under
insurance or in connection with any indemnity, warranty or guaranty payable
by reason of loss or damage to, or otherwise with respect to, any of the
foregoing collateral.
9
<PAGE>
EXHIBIT B
ATTACH INITIAL UCC-1
10
<PAGE>
EXHIBIT C
ATTACH INITIAL PTO COVER SHEET
11
<PAGE>
GUARANTY
This Guaranty is made and given as of August 7, 1998 by
[Korea Data Systems Co., Ltd. or Korea Data Systems (USA), Inc.] with a place
of business at _______________________________________
______________________________________________________________________________
("GUARANTOR") in favor of Radius Inc., a California corporation ("SELLER").
R E C I T A L S
A. Guarantor is affiliated with Korean Data Services (America), Inc.
("BUYER").
B. Guarantor desires to induce Seller to extend credit to Buyer under
a certain Amended and Restated License Agreement and Asset Purchase Agreement
(and related agreements and instruments including a promissory note and
security agreement) dated of even date herewith between Seller and Buyer
(collectively, the "TRANFER AGREEMENT") by providing Seller with this
Guaranty. It is a condition precedent, and a material inducement, to the
extension of credit by Seller to Buyer under the Transfer Agreement that
Guarantor makes and provides this Guaranty to Seller. Guarantor will benefit
significantly as a result of such extension of credit.
NOW, THEREFORE, as a material inducement to Seller to enter into the
Transfer Agreement, and in consideration of loans made or to be made by
Seller under the Transfer Agreement, and for other good and valuable
consideration, Guarantor hereby agrees with Seller as follows:
1. MEANINGS OF CAPITALIZED TERMS. Unless they are otherwise
expressly defined herein, each capitalized term used in this Guaranty will
have the same meaning given to such term in the Transfer Agreement.
2. GUARANTY. As a material inducement and consideration for
Seller to enter into the Transfer Agreement and to extend credit to Buyer
under the Transfer Agreement, which Seller is unwilling to do without
Guarantor's agreements and guaranty hereunder, Guarantor hereby guarantees
and promises to pay Seller, or order, on demand, in lawful money of the
United States of America, any and all Indebtedness (as defined below) of
Buyer to Seller when such Indebtedness is due. The liability of Guarantor
under this Guaranty is exclusive and independent of any security for or other
guarantee of the Indebtedness of Buyer, whether executed by Guarantor or any
other party, and the liability of Guarantor under this Guaranty shall not be
affected or impaired by (a) any Indebtedness exceeding Guarantor's liability;
(b) any other continuing or other guaranty, or undertaking or liability of
Guarantor or of any other party as to any Indebtedness of Buyer; (c) any
payment on or in reduction of any other guaranty or undertaking; or (d) any
payment made on the Indebtedness which Seller repays to Buyer pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium, or
other debtor relief proceeding, and Guarantor hereby waives any right to the
deferral or modification of Guarantor's obligations hereunder by virtue of
any such proceeding.
3. INDEBTEDNESS DEFINED. The word "INDEBTEDNESS" as used
herein means any and all debts, obligations, or liabilities of Buyer to
Seller under the Transfer Agreement executed and delivered by Buyer
thereunder (including but not limited to principal, accrued interest and
attorneys' fees) whether or not recovery of such Indebtedness may now be or
may hereafter become barred by any statute of limitations, or whether such
Indebtedness may now be or may hereafter otherwise become unenforceable
against, or uncollectible from, Buyer for any reason, including but not
limited to Buyer's bankruptcy or insolvency, other principles of equity or
usury laws.
4. SEPARATE AND INDEPENDENT OBLIGATIONS; CERTAIN WAIVERS. The
obligations of Guarantor under this Guaranty are separate and independent of
the obligations of Buyer under the Transfer Agreement and a separate action
or actions may be brought and prosecuted against Guarantor, whether or not
any action is brought
12
<PAGE>
against Buyer or whether Buyer be joined in any such action or actions; and
Guarantor hereby waives the benefit of any statute of limitations affecting
its liability under this Guaranty or the enforcement of this Guaranty, to the
maximum extent permitted by law. Any part payment by Buyer or other
circumstances which operate to toll any statute of limitations as to Buyer
will operate to toll the statute of limitations as to Guarantor. Guarantor
further agrees that recourse may be had under this Guaranty against any and
all property and property interests owned by Guarantor, whether legally or
beneficially, including but not limited to any property which is such
Guarantor's separate property and any property in which such Guarantor has a
community property interest, to satisfy such Guarantor's obligations under
this Guaranty.
5. AUTHORIZATION. Guarantor authorizes Seller, without notice
or demand or any further or additional consent of Guarantor, and without
affecting Guarantor's liability hereunder, to at any time and/or from time to
time: (a) renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change or modify the terms of, any Indebtedness or any part
thereof ; and (b) apply the collateral and direct the order or manner of sale
thereof as Seller in its discretion may determine, and Guarantor agrees that
no such renewal, extension, acceleration, or other change, or any such
application or non-application of collateral shall relieve Guarantor of any
of Guarantor's obligations or liabilities hereunder. Seller may, without
notice to Seller, assign this Guaranty in whole or in part and any rights in
related collateral.
6. WAIVERS OF GUARANTOR. Guarantor expressly waives any right
to require Seller to: (a) proceed against Buyer, or to proceed against Buyer
prior to proceeding against Guarantor under this Guaranty or otherwise; (b)
proceed against any other party or guarantor; (c) protect, preserve or
perfect any of Seller's rights in or to, or to proceed against, or exercise
any rights or remedies of a secured creditor with respect to, or to exhaust,
any collateral, security, mortgage, deed of trust, security interest or lien
held by Seller in any assets or properties of Buyer; or (c) pursue any other
right or remedy in Seller's power whatsoever with respect to the Indebtedness
or any part thereof. Seller may, at its election, exercise or refrain from
exercising any right or remedy it may have against Buyer or any security
interest in Buyer's assets (including without limitation the right to
foreclose upon any such security by judicial or nonjudicial sale), without
thereby affecting or impairing in any way Guarantor's liability hereunder,
except to the extent that Buyer has reduced the amount of the Indebtedness.
In addition, Guarantor hereby also waives: (a) any defense arising out of
the absence, impairment or loss of any right of reimbursement or subrogation
or other right or remedy of such Guarantor against Buyer or any such
security; (b) any defense arising by reason of any disability or other
defense of Buyer or by reason of the cessation from any cause whatsoever of
the liability of Buyer to Seller; and (c) all presentments, demands for
performance, notices of nonperformance, protests, notice of protest, notices
of dishonor, and notices of acceptance of this Guaranty and of the existence,
creation or incurring of new or additional Indebtedness.
7. GUARANTOR'S UNDERSTANDING. Guarantor warrants and agrees
that each of the authorizations and waivers set forth in Sections 5 and 6
above are made with Guarantor's full knowledge and understanding of their
significance and consequences, and that under the circumstances, such
authorizations and waivers are reasonable and not contrary to public policy
or law. If any of said authorizations or waivers are determined to be
contrary to any applicable law or public policy, such authorizations and
waivers will nevertheless be effective to the fullest extent permitted by law
or public policy.
8. SUBROGATION. Until all Indebtedness shall have been paid in
full, Guarantor will have no right of subrogation to any right of Seller
against Buyer, and Guarantor waives any right to enforce any remedy which
Seller now has or may hereafter have against Buyer, and waives any benefit
of, and any right to participate in, any security now or hereinafter held by
Seller.
9. INFORMATION. Guarantor assumes the responsibility for being
and keeping itself informed of the financial condition of Buyer and of all
other circumstances bearing upon the risk of nonpayment of the Indebtedness
and agrees that Seller will have no duty to advise Guarantor of any
information regarding such condition or any such circumstances.
10. SUBORDINATION. In the event of any default by Buyer under the
Transfer Agreement or other failure to pay any sum when due, then any debt or
obligation of Buyer now or hereafter held by Guarantor is hereby
13
<PAGE>
fully subordinated in right of payment to the repayment of the Indebtedness
and any such debt or obligation of Buyer to Guarantor will, if Seller so
requests, be collected, enforced and received by Guarantor as trustee for
Seller and be paid over to Seller on account of the Indebtedness, but without
reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guaranty.
11. JURISDICTION; VENUE. Guarantor, by its execution of this
Guaranty, hereby irrevocably submits to the personal jurisdiction of the
state courts of the State of California and of the United States District
Court for the Northern District of California that are located in Santa Clara
County, California for the purpose of any suit, action or other proceeding
arising out of or based upon this Guaranty.
12. AMENDMENT; WAIVER. No amendment or modification of this
Guaranty may be made unless it is set forth in writing and signed by both
Guarantor and Seller. No waiver of any right of Seller under this Guaranty
will be effective unless expressly set forth in a writing signed by Seller.
No course of dealing between the parties will operate as a waiver of Seller's
rights under this Guaranty. A waiver by Seller on any one occasion will not
be construed as a bar to or waiver by Seller of any right or remedy on any
future occasion.
13. ATTORNEYS' FEES. Guarantor agrees to pay all reasonable
attorneys' fees, court costs and all other costs and expenses which may be
incurred by Seller in the enforcement of this Guaranty.
14. SUCCESSORS AND ASSIGNS. The provisions of this Guaranty
will inure to the benefit of, and be binding on, each party's respective
heirs, successors and assigns; EXCEPT THAT Guarantor may not assign or
delegate any of its rights or obligations under this Guaranty without
Seller's prior written consent.
15. SEVERABILITY. The invalidity or unenforceability of any
term or provision of this Guaranty will not affect the validity or
enforceability of any other term or provision hereof. The headings in this
Guaranty are for convenience of reference only and will not alter or
otherwise affect the meaning of this Guaranty.
16. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts, which together will constitute one instrument.
17. GOVERNING LAW. This Guaranty will be governed by and
construed in accordance with the laws of the State of California.
18. ENTIRE AGREEMENT. This Guaranty will constitute the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior understandings or agreements
regarding such subject matter.
IN WITNESS WHEREOF, the undersigned Guarantor has executed and delivered
this Guaranty effective as of the date first above written.
Accepted by:
"SELLER" "GUARANTOR"
Name: Name:
------------------------- ----------------------------
By: By:
--------------------------- ------------------------------
Title: Title:
-------------------------- ----------------------------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 1188
<SECURITIES> 0
<RECEIVABLES> 5877
<ALLOWANCES> (3869)
<INVENTORY> 1081
<CURRENT-ASSETS> 5737
<PP&E> 19745
<DEPRECIATION> (19635)
<TOTAL-ASSETS> 5847
<CURRENT-LIABILITIES> 11725
<BONDS> 0
0
0
<COMMON> 169102
<OTHER-SE> (174980)
<TOTAL-LIABILITY-AND-EQUITY> 5847
<SALES> 14425
<TOTAL-REVENUES> 14425
<CGS> 9283
<TOTAL-COSTS> 9283
<OTHER-EXPENSES> 7525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416
<INCOME-PRETAX> 7412
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7412
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.33
</TABLE>
