SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Radius, Inc.
(Name of Issuer)
Common Stock, No Par Value
(Title of Class of Securities)
750470205
(CUSIP Number)
Michael M. Sullivan, Esq.
Secretary & Corporate Counsel
SCI Systems, Inc.
c/o SCI Suatems (Alabama), Inc.
P.O. Box 1000
Huntsville, Alabama 35807
(205) 883-4603
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 12, 1996
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1 (b)(3) or (4), check the following box o.
Check the following box if a fee is being paid with the statement |X|. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class).
(See Rule 13d-7).
CUSIP No. 750470205 13D
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCI Systems, Inc. I.R.S. Identification Number: 63-0583436
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |X| (b)
3 SEC USE ONLY
4 SOURCE OF FUNDS OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 9,719,200 (See Item 4.)
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON WITH 10 SHARED DISPOSITIVE POWER 9,719,200
(See Item 4.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,719,200 (See Item 4.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.9% (See Item 4.)
14 TYPE OF REPORTING PERSON
CO
CUSIP No. 750470205 13D Page 3 of Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SCI Technology, Inc. I.R.S. Identification Number:
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |X| (b)
3 SEC USE ONLY
4 SOURCE OF FUNDS OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION Alabama
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 9,719,200 (See Item 4.)
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON WITH 10 SHARED DISPOSITIVE POWER
9,719,200 (See Item 4.)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 9,719,200 (See Item 4.)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.9% (See Item 4.)
14 TYPE OF REPORTING PERSON
CO
Item 1. Security and Issuer
This statement relates to the Common Stock, No Par Value (the "Common
Stock"), of Radius, Inc., a California corporation having its principal
executive office at 215 Moffett Park Drive, Sunnydale, California 94089 (the
"Company").
Item 2. Identity and Background
This statement is being filed by each of:
(i) SCI Systems, Inc. ("SCI"), a Delaware corporation whose principal
business is the design, manufacture, marketing, distribution, and servicing of
electronic products principally for the computer, aerospace, defense,
telecommunications, medical, and entertainment industries as well as the United
States Government; and
(ii) SCI Technology, Inc., an Alabama corporation and a subsidiary of SCI
whose principal business is the design, manufacture, marketing, distribution,
and servicing of electronic products principally for the computer, aerospace,
defense, telecommunications, medical, and entertainment industries as well as
the United States Government ("SCI Technology").
SCI and SCI Technology are collectively referred to herein as the
"Holders." The business address and principal place of business of each of the
Holders is 2101 West Clinton Avenue, Huntsville, Alabama 35805. SCI and SCI
Technology constitute a "group" (the "Group") for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, with respect to the shares
of Common Stock and the Rights (as defined in Item 3 herein) reported herein as
beneficially owned by any of SCI or SCI Technology.
The directors and executive officers of each of SCI and SCI Technology are
as follows:
(i) Olin B. King, an individual and a United States citizen ("Mr. King"),
is the Chairman of the Board of Directors, a Director, and the Chief Executive
Officer of SCI. Mr. King also is a Director and the Chief Executive Officer of
SCI Technology. The principal business of each of SCI and SCI Technology is the
design, manufacture, marketing, distribution, and servicing of electronic
products principally for the computer, aerospace, defense, telecommunications,
medical, and entertainment industries as well as the United States Government.
The business address of each of SCI, SCI Technology, and Mr. King is 2101 West
Clinton Avenue, Huntsville, Alabama 35805.
(ii) A. Eugene Sapp, an individual and a United States citizen, is a
Director and the President of SCI ("Mr. Sapp"). Mr. Sapp also is a Director and
the President of SCI Technology. The principal business of each of SCI and SCI
Technology is the design, manufacture, marketing, distribution, and servicing of
electronic products principally for the computer, aerospace, defense,
telecommunications, medical, and entertainment industries as well as the United
States Government. The business address of each of SCI, SCI Technology, and Mr.
Sapp is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(iii) Howard H. Callaway, an individual and a United States citizen, is a
Director of SCI ("Mr. Callaway"). Mr. Callaway's principal occupation is to
serve as the Chief Executive Officer of Crested Butte Mountain Resort, Inc. and
as the Chairman of Callaway Gardens Resort, Inc. The principal business of
Crested Butte Mountain Resort, Inc. and Callaway Gardens Resort, Inc. is to own
and operate vacation resorts. The business address of each of Mr. Callaway and
Callaway Gardens Resort, Inc. is c/o Callaway Gardens, U.S. Highway 27, Pine
Mountain, Georgia 31822. The business address of Crested Butte Mountain Resort,
Inc. is 500 Gothic Road, Mount Crested Butte, Colorado 81225.
(iv) William E. Fruhan, an individual and a United States citizen, is a
Director of SCI ("Mr. Fruhan"). Mr. Fruhan's principal occupation is to serve as
a Professor of Business Administration at the Graduate School of Business of
Harvard University. Harvard University is an institution of higher education.
The business address of Mr. Fruhan is Harvard University, Harvard University
Business School, Morgan Hall #487, Boston, Massachusetts. The business address
of the Graduate School of Business of Harvard University Business School is
Harvard University Business School, Boston, Massachusetts.
(v) Joseph C. Moquin, an individual and a United States citizen, is a
Director of SCI ("Mr. Moquin"). Mr. Moquin is the retired Chief Executive
Officer of Teledyne Brown Engineering, an engineering concern. Mr. Moquin's
residence address is 183 Stoneway Trail, Madison, Alabama 35758.
(vi) Wayne Shortridge, an individual and a United States citizen, is a
Director of SCI ("Mr. Shortridge"). Mr. Shortridge's principal occupation is to
serve as a Partner in the law firm of Paul, Hastings, Janofsky & Walker. The
business address of Mr. Shortridge and the office of Paul, Hastings, Janofsky &
Walker in which he works is Suite 2400, 600 Peachtree Street, N.E., Atlanta,
Georgia 30303.
(vii) Mr. G. Robert Tod, an individual and a United States citizen, is a
Director of SCI ("Mr. Tod"). Mr. Tod's principal occupation is to serve as the
President of CML Group, Inc., a specialty marketing company. The business
address of each of Mr. Tod and CML Group, Inc. is 524 Main Street, Acton,
Massachusetts 01720.
(viii) Ms. Jackie M. Ward, an individual and a United States citizen, is a
Director of SCI ("Ms. Ward"). Ms. Ward's principal occupation is to serve as the
Chief Executive Officer of Computer Generation Incorporated, a provider of
turn-key communications products and data processing services to U.S. and
international markets. The business address of each of Ms. Ward and Computer
Generation Incorporated is Building G - 4th floor, 5775 Peachtree Dunwoody Road,
Atlanta, Georgia 30342.
(ix) Mr. Richard A. Holloway, an individual and a United States citizen, is
a Senior Vice President, Government Division, of SCI ("Mr. Holloway"). The
principal business of SCI is the design, manufacture, marketing, distribution,
and servicing of electronic products principally for the computer, aerospace,
defense, telecommunications, medical, and entertainment industries as well as
the United States Government. The business address of each of SCI and Mr.
Holloway is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(x) Mr. David F. Jenkins, an individual and a United States citizen, is a
Senior Vice President, Commercial Division, Western Region, of SCI ("Mr.
Jenkins"). The principal business of SCI is the design, manufacture, marketing,
distribution, and servicing of electronic products principally for the computer,
aerospace, defense, telecommunications, medical, and entertainment industries as
well as the United States Government. The business address of each of SCI and
Mr. Jenkins is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(xi) Mr. Jeffrey L. Nesbitt, an individual and a United States citizen, is
a Senior Vice President, Commercial Division, Eastern Region, of SCI ("Mr.
Nesbitt"). The principal business of SCI is the design, manufacture, marketing,
distribution, and servicing of electronic products principally for the computer,
aerospace, defense, telecommunications, medical, and entertainment industries as
well as the United States Government. The business address of each of SCI and
Mr. Nesbitt is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(xii) Mr. Peter M. Scheffler, an individual and a United States citizen, is
a Senior Vice President, Commercial Division, Asian Region, of SCI ("Mr.
Scheffler"). The principal business of SCI is the design, manufacture,
marketing, distribution, and servicing of electronic products principally for
the computer, aerospace, defense, telecommunications, medical, and entertainment
industries as well as the United States Government. The business address of each
of SCI and Mr. Scheffler is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(xiii) Mr. Jerry F. Thomas, an individual and a United States citizen, is a
Senior Vice President, Commercial Division, Central Region, of SCI ("Mr.
Thomas"). The principal business of SCI is the design, manufacture, marketing,
distribution, and servicing of electronic products principally for the computer,
aerospace, defense, telecommunications, medical, and entertainment industries as
well as the United States Government. The business address of each of SCI and
Mr. Thomas is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(xiv) Mr. Alexander A.C. Wilson, an individual and a United States citizen,
is a Senior Vice President, Commercial Division, European Region, of SCI ("Mr.
Wilson"). The principal business of SCI is the design, manufacture, marketing,
distribution, and servicing of electronic products principally for the computer,
aerospace, defense, telecommunications, medical, and entertainment industries as
well as the United States Government. The business address of each of SCI and
Mr. Wilson is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
(xv) Mr. Michael M. Sullivan, an individual and a United States citizen, is
the Secretary and a Director of SCI Technology ("Mr. Sullivan"). Mr. Sullivan's
principal occupation is serving as the Secretary and Corporate Counsel of SCI.
The principal business of SCI is the design, manufacture, marketing,
distribution, and servicing of electronic products principally for the computer,
aerospace, defense, telecommunications, medical, and entertainment industries as
well as the United States Government. The business address of each of SCI and
Mr. Sullivan is 2101 West Clinton Avenue, Huntsville, Alabama 35805.
Mr. King, Mr. Sapp, Mr. Callaway, Mr. Fruhan, Mr. Moquin, Mr. Shortridge,
Mr. Tod, Ms. Ward, Mr. Holloway, Mr. Jenkins, Mr. Scheffler, Mr. Nesbitt, Mr.
Thomas, Mr. Wilson, and Mr. Sullivan are collectively referred to herein as the
"Executive Officers and
Directors." Each of the Executive Officers and Directors disclaims
beneficial ownership of any of the Common Stock or the Rights (as hereinafter
defined).
During the last five years, neither SCI, SCI Systems, nor any of the
Executive Officers and Directors has been convicted in a criminal proceeding,
nor been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds and Other Consideration
As more fully described in Item 4 herein, SCI Technology acquired 9,719,200
shares of the Common Stock (the "Shares") and rights (the "Rights") to receive
an additional 2,958,017 shares of Common Stock (the "Rights Shares") in the
event that the Company's Series A Convertible Preferred Stock, No Par Value (the
"Series A Preferred Stock"), is converted into Common Stock of the Company, as
more fully described in Item 4 below, pursuant to a plan of the Company (the
"Plan"), in satisfaction of claims of $12,282,885 (the "Claims"). The Plan is
set forth in (i) a Term Sheet, executed in July 1996 by the Company, IBM Credit
Corporation ("IBM Credit"), and The Unofficial Creditors Committee (the
"Committee") of Radius, Inc. (the "Term Sheet"); (ii) a letter, dated July 11,
1996, from L. Morris Dennis to Garrett L. Cecchini and Harvey S. Schochet, and
agreed to by the Company, IBM Credit, and the Committee, which contained
additional terms and conditions of the Plan (the "Cover Letter"); and (iii) an
Addendum To Term Sheet, executed in July 1996, among the Company, IBM Credit,
and the Committee, which changed certain terms of the Plan (the "Addendum"). SCI
is a member of the Committee. The Term Sheet is attached as Exhibit 1 hereto;
the Cover Letter is attached as Exhibit 2 hereto; and the Addendum is attached
as Exhibit 3 hereto; and the description of the Plan set forth herein is
qualified in its entirety by reference thereto. SCI Technology has been a
significant supplier of the Company, and the Claims were incurred by the Company
as a result of its purchases of graphics cards from SCI Technology in the past.
Item 4. Purpose of Transaction
The Company has informed the Holders that, as of June 30, 1996, it had a
negative net worth, was delinquent in its accounts payable, and that several
vendors had initiated legal action to collect allegedly delinquent accounts and
at least two vendors had orally threatened the Company with initiation of
insolvency or bankruptcy proceedings. The Company has informed the Holders that,
as a result, the Company established the Committee, which is comprised of eight
of the Company's larger unsecured creditors, in an effort to resolve its
delinquent accounts payable, capital deficiency, and creditor litigation issues
outside of insolvency or bankruptcy proceedings. SCI is a member of the
Committee. The Company has informed the Holders that the Company, the Committee
and IBM Credit agreed to the Plan, pursuant to which, among other things, (i)
IBM Credit received the Series A Preferred Stock in satisfaction of $3 million
of the Company's approximately $26.4 million secured indebtedness to IBM Credit
and in consideration of the restructuring of its loan with the Company, plus
warrants to purchase 600,000 shares of Common Stock, and (ii) the Company's
unsecured creditors received either shares of Common Stock or, in the case of
certain creditors, a discounted cash payment, in satisfaction of certain
claims. The Company has informed the Holders that, pursuant to the Plan,
unsecured creditors received 36,294,198 shares of Common Stock, or 60% of the
outstanding Common Stock after consummation of the Plan. The Company has
informed the Holders that an increase in the authorized number of shares of
Common Stock was necessary to implement the Plan, and that the Company obtained
shareholder approval for such increase at a special meeting of shareholders on
August 27, 1996. SCI received the Shares upon consummation of the Plan on
September 12, 1996 pursuant to a Subscription Agreement, dated August 27, 1996,
between SCI Systems, Inc. and the Company (the "Subscription Agreement"). A copy
of the Subscription Agreement is attached as Exhibit 4 hereto, and the
description of the Subscription Agreement set forth herein is hereby qualified
in its entirety by reference thereto.
The Company has informed the Holders that a portion of the Series A
Preferred Stock is automatically convertible into shares of Common Stock at any
time which is 90 days after the effective date of the Registration Statement (as
defined in Item 6 herein), if (i) the Registration Statement is in effect and
the use of the prospectus contained therein has not then been suspended, and
(ii) if the trading price of the Common Stock exceeds, for a period of 15
consecutive trading days, a price per share equal to $0.815 and a registration
statement with respect to the Common Stock issuable upon conversion of such
securities is in effect. The Company has informed the Holders that the
Registration Statement covers the Common Stock issuable upon such conversion and
was filed with the Securities and Exchange Commission on September 20, 1996 but
has not yet been declared effective by the Securities and Exchange Commission.
The Company has informed the Holders that the unsecured creditors received
rights to receive an aggregate of 11,046,060 additional shares of the Common
Stock in the event that the Series A Preferred Stock is converted into Common
Stock so that the number of shares of Common Stock received by such unsecured
creditors continues to represent 60% of the outstanding Common Stock after such
conversion. SCI received the Rights upon consummation of the Plan on September
12, 1996.
Each of the Holders so holds its direct or indirect interest, as the case
may be, in the Shares and the Rights for investment purposes. The Holders
currently are engaged in discussions with the Issuer relating to the proposed
appointment of one representative of the Holders to the Company's Board of
Directors, but there can be no assurance that any such representative will be so
appointed to the Company's Board of Directors. A representative of SCI and SCI
Technology has attended and participated in meetings of the Company's Board of
Directors as an invited guest of the Company's Board of Directors. The Holders
may consider disposing of all or a portion of the Shares, the Rights, and the
Rights Shares, at any time and from time to time, depending upon market
conditions and prevailing prices for the Common Stock. The Holders have no plan
or proposal, other than as described herein, which may relate to or would result
in: (a) the acquisition by any person of additional securities of the Company,
or the disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or of any of its subsidiaries; (d) any change in the
present board of directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Company; (f) any other material change in the Company's
business or corporate structure, including but not limited to, if the Company is
a registered closed-end investment company, any plans or proposals to make any
changes in its investment policy for which a vote is required by Section 13 of
the Investment Company Act of 1940; (g) changes in the Company's charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above. The Holder reserves the right to adopt
other plans or proposals in the future.enumerated above. The Holder reserves the
right to adopt other plans or proposals in the future.
Item 5. Interest in Securities of Issuer
As more fully discussed in Item 4 herein, at the close of business on
September 12, 1996, each of the Holders beneficially owned the same 9,719,200
shares of the Common Stock, which represents approximately 17.9.0% of the shares
of the Common Stock outstanding on such date, and beneficially owned the same
rights to receive an additional 2,958,017 shares of Common Stock upon the
conversion of the Series A Preferred Stock into Common Stock as more fully
described in Item 4 above. As more fully discussed in Item 4 herein, the Holders
share power to vote, and to direct the voting of, and shares power to dispose
of, and to direct the disposition of, the Shares and the Rights. During the last
five years, none of the Holders have been convicted in a criminal proceeding,
nor has it been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or State securities laws
or finding any violation with respect to such laws.
Except as set forth above, no member of the Group beneficially owns any
shares of the Common Stock or has effected any transaction in the Common Stock
during the sixty days preceding this statement.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
The Company and SCI are parties to a Registration Rights Agreement, dated
as of August 30, 1996, by and between the Company and SCI (the "Registration
Rights Agreement"). A copy of the Registration Rights Agreement is attached as
Exhibit 5 hereto, and the description of the Registration Rights Agreement set
forth herein is hereby qualified in its entirety by reference thereto. Pursuant
to the Registration Rights Agreement, the Company is obligated, among other
things, to prepare and file with the Securities and Exchange Commission a
registration statement for an offering to be made on a continuous basis pursuant
to Rule 415 under the Securities Act of 1933, as amended covering, among other
things, the Shares and the shares of Common Stock issuable upon exercise of the
Rights on or before September 22, 1996. Pursuant to the Registration Rights
Agreement, the Company is obligated to use its best efforts to have such
registration statement declared effective on or before November 12, 1996 and to
keep such registration statement effective until the earlier of September 12,
1998, subject to the occurrence of certain events. The Company has informed the
Holders that such a registration statement (the "Registration Statement") was
filed with the Securities and Exchange Commission on September 20, 1996 but has
not yet been declared effective by the Securities and Exchange Commission.
As a part of the Plan, certain shares of Common Stock attributable to
disputed creditor claims are to be held in trust until such disputed claims are
resolved pursuant to a Creditor Trust Agreement dated as of August 23, 1996, by
and between Radius, Inc. and the Committee (the "Creditor Trust Agreement"). A
copy of the form of the Creditor Trust Agreement is attached as Exhibit 6
hereto, and the description of the Creditor Trust Agreement set forth herein is
qualified in its entirety by reference thereto.
Except as otherwise described herein, none of the Holders is a party to any
contract, arrangement, understanding or relationship (legal or otherwise) with
any person with respect to any securities of the Company, including but not
limited to, the transfer or voting of any of such securities, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guaranties of
profits, division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be filed as Exhibits
1. Term Sheet, executed in July, 1996, between Radius, Inc., IBM Credit
Corporation, and the Unofficial Creditors Committee of Radius, Inc.
2. Letter, dated July 11, 1996, from L. Morris Dennis to Garrett L.
Cecchini and Harvey S. Schochet, and agreed to by Radius, Inc., IBM
Credit Corporation, and the Unofficial Creditors Committee of Radius,
Inc.
3. Addendum To Term Sheet, executed in July 1996, among Radius, Inc., IBM
Credit Corporation, and the Unofficial Creditors Committee of Radius,
Inc.
4. Subscription Agreement, dated August 27, 1996, by and between Radius,
Inc. and SCI Systems, Inc.
5. Registration Rights Agreement, dated as of August 30, 1996, between
Radius, Inc. and SCI Systems, Inc.
6. Form of Creditor Trust Agreement dated as of August 23, 1996, by and
between Radius, Inc. and the Unofficial Creditors Committee of Radius,
Inc.
7. Joint Filing Agreement, dated as of October 8, 1996, between and among
SCI Systems, Inc. and SCI Technology, Inc.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 12, 1996 SCI SYSTEMS, INC.
By: /s/ Michael M. Sullivan
Name: Michael M. Sullivan
Title: Secretary
SCI TECHNOLOGY, INC.
By: /s/ Michael M. Sullivan
Name: Michael M. Sullivan
Title: Secretary
EXHIBIT INDEX
Exhibit Sequential
Number Exhibit Description
1 Term Sheet, executed in July, 1996, between Radius, Inc.,
IBM Credit Corporation, and the Unofficial Creditors
Committee of Radius, Inc.
2 Letter, dated July 11, 1996, from L. Morris Dennis to
Garrett L. Cecchini and Harvey S. Schochet, and agreed
to by Radius, Inc., IBM Credit Corporation, and the
Unofficial Creditors Committee of Radius, Inc.
3 Addendum To Term Sheet, executed in July 1996, among
Radius, Inc., IBM Credit Corporation, and the
Unofficial Creditors Committee of Radius, Inc.
4 Subscription Agreement, dated August 27, 1996, by and
between Radius, Inc. and SCI Systems, Inc.
5 Registration Rights Agreement, dated as of August 30,
1996, between Radius, Inc. and SCI Systems, Inc.
6 Form of Creditor Trust Agreement dated as of August 23, 1996,
by and between Radius, Inc. and the Unofficial Creditors
Committee of Radius, Inc.
7 Joint Filing Agreement, dated as of October 8, 1996,
between and among SCI Systems, Inc. and SCI Technology, Inc.
EXHIBIT 1
TERM SHEET
1. GENERAL
a. The largest unsecured creditors, i.e. those with claims in excess of
$50,000, ("Major Creditors") shall convert all of their unsecured debt
(approximately $45,000,000) into Radius' common stock.
b. A convenience class of unsecured creditors, i.e. those with claims less
than $50,000, ("Convenience Class") shall be given the election of receiving a
portion of their claim in cash or converting into equity on same terms as Major
Creditors.
c. IBM Credit Corporation ("IBM Credit") shall agree to restructure its
loan, including a conversion of a portion of its debt into senior preferred
stock convertible into Radius' common stock.
2. CONVERSION OF DEBT INTO EQUITY BY MAJOR CREDITORS
a. Debt of Major Creditors will include "component claims" of SCI, Avex,
MSL and Mitsubishi.
b. Debt owed to Major Creditors shall be converted into the number of shares
of the common stock of Radius which will, together with common stock issued to
the members of the Convenience Class electing to convert their debt into common
stock, represents 60% of the issued and outstanding common stock of Radius.
i. The shares of common stock shall be allocated among the Major Creditors and
the electing members of the Convenience Class on a prorata basis, based upon
their allowed claims. Appropriate amounts of common stock will be reserved for
any disputed claims. Determination of allowed and disputed claims shall be made
by Radius with the concurrence of the Creditors' Committee by the Closing Date.
ii. The common stock issued to the Major Creditors shall
have the same rights and privileges as the currently outstanding common stock of
Radius, including the right to receive the same dividends and the same right to
vote.
iii. The agreement of all Major Creditors to the conversion of their claims
into shares of said common stock shall be a condition of the obligations of
Radius, IBM Credit and the Unofficial Creditors Committee of Radius, Inc.
("Committee") under this Term Sheet. Radius, IBM Credit and the Committee may
elect to waive this requirement that all of the Major Creditors must convert.
iv. The agreement of Major Creditors, holding at least 75% of the total amount
of claims held by Major Creditors, to hold their shares in a trust or other
arrangement to insure a stable market price for the stock issued to the Major
Creditors, shall be a condition of the obligations of Radius, IBM Credit and the
Committee under this Term Sheet.
3. TREATMENT OF THE CONVENIENCE CLASS
a. This class consists of creditors of Radius, each holding claims in an
amount less than $50,000, numbering approximately 290 creditors to whom is owed
approximately $1,900,000.
b. Radius will initially offer to each creditor in the
Convenience Class payment, on the Closing Date, an amount not to exceed 20% of
their allowed claim, in full payment of said claim. The existing Committee will
assist Radius in obtaining said consents.
c. Creditors in the Convenience Class,
who do not accept the offer described in sub-paragraph III.B. above, may
exchange their claim for common stock on the same terms set forth in paragraph
II.
d. The agreement of creditors in the Convenience Class numbering at least 95%
of said creditors and holding at least 95% of the total amount of claims held by
all creditors in the Convenience Class, to accept either the payment referred to
in sub-paragraph III.B. or the conversion of debt into common stock referred to
in sub-paragraph III.C., shall be a condition of the obligations of Radius, IBM
Credit and the Committee under this Term Sheet. Radius, IBM Credit and the
Committee may elect to waive this requirement.
e. IBM Credit shall advance to Radius up to $500,000, to be used, as
determined by Radius, to make the payments to the creditors in the Convenience
Class, pursuant to the Working Line of Credit referred to in paragraph IV.B.
below. Radius will not pay more than $500,000 to the Convenience Class in
connection with settling the claims of the Convenience Class.
4. RESTRUCTURE OF IBM CREDIT DEBT
IBM Credit Will restructure its existing debt of approximately $23,000,000 as
follows:
a. IBM Credit will convert $3,000,000 of its existing debt into preferred
stock, convertible into the common stock of Radius. The rights and preferences
of the preferred stock are as follows: i. The preferred stock shall at all times
be senior to any other preferred stock and have a liquidation preference of
$3,000,000 plus any accrued but unpaid dividends (collectively the "Liquidation
Value"). ii. The preferred stock shall be convertible into the number of shares
of the common stock of Radius, which will represent 7% of the issued and
outstanding common stock of Radius as of the date of the conversion into common
stock, excluding common shares issued pursuant to the warrants or as dividends
on the preferred stock and any other equity issuances authorized by Radius and
approved by IBM Credit after the Closing Date. The common stock issued to IBM
Credit, on the conversion of the preferred stock, shall have the same rights and
privileges as the currently outstanding common stock of Radius, including the
right to receive the same dividends and the same right to vote. iii. The
preferred stock shall receive 10% cumulative dividends, which shall, at the
election of Radius, be payable either in cash or in additional shares of common
stock of Radius, at the market price in effect on the date the dividend is due,
which shall have the same rights and privileges as the common stock to be issued
to IBM Credit on the conversion of the preferred stock into common stock. iv.
The preferred stock shall be redeemable, at IBM Credit's election, at 100% of
Liquidation Value, upon the sale of Radius' "Splash" stock or such other non
ordinary course of business events as may be agreed to by Radius, IBM Credit,
and the Committee prior to the Closing Date. In the event IBM Credit does not so
elect, then Radius can either, at IBM Credit's election, (i) redeem the
preferred stock at 110% of the Liquidation Value or (ii) convert the preferred
stock to common stock pursuant to paragraph IV.A.2. above. v. Radius can elect
to convert the preferred stock into common stock, at any time more than ninety
(90) days after the Closing Date, when the average closing market price of
Radius' common stock is more than 150% of the conversion price for a period of
over fifteen consecutive trading days, at a premium of 10% (i.e. the shares
shall be converted into common stock representing 7.7% of the outstanding common
stock rather than 7%). vi. The preferred stock, the common stock into which it
is convertible, the warrants, the common stock issuable in connection with the
exercise of the warrants and the common stock which may be issued as dividends
on the preferred stock, shall be registered with the SEC at the time of the
issuance of the preferred stock. IBM Credit shall have the right to demand
registration of any common stock issued to it by Radius once per year for two
years after the last such issuance. After the expiration of the initial
registration statement by Radius (on form S-1), at IBM Credit's request, Radius
shall file a form S-3 registration statement with the SEC as soon as permitted
by the SEC and shall use its best efforts to make such registration statement
effective as soon as practicable after notice by IBM Credit of its intention to
sell common stock.
b. IBM Credit and Radius shall negotiate a new loan agreement between IBM
Credit and Radius ("Working Line of Credit"), upon terms and conditions
satisfactory to IBM Credit and Radius, with a credit limit of at least
$5,000,000 subject to the following: i. The initial amount of the existing
indebtedness which shall continue to be subject to the Working Line of Credit
shall be the amount of the "borrowing base" upon which IBM Credit is required to
loan pursuant to the Working Line of Credit, as of the Closing Date, plus the
amount to be advanced pursuant to paragraph III.E. above. ii. IBM Credit shall,
upon the request of Radius, be required to make advances to Radius, as required
by Radius' business from time to time, to the extent of the "borrowing base",
without taking into account the amount advanced pursuant to paragraph III.E.
above, provided Radius, at the time of said request, is in full compliance with
the terms and conditions of said Working Line of Credit and the Term Loan
referred to below. iii. The interest rate on the amount owing on the Working
Line of Credit up to the amount of the "borrowing base" shall be prime plus
2.25%; the interest rate on any portion of the amount owing in excess of the
"borrowing base" shall be prime plus 3.25%. iv. The "borrowing base" shall be:
(i) the lesser of 10% of the gross value of eligible inventory or $500,000; plus
(ii) 80% of the value of eligible domestic accounts receivable; plus (iii) the
lesser of 50% of the gross value of eligible QMS (Japan) and Computers Unlimited
(Europe) accounts receivable or $500,000.
c. The balance of Radius' existing indebtedness to IBM Credit, as of the
Closing Date, shall be converted into a term loan with a term of four years (the
"Term Loan") to be paid follows: i. The interest rate on the Term Loan shall be
prime plus 3.25% and shall be payable with the interest on the Working Line of
Credit. ii. Principal on the Term Loan shall (subject to the minimum payments
specified below) be paid as follows: (i) 50% from the Net Operating Cash Flow of
Radius; (ii) 100% of any Non-Operating Cash Flow of Radius (i.e. net proceeds
from the disposition of assets of Radius, other than in the ordinary course of
business); and (iii) 10% of any new equity invested in Radius during the term of
the Term Loan. Net Operating Cash Flow and Non-Operating Cash Flow of Radius
shall be defined in a manner approved by Radius, IBM Credit and the Committee
prior to the Closing Date. iii. The minimum payments due on the Term Loan, from
Net Operating Cash Flow, shall be 37.5% of the Net Operating Cash Flow projected
by Radius, on schedules prepared by Radius and approved by IBM Credit from time
to time, during the term of the Term Loan. Failure of Radius to achieve the
levels of cash flow projected shall constitute a "performance default" under the
loan documents and failure of Radius to pay the amounts due pursuant to the
foregoing shall constitute a "payment default" under the loan documents. iv. IBM
Credit shall have the right to require Radius to sell the following percentages
of its interest in the "Splash stock", on a cummulative basis, and to apply the
proceeds received from said sale to the payment of the Term Loan as follows: (i)
up to 50% of Radius' interest in said stock at any time within one year after
the registration of said stock as part of a public offering of the stock; (ii)
up to 25% of Radius' interest in said stock at any time during each of the
second and third years after the registration of said stock as part of a public
offering of the stock (plus any unsold portion of the Radius' interest in said
stock which IBM Credit could have required Radius to sell in a previous year);
(iii) up to 100% of Radius' interest in said stock, notwithstanding the
provisions of paragraphs (a) and (b) above, at any time after the registration
of said stock as part of a public offering of the stock, that the balance of the
Term Loan shall be more than 90% of the market value of Radius' interest in said
stock.
d. The Working Line of Credit and the Term Loan shall be cross-
collateralized and cross-defaulted and shall include customary positive and
negative covenants including a prohibition on common stock dividends while
amounts are owing on the Working Line of Credit and the Term Loan.
e. All Non-Operating Cash Flow, including all proceeds from any collateral
held by IBM Credit to secure its indebtedness, shall be applied in the following
order: i. first, to the payment of any amounts advanced by IBM Credit, on or
after the Closing Date, in excess of the amount of the "borrowing base" upon
which IBM Credit is required to loan pursuant to the terms and conditions of
Working Line of Credit, including the $500,000 to be advanced pursuant to
paragraph III.; ii. second, to the payment of any amounts outstanding on the
Term Loan; iii. third, at IBM Credit's election, to the redemption of any
preferred stock received by IBM Credit on the conversion of a portion of its
debt pursuant to paragraph IV.A. of this Term Sheet; and iv. finally, to the
payment of any amounts owing on the Working Line of Credit.
f. IBM Credit and Radius will agree on what portion of the remaining Net
Operating Cash Flow, which is not required to be applied to the Term Loan, shall
be used to repay the amount to be advanced pursuant to paragraph III.E.
5. STOCK RESTRICTIONS AND RIGHTS.
a. The issuance of the common stock (and the preferred stock convertible
into common stock, warrants, the common stock issuable in connection with the
exercise of the warrants and the common stock which may be issued as dividends
on the preferred stock) referred to herein shall be in compliance with all
applicable federal and state securities laws. Radius shall register said
securities with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, and take all action required by applicable federal and
state securities laws so that said securities may be freely traded. Radius shall
remain current in all of its required filings pursuant to the Securities Act of
1933, the Securities Exchange Act of 1934 and all applicable state securities
laws.
b. It is understood that Radius may issue additional shares of common stock
to provide incentive compensation to management of Radius, provided that the
number of shares to be issued, when combined with shares to be issued on the
exercise of any existing stock options, shall not exceed 10% of the common stock
issued and outstanding as of the Closing Date (counting any common stock to be
issued to IBM Credit upon the conversion of its preferred stock). The issuance
of said additional shares of common stock shall not reduce the interest of the
Major Creditors, together with the members of the Convenience Class electing to
convert their debt into common stock, below 60% of the outstanding common stock,
or the interest of IBM Credit below 7% of the outstanding common stock. Any
dilution of ownership due to the issuance of said additional shares of common
stock shall be to the currently issued and outstanding common stock. Prior to
the Closing Date, no additional shares, nor options or other rights to acquire
shares in Radius shall be issued or granted other than in connection with
Radius' existing stock option plans (which will not dilute the unsecured
creditors' 60% and IBM Credit's 7% interests in Radius).
6. TERMINATION OF OVERRIDE PAYMENTS. Upon execution of this Term Sheet, and
for so long as the parties shall continue to pursue their efforts to carry out
the terms of this Term Sheet, each of the members of the Committee who have
continued to supply product to Radius, on condition that Radius pay to them an
amount equal to 110% of the price of the new product shipped, shall cease said
requirement for payment of said override.
7. WARRANTS TO CREDITORS. In consideration for the credit which they have
extended and may extend in the future, the following creditors shall receive
warrants to purchase shares of Radius' common stock as follows:
a. IBM Credit shall receive warrants to purchase 600,000 shares;
b. Any Major Creditor who shall extend to Radius open credit
terms, agreed to by Radius and said Major Creditor, shall
receive warrants to purchase a number of shares computed on a
mutually agreeable basis (provided that the warrants issued to
all Major Creditors shall not exceed 600,000 shares)
c. The exercise price shall be the average market price of
Radius' common stock during the period from five trading days
prior to the Closing Date until five trading days following
the Closing Date, not to exceed $1.25 per share.
d.The warrants may be exercised, at any time, during the four years following
the Closing Date, provided that at the time of said exercise, in the case of a
Major Creditor who has extended open credit terms to Radius, said Major Creditor
has not ceased extending said credit for any reason other than Radius' failure
to pay amounts owing to said Major Creditor in accordance with said terms.
8.OTHER DOCUMENTS. This Term Sheet sets forth the broad terms of an agreement in
principle between Radius, IBM Credit and the Committee concerning the subject
matter hereof and is intended to provide the framework for further
documentation. The provisions set forth above represent certain key terms that
have been the basis of the parties' discussions to date and will continue to
serve as the basis of the various agreements, documents and instruments
(relating to the restructuring, recapitalization and related transactions
referenced above) to be negotiated and documented in order for there to be a
definitive and binding agreement among the parties. Accordingly, this agreement
in principle is not intended to confer any legal or equitable rights or to
impose any legal or equitable obligations whatsoever, of any kind, character or
nature on any party. Such agreements, documents and instruments, when they
become fully effective in accordance with their terms, shall supersede in their
entirety this Term Sheet. All parties agree to maintain the confidentiality of
the terms provided in this document, except as required by law.
9.TIMETABLE All documents and all actions necessary to carry out the terms and
conditions of this Term Sheet and the conversion shall be executed and completed
by September 30, 1996, or such other date as may be mutually agreed by the
parties to this Term Sheet ("Closing Date").
Executed effective this __ day of July, 1996.
RADIUS, INC.
IBM CREDIT CORPORATION
by ___________________________ by ___________________________
Charles Berger, President Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERIC
by ___________________________
Carl Carlson, Co-Chairman
SCI SYSTEMS
by ____________________________
Michael Ledbetter, Co-
Chairman
AVNET EMG
MANUFACTURERS' SERVICES LTD.
by ____________________________
by ___________________________
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by ____________________________
by ___________________________
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by ____________________________
David Vetter
EXHIBIT 2
July 11, 1996
Garrett L. Cecchini, Esq.
Wright, Robinson, Osthimer & Tatum
44 Montgomery Street, 18th Floor
San Francisco, CA 94104-4705
Harvey S. Schochet, Esq.
Steefel, Levitt & Weiss
One Embarcadero Center, 29th Floor
San Francisco, CA 94111
Re:
Recapitalization of Radius, Inc.
Gentlemen:
Attached you will find the final draft of the Term Sheet containing the
agreement in principle which we believe has been reached regarding the
recapitalization of Radius, Inc. The Term Sheet contemplates that the
recapitalization will be accomplished by an out of court voluntary arrangement
between Radius and its creditors which the Creditors Committee will actively
support. It was agreed, however, that if it becomes apparent that the
recapitalization cannot be accomplished by an out of court voluntary
arrangement, a petition for reorganization of Radius under Chapter 11 of the
United States Bankruptcy Code will be filed to consummate the recapitalization
plan. The following is a summary of the procedure for the attempt to achieve the
plan voluntarily and filing the pre-packaged Chapter 11 if it becomes necessary.
a. A good faith attempt shall be made by all parties to achieve the
recapitalization of Radius, in the manner set forth in the Term Sheet, without
the necessity of filing a petition for reorganization of Radius under Chapter 11
of the United States Bankruptcy Code. To that end, the parties shall do the
following:
i.The Committee shall, within two (2)days following execution of the Term Sheet
by Radius and IBM Credit send out a bulletin to the creditors of Radius
indicating:
(i) that the Committee has met and conferred with Radius and IBM Credit and
agreed in principle that it believes that it would be in the best interests
of all unsecured creditors to compromise or convert their claims into stock of
Radius upon the terms set forth in the Term Sheet;
(ii) that Radius will, subject to the registration of the necessary stock,
make an offer to the creditors to compromise or convert their claims into stock
of Radius upon the terms set forth in the Term Sheet;
(iii) that the Committee recommends that the creditors accept such offer
from Radius when received;
(iv) that if the percentage of creditors specified in the Term Sheet does
not accept said offer, a petition for reorganization of Radius under Chapter 11
of the United States Bankruptcy Code, will be filed proposing a plan of
reorganization consistent with the Term Sheet; and
(v) that the creditors will be receiving an informational package
concerning Radius and a ballot to elect how their claims will be treated.
b. In the event that it should become necessary because of:
i. the failure of Radius to deliver to counsel for the Committee the items
specified herein in paragraph C in a timely manner;
ii. an inability to comply with federal or state securities laws required
to issue the preferred and common stock and warrants provided for in the Term
Sheet (including an inability to have the registration statement become
effective on or before September 30, 1996, (the "Closing Date");
iii. an inability to obtain the necessary consents of creditors as
specified in the Term Sheet, especially in the convenience class;
iv. the necessity of staying litigation against Radius which would
otherwise unreasonably interfere with Radius' ability to continue to operate its
business;
v. protection of Radius' Board of Directors, IBM Credit or the Committee
from claims related to their negotiations or other dealings with one another;
vi. protection of Radius and its creditors from materially adverse tax
consequences from the conversion of debt into stock, as provided for in the Term
Sheet; or
vii. an inability, for any other reason, to carry out the provisions of the
Term Sheet without the filing of a petition for reorganization of Radius under
Chapter 11 of the United States Bankruptcy Code, on or before the Closing Date;
Radius shall cause to be filed such a petition, in which Radius shall propose a
plan of reorganization which is consistent with the terms of the Term Sheet,
other than those related to registration of the preferred and common stock and
warrants. IBM Credit and the Committee shall support said Plan.
c. To facilitate the ability to file such a petition:
i.
Radius will prepare and deposit with counsel for the Committee, within seven
(7) days from the execution of the Term Sheet, a duly executed petition for
reorganization of Radius under Chapter 11 of the United States Bankruptcy Code
and certified resolutions of Radius' Board of Directors authorizing the filing
of such petition and such other documents as are required to file such a
petition;
ii.
Radius will prepare and deposit with counsel for the Committee, within twenty
one (21) days from the execution of the Term Sheet, an informational document to
be used in the solicitation of consents from the creditors to the compromise or
conversion of their debt as specified in the Term Sheet, including a prospectus
which complies with the disclosure requirements of the SEC for solicitation of
such conversion in a voluntary plan and a disclosure statement describing the
recapitalization plan specified in the Term Sheet, complying with all
requirements of the United States Bankruptcy Code.
iii.
Radius and the Committee, acting in concert, shall, within five (5) days from
delivery of the above described informational document mail said informational
document to the creditors of Radius and solicit the consents of the creditors to
the compromise or conversion of their debt as specified in the Term Sheet.
Radius shall have a period of thirty (30) days from the mailing of said
informational document to obtain the necessary consents.
iv.
Radius will prepare and deposit with counsel for the Committee, within forty
five (45) days from the execution of the Term Sheet, all necessary schedules to
the petition, a plan of reorganization consistent with the terms of the Term
Sheet, any consents of creditors and shareholders to the plan obtained and such
other documents as are required to file a "pre- packaged" plan of
reorganization.
v.
Counsel for the Committee is hereby authorized, upon the occurrence of one of
the events specified in paragraph B above, and upon two days notice to, and
consultation with, Radius and IBM Credit, to file said petition.
d.
To facilitate the payment of the fees of counsel to the Committee for their
increased level of services related to communicating with the creditors and
soliciting their consent to the recapitalization plan set forth in the Term
Sheet, Radius shall pay to said counsel, on an accelerated basis and no less
favorable basis as counsel to Radius, the amount shown as owing on said
statement. This is not intended, however, to effect a subordination of any of
IBM Credit's claims, liens or other rights.
If the above correctly reflects your agreement, please have your respective
clients execute a copy of this letter at the place indicated and return it to us
with the executed Term Sheet. We will also obtain the signatures of the
Creditors Committee which will be binding on them not only as members of the
Committee but as individual creditors as well.
Very truly yours,
L. Morris Dennis
Agreed to:
RADIUS, INC.
IBM CREDIT CORPORATION
by ___________________________ by ___________________________
Charles Berger, President Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA
SCI SYSTEMS
by ____________________________
by ___________________________
Carl Carlson, Co-Chairman Michael Ledbetter, CoChairman
AVNET EMG
MANUFACTURERS' SERVICES LTD.
by ____________________________
by ___________________________
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by ____________________________
by ___________________________
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by ____________________________
David Vetter
EXHIBIT 3
ADDENDUM TO TERM SHEET
This is an Addendum to the Term Sheet executed by the parties hereto, to clarify
or change certain of the terms contained therein.
i.
Paragraph II.B.1. of the Term Sheet is amended to add the following: "If the
determination of allowed and disputed claims is not completed by the Closing
Date, the shares reserved for the disputed claims shall be issued to the
Trustees of the Creditors' Trust referred to in paragraph II.B.4., to be
distributed by them to the Major Creditors and the members of the Convenience
Class electing to convert their debt into common stock, when the disputed claims
are resolved."
ii.
Paragraph II.B.4. of the Term Sheet is amended to read as follows: "The
agreement of all of the Major Creditors and the members of the Convenience Class
electing to convert their debt into common stock, that the portion of their
shares attributable to disputed claims shall be held in a Creditors' Trust, to
be established by a trust agreement between Radius and the Committee, until the
disputed claims are resolved shall be a condition of the obligations of Radius,
IBM Credit and the Committee under this Term Sheet." Radius, IBM Credit and the
Committee may elect to waive this requirement."
iii.
Paragraph III.C. of the Term Sheet is amended to read as follows: "Creditors
in the Convenience Class, who do not accept the offer described in sub-paragraph
III.B. above and who are 'Accredited Investors', as defined in Rule 501 to
Regulation D promulgated by the Securities and Exchange Commission ("SEC"), may
exchange their claim for common stock on the same terms set forth in paragraph
II.B."
iv.
Paragraph IV.A.6. of the Term Sheet is amended to read as follows: "The
preferred stock, the common stock into which it is convertible, the warrants to
IBM Credit referred in paragraph VII.A., the common stock issuable in connection
with the exercise of said warrants and the common stock which may be issued as
dividends on the preferred stock (the "IBM Credit Securities"), shall be in
compliance with all applicable federal and state securities laws. The IBM Credit
Securities shall initially be issued pursuant to the exemption from the
registration requirements of the Securities Act of 1933 (the "Act") provided by
Regulation D promulgated by the SEC. As soon as permitted by the SEC after the
Closing Date, (estimated to be approximately 30 days following the Closing
Date), the resale by IBM Credit of the IBM Credit Securities shall be registered
under the Act, by the filing with the SEC of a registration statement on Form
S-1 and the diligent prosecution of said registration statement by Radius until
it becomes effective. Thereafter, Radius shall file all statements and take all
actions necessary to maintain said registration as "evergreen" for a period of 2
years following the Closing Date so that said securities may be freely traded
unless earlier tradeable without restriction pursuant to Rule 144 promulgated by
the SEC. Thereafter, IBM Credit shall have the right to demand registration of
any common stock issued to it by Radius once per year for two years after the
last such issuance. At IBM Credit's request, Radius shall file a form S-3
registration statement with the SEC as soon as permitted by the SEC and shall
use its best efforts to make such registration statement effective as soon as
practicable after notice by IBM Credit of its intention to sell common stock.
Radius shall remain current in all of its required filings pursuant to the Act,
the Securities Exchange Act of 1934 and all applicable state securities laws."
v.
Paragraph V.A. of the Term Sheet is amended to read as follows: "The issuance
of the common stock to be issued to the Major Creditors and the members of the
Convenience Class electing to convert their debt into common stock shall be in
compliance with all applicable federal and state securities laws. Said common
stock shall initially be issued pursuant to the exemption from the registration
requirements of the Act provided by Regulation D promulgated by the SEC. As soon
as permitted by the SEC after the Closing Date, (estimated to be approximately
30 days following the Closing Date), the resale by the Major Creditors and the
members of the Convenience Class electing to convert their debt into common
stock shall be registered under the Act, by the filing with the SEC of a
registration statement on Form S-1 and the diligent prosecution of said
registration statement by Radius until it becomes effective. Thereafter, Radius
shall file all statements and take all actions necessary to maintain said
registration as "evergreen" for a period of 2 years following the Closing Date
so that said securities may be freely traded, unless earlier tradeable without
restriction pursuant to Rule 144 promulgated by the SEC. Thereafter, it is
contemplated that the Major Creditors and the members of the Convenience Class
electing to convert their debt into common stock shall be permitted to resell
their shares pursuant to Rule 144 promulgated by the SEC. Radius shall remain
current in all of its required filings pursuant to the Act, the Securities
Exchange Act of 1934 and all applicable state securities laws."
vi.
Paragraph VI. of the Term Sheet is amended to read as follows: "Upon execution
of all agreements, documents and instruments (relating to the restructuring,
recapitalization and related transactions referenced herein) to be negotiated
and documented and executed pursuant to, or to carry out the purposes of, the
Term Sheet, and for so long as the parties shall continue to pursue their
efforts to carry out the terms of the Term Sheet, each of the members of the
Committee who have continued to supply product to Radius, on condition that
Radius pay to them an amount equal to 110% of the price of the new product
shipped, shall cease said requirement for payment of said override."
vii.
Paragraph VII. of the Term Sheet is amended to add to said paragraph a new
sub-paragraph E. which shall read as follows: The warrants to be issued pursuant
to the provisions of paragraph VII.B. and the common stock issuable in
connection with the exercise of said warrants shall be in compliance with all
applicable federal and state securities laws. Said warrants and common stock
shall initially be issued pursuant to exemption from registration under the Act
and thereafter registered under the Act in the same manner as provided in
paragraph V.A. of the Term Sheet."
Except as expressly modified herein, all of the terms and conditions of the Term
Sheet shall continue in full force and effect.
Executed effective this __ day of July, 1996.
RADIUS, INC.
IBM CREDIT CORPORATION
by ___________________________ by ___________________________
Charles Berger, President
Philip Morse
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA
SCI SYSTEMS
by ____________________________
by ___________________________
Carl Carlson, Co-Chairman
Michael Ledbetter, Co-
Chairman
AVNET EMG
MANUFACTURERS' SERVICES LTD.
by ____________________________
by ___________________________
Dennis E. Losik
Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by ____________________________
by ___________________________
Takahiro Kitamoto
Aimee Takamoto
TECH DATA CORP.
by ____________________________
David Vetter
EXHIBIT 4
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set forth below,
by and between RADIUS INC., a California corporation, with headquarters located
at 215 Moffett Park Drive, Sunnyvale, California 94089 (the "Company"), and the
undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer maintains that the Company is delinquent to Buyer in certain
accounts or other claims in the amount of $________ (the "Obligation") which
Obligation represents all amounts owed to Buyer for whatever reason by the
Company other than current trade payables of $________ as specified in a
schedule attached to this Agreement ("Buyer's Schedule of Current Accounts");
WHEREAS, as a result of the Company's current financial condition, the Company
is unable to repay the Obligation along with approximately $45 million of claims
of other unsecured creditors of the Company;
WHEREAS, the Company, its secured creditor and an unofficial committee of its
largest unsecured creditors have proposed a plan pursuant to which unsecured
creditors will release their claims against the Company in exchange for a number
of shares of the Company's Common Stock, no par value ("Common Stock"), equal to
60% of the issued and outstanding shares of Common Stock;
WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
WHEREAS, the Buyer wishes to subscribe for and purchase shares of Common Stock
in full satisfaction of the Obligation and the release the Company from any and
all liability relating to the Obligation upon the terms and subject to the
conditions of this Agreement, subject to acceptance of this Agreement by the
Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1.AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
a.Subscription. Buyer hereby subscribes for and agrees to purchase the number of
shares of Common Stock set forth on the signature page of this Agreement (the
"Shares") in full satisfaction of the Obligation. Subscriber understands that
the number of shares of Common Stock to be received will represent its pro rata
share of the 60% of the outstanding shares of the Company's Common Stock to be
issued to the Company's unsecured creditors as of the Closing Date (defined
below).
b.Release. Buyer accepts the Common Stock as full satisfaction of the
Obligation, and upon receipt of the Common Stock and an executed Registration
Rights Agreement, Buyer forever fully releases and discharges the Company, its
predecessors, successors, subsidiaries, officers, directors, agents, attorneys,
employees, lenders, creditors , shareholders and assigns ("Releasees") from any
and all causes of action, claims, suits, demands or other obligations or
liabilities (except those set forth in the attached Buyer's Schedule of Current
Accounts, ifany), whether known or unknown, that Buyer ever had, now has, or may
in the future have, that may be alleged to arise out of or in connection with
the Obligation or its satisfaction ("Claims"). Buyer also agrees not to sue or
otherwise institute or cause to be instituted or in any way participate in legal
or administrative proceedings against the Releasees with respect to the Claims
(except at the reasonable request of the Company). This release extends to all
claims of every nature and kind, known or unknown, suspected or unsuspected,
past, present, or future, arising from or related to the Obligation or its
satisfaction, and any and all rights granted to us under Section 1542 of the
California Civil Code or any analogous state law or federal law or regulation
hereby expressly waived. Section 1542 of the Civil Code of the State of
California states: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IS KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR.
Buyer understands that other creditors and the Company will rely on its
agreement to accept the Common Stock in full satisfaction of the Obligation and
in consideration of the release described above. The adequacy of this
consideration is acknowledged and will never be challenged.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:
a. The Buyer is purchasing the Shares for its own account for investment only
and not with a view towards the public sale or distribution thereof; b. The
Buyer is an "Accredited Investor" as that term is defined in Rule 501 of the
General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3) and
is experienced and knowledgeable in investing in equity and other securities;
c.All subsequent offers and sales of the Shares by the Buyer shall be made
pursuant to registration under the 1933 Act and qualification under the
applicable state securities laws or pursuant to an exemptions from registration
and qualification;
d.The Buyer understands that the Shares are being offered and sold to it in
reliance on specific exemptions from the registration and qualification
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e.The Buyer and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has had the opportunity to obtain and to review the Company's Preliminary
Confidential Private Placement Memorandum dated August 9, 1996 relating to the
offering of the Shares (the "Memorandum") and the exhibits to the Memorandum.
The Buyer acknowledges that the Company may sell securities pursuant to the
Memorandum or otherwise that are similar to or different than the securities
referred to in the Memorandum, and on terms that are similar to or different
than those set forth in the Memorandum and those of this Agreement. The Buyer
understands that its investment in the Shares involves a high degree of risk;
f. The Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares; and
g.Each of this Agreement and the Release has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3.COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a.Concerning the Shares. The Shares, when issued, delivered and paid for in
accordance with this Agreement, will be duly and validly authorized and issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive
rights of any shareholder of the Company, as such, to acquire the Shares.
b.Subscription Agreement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
c.Non-contravention. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the issuance of the Shares and the other
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or by-laws of the
Company, or any indenture, mortgage, deed of trust or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court, United
States federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets.
d.Approvals. The Company is not aware of any authorization, approval or consent
of any governmental body which is required to be obtained by the Company (other
than the approval of the Company's shareholders of an amendment to the Company's
Articles of Incorporation to approve an increase in the authorized number of
shares of Common Stock of the Company) for the issuance and sale of the Shares
as contemplated by this Agreement.
4.CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a.Transfer Restrictions. The Buyer acknowledges that (1) the Shares to be
issued to it hereunder have not been and are not being registered under the
provisions of the 1933 Act or qualified under applicable state securities laws
(except to the extent provided for in the Registration Rights Agreement referred
to in Section 4(c) of this Agreement), and may not be transferred unless and
until (A) such transfer is registered under the 1933 Act and qualified under
applicable state securities laws or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Shares may be sold or
transferred pursuant to exemptions from such registration and qualification; (2)
any sale of the Shares made in reliance on Rule 144 promulgated under the 1933
Act may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such Shares under circumstances in
which the seller, or the person through whom the sale is made, may be deemed to
be an underwriter, as that term is used in the 1933 Act, may require compliance
with some other exemption under the 1993 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person is under any
obligations to register the Shares under the 1933 Act or qualify them under
state securities laws (other than pursuant to the Registration Rights Agreement
referred to in Section 4(c) of this Agreement) or to comply with the terms and
conditions of any exemption under the 1933 Act or applicable state securities
laws.
b.Restrictive Legend. The Buyer acknowledges and agrees that, except during such
time as the Shares are registered under the 1933 Act and qualified under
applicable state securities laws as provided in the Registration Rights
Agreement referred to in Section 4(c) of this Agreement, or after the Shares
have been sold pursuant to such registration and qualification or pursuant to
exemptions (such as Rule 144) that do not require further restrictions on
transfer, the certificates for the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or applicable state
securities laws. The shares have been acquired for investment and may not be
sold, transferred, assigned or hypothecated unless registered under the 1933 Act
and qualified under applicable state securities laws or unless such sale,
transfer, argument or hypothecation is exempt from the registration requirements
of the 1933 Act and the qualification requirements of applicable state
securities laws and, at the Company's election, unless the Company receives an
opinion of counsel satisfactory to the Company that such registration and
qualification are not required.
c.Registration Rights Agreement. The parties hereto agree to enter into a
Registration Rights Agreement in form acceptable to the Company and the
Unofficial Creditors Committee on or before the Closing Date.
d.Form D. The Company agrees to file a Form D with respect to the Shares as
required under Regulation D.
e.Reporting Status. So long as the Buyer beneficially owns any of the Shares or
until the third anniversary of the Closing Date, whichever first occurs, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
5.TRANSFER AGENT INSTRUCTIONS.
Promptly following the Closing, the Company will instruct its transfer agent to
issue one or more certificates for the Shares, bearing the restrictive legend
specified in Section 4(b) of this Agreement, registered in the name of the Buyer
or its nominee and in such denominations to be specified by the Buyer prior to
the closing. The Company warrants that no instruction (other than such
instructions referred to in this Section 5, instructions consistent with this
Agreement, including Sections 4(a) and 4(b) hereof, or with the Registration
Rights Agreement and stop transfer instructions to give effect to Section 4(a)
hereof) will be given by the Company to the transfer agent with respect to the
Shares and that the Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Shares. If the Buyer sells the Shares under an effective
Registration Statement or if Buyer provides the Company with an opinion of
counsel that registration and qualification of a resale by the Buyer of any of
the Shares in accordance with clause (1)(B) of Section 4(a) of this Agreement is
not required under the 1933 Act, the Company shall permit the transfer of such
Shares and promptly instruct the Company's transfer agent to issue one or more
share certificates in such name and in such denominations as specified by the
Buyer (provided that such specification is consistent with such opinion).
6.CLOSING DATE.
The date and time of the issuance and sale of the Shares (the "Closing Date")
shall be 12:00 noon, California time, on the date which: (i) the Company has
received Subscription Agreements from all unsecured creditors with claims in
excess of $50,000; (ii) the Company has executed and delivered an amended loan
agreement with IBM Credit Corporation in form acceptable to the Unofficial
Creditors Committee; and (iii) unsecured creditors other than those described in
(i) above holding claims representing 95% of all remaining unsecured claims
against the Company have received a discounted cash payment or have agreed to
receive shares of Common Stock in satisfaction of their claims. The foregoing
conditions may be waived or modified with the consent of each of the Company,
IBM Credit Corporation and the unofficial creditors committee. The closing shall
occur on the Closing Date at the offices of the Company and is expected to occur
at the end of August 1996. Unless Buyer is issued Common Stock by October 31,
1996, however, Buyer reserves the right to cancel this agreement by written
notice to the Company. Buyer also understands that the Company may be forced to
seek bankruptcy protection in order to implement the transactions contemplated
by this Agreement. In such event, additional documentation will be sent to
Buyer.
7.CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares to the
Buyer pursuant to this Agreement is conditioned upon:
a.The receipt and acceptance by the Company of the Buyer's subscription for
the Shares as evidenced by execution and delivery of this Agreement by the
Company;
b.Satisfaction of the conditions referred to in Section 6 hereof;
c.The accuracy on the Closing Date of the representations and warranties of the
Buyer contained in this Agreement and the performance by the Buyer on or before
the Closing Date of all covenants and agreements of the Buyer required to be
performed on or before such Closing Date; and
d.Execution and delivery of a Registration Rights Agreement by Buyer.
The foregoing conditions may be waived by the Company at its discretion.
8.CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Shares is
conditioned upon:
a.Delivery by the Company of one or more certificates for the Shares in
accordance with this Agreement;
b.The accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement and the performance by the Company on or
before the Closing Date of all covenants and agreements of the Company required
to be performed on or before such Closing Date; and
c.Execution and delivery of the Registration Rights Agreement by the Company.
The foregoing conditions may be waived by the Buyer at its discretion.
9.GOVERNING LAW; MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California. A facsimile transmission of this signed agreement
shall be legal and binding on all parties hereto. The headings of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. Any notices
required or permitted to be given under the terms of this Agreement shall be
sent by mail or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier to such party's office, in each case addressed to a
party at such party's address shown in the introductory paragraph or on the
signature page of this Agreement or such other address as a party shall have
provided by notice to the other party in accordance with this provision.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or one of
its officers thereunto duly authorized as of the date set forth below.
AGGREGATE AMOUNT OF ALL RELEASED CLAIMS: $12,282,885
NAME OF BUYER: SCI SYSTEMS, INC.
SIGNATURE
Title:
Date:
Address:
This Agreement has been accepted as of the date set forth below.
RADIUS INC.
By:
Title:
Date:
NUMBER OF SHARES: 9,719,200 plus 2,958,017 Rights
Such number of shares will be computed by the Company and confirmed by the
Unsecured Creditors Committee. Each unsecured creditor shall receive such number
of shares of Common Stock as represents its pro rata share of the 60% of the
outstanding shares of Common Stock as of the Closing Date.
EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of __________, 1996 (this
"Agreement"), is made by and between RADIUS INC., a California corporation (the
"Company"), and the person named on the signature page hereto (the "Initial
Investor").
W I T N E S S E T H:
WHEREAS, in connection with each of the Subscription Agreements, between certain
unsecured creditors of the Company ("Creditors") and the Company (the
"Subscription Agreements"), the Company has issued and sold to the Creditors
shares (the "Shares") of Common Stock, no par value (the "Common Stock") and
certain Common Stock Purchase Rights ("Rights") in satisfaction of certain
claims of such Creditors as set forth in the Subscription Agreements;
WHEREAS, the Company has issued to IBM Credit Corporation ("IBM Credit") shares
of Series A Convertible Preferred Stock (the "Series A Preferred") and Warrants
("Warrants") to purchase 600,000 shares of Common Stock in satisfaction of
certain outstanding indebtedness of the Company to IBM Credit and extension by
IBM Credit of an advance of up to $500,000 as well as the restructuring of the
Company's remaining indebtedness to IBM Credit (such transactions with IBM
Credit are collectively referred to herein as the "Restructuring");
WHEREAS, the Company has issued or will issue to certain unsecured creditors
("Key Suppliers") Warrants to purchase an aggregate of 600,000 shares of Common
Stock;
WHEREAS, to induce (i) the Creditors to execute and deliver the Subscription
Agreements, (ii) IBM Credit to enter into the Restructuring and, (iii) the Key
Suppliers to accept Warrants to ensure favorable credit and supply terms, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), and applicable
state securities laws with respect to the Registrable Securities (defined
below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1.
Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
(a)
"Demand Securities" means the Warrant Shares and the Dividend Shares.
(b)
"Demand Registration" means a registration effected pursuant to Section 2(b)
hereof.
(c)
"Dividend Shares" means any shares of Common Stock issuable in lieu of cash
dividends paid or to be paid on the Series A Preferred.
(d)
"Effectiveness Period" means with respect to (i) the Shelf Registration, a
period of 24 consecutive months from the effective date of the Registration
Statement relating to the Initial Registration and (ii) any Demand Registration,
a period of 90 consecutive days from the effective date of the Demand
Registration and excluding any period of time in which the Effectiveness Period
may be suspended pursuant to the provisions of clauses (i)- (iv) of Section
3(a).
(e)
"Form S-3" means such form under the Securities Act as is in effect on the date
hereof or any successor registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(f)
"Holdover Securities" means Registrable Securities which are held by an Investor
after the end of the Effectiveness Period for the Shelf Registration and which
Investor also holds Demand Securities.
(g)
"Initial Registration" means a registration effected pursuant to Section
2(a) hereof.
(h)
"Investor" means the Initial Investor and any transferee or assignee who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
hereof.
(i)
"register," "registered" and "registration" refer to a registration effected by
preparing and filing a Registration Statement or Statements in compliance with
the Securities Act and, to the extent required hereunder, pursuant to Rule 415,
and the declaration or ordering of effectiveness of such Registration Statement
by the SEC.
(j)
"Registrable Securities" means the Shares, the Warrant Shares, the Dividend
Shares, the Rights Shares, the Series A Shares, the Series A Preferred and the
Warrants.
(k)
"Registration Statement" means a registration statement of the Company under the
Securities Act with respect to the Shelf Registration or the Demand
Registration, as the case may be.
(l)
"Registration Termination Date" means the date on which the Company's obligation
to register or maintain any registration with respect to any Registrable
Securities terminates as provided in Section 11 hereof.
(m)
"Rights Shares" means shares of Common Stock issued or issuable pursuant to the
Rights issued to the Creditors pursuant to the Subscription Agreements.
(n)
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
(o)
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.
(p)
"SEC" means the U.S. Securities and Exchange Commission.
(q)
"Securities Act" means the Securities Act of 1933, as amended.
(r)
"Series A Shares" means shares of Common Stock issued or issuable upon
conversion of the Series A Preferred.
(s)
"Shelf Registration" means the Initial Registration and any Subsequent
Registration.
(t)
"Subsequent Registration" has the meaning specified in Section 2 hereof.
(u)
"Target Effective Date" means 60 days after the issuance of the Shares.
(v)
"Target Filing Date" means 10 days after the issuance of the Shares.
(w)
"Underwritten Offering" means an underwritten public offering on a firm
commitment basis.
(x)
"Warrant Shares" means shares of Common Stock issued or issuable upon exercise
of the Warrants issued to IBM Credit and the Key Suppliers.
2.
Registration.
(a)
Initial Registration.
(i)
The Company shall prepare and file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Securities. The Initial Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Securities
for resale by such holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). Such filing
shall be made on or before the Target Filing Date. The Company shall use its
best efforts to have such Initial Registration declared effective on or before
the Target Effective Date and to keep the Initial Registration continuously
effective under the Securities Act until the earlier to occur of the date that
is 24 months from the effectiveness date of the Initial Registration (the
"Initial Effectiveness Period") or the Registration Termination Date.
(ii)
If the Initial Registration or a Subsequent Registration ceases to be effective
for any reason at any time during the Effectiveness Period (other than because
of the occurrence of the Registration Termination Date with respect to the
Registrable Securities covered thereby), the Company shall use its best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 30 days of such cessation of
effectiveness file an amendment to the Initial Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a "Subsequent
Registration"). If a Subsequent Registration is filed, the Company shall use its
best efforts to cause the Subsequent Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective until the earlier to occur of the end of the
Effectiveness Period or the Registration Termination Date.
(iii)
The Company shall supplement and amend the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration, if required by the Securities Act.
(b)
Demand Registration.
(i)
If the Company shall receive at any time after the end of the Effectiveness
Period for the Shelf Registration, a written request from the Investors of at
least thirty-three percent (33%) of the Demand Securities then outstanding that
the Company file a registration statement under the Securities Act covering the
registration of the Demand Securities pursuant to this Section 2(b), then the
Company shall, within ten (10) business days of the receipt of such written
request, give written notice of such request ("Request Notice") to all
Investors, and file within thirty (30) days and use its best efforts to cause
such Registration Statement to become effective within an additional thirty (30)
days, the Registration Statement covering all Demand Securities which Investors
request to be registered and included in such registration by written notice
given such Investors to the Company within twenty (20) days after receipt of the
Request Notice; provided that the Registrable Securities requested by all
Investors to be registered pursuant to such request must be at least
thirty-three percent (33%) of all Demand Securities then outstanding; provided
further, that in the event the proposed offering described in the Request Notice
is an Underwritten Offering, then additional Holdover Securities (other than
Warrants and Series A Preferred) held by Investors may be included in the
registration described in the Request Notice, subject to compliance with
subsection (ii) below.
(ii)
If the Investors initiating the registration request under this Section 2(b)
("Initiating Investors") intend to distribute the Demand Securities covered by
their request by means of an Underwritten Offering, then they shall so advise
the Company as a part of their request made pursuant to this Section 2(b) and
the Company shall include such information in the Request Notice referred to in
subsection (i) of this Section 2(b). In such event, the right of any Investor to
include his Demand Securities and, if applicable, Holdover Securities in such
registration shall be conditioned upon such Investor's participation in such
Underwritten Offering and the inclusion of such Investor's Demand Securities in
the Underwritten Offering (unless otherwise mutually agreed by a majority in
interest of the Initiating Investors and such Investor) to the extent provided
herein. All Investors proposing to distribute their securities through such
Underwritten Offering shall enter into an underwriting agreement in customary
form with the managing underwriter or underwriters selected for such
Underwritten Offering by the Company. Notwithstanding any other provision of
this Section 2(b), if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Investors owning Demand
Securities and, if applicable, Holdover Securities, which would otherwise be
registered and underwritten pursuant hereto, and the number of Demand Securities
and, if applicable, Holdover Securities, that may be included in the
Underwritten Offering shall be reduced as required by the underwriter(s) and
allocated among the Investors owning Demand Securities and, if applicable,
Holdover Securities, on a pro rata basis according to the number of Demand
Securities and, if applicable, Holdover Securities, then outstanding held by
each Investor requesting registration (including the Initiating Investors).
(iii)
Maximum Number of Demand Registrations. The Company is obligated to effect only
two (2) such registrations pursuant to this Section 2(b) in any calendar year.
(iv)
Deferral. Notwithstanding the foregoing, if the Company shall furnish to
Investors requesting a Demand Registration,
a certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Investors; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(v)
Form S-3 Registration. In lieu of the Company's obligation to effect Demand
Registrations pursuant to this Section 2(b), the Company may, at its election,
at any time after the Effectiveness Period of the Shelf Registration, prepare,
file and cause to be effective a Registration Statement on Form S-3, and subject
to the provisions of Section 3(a), keep such Registration Statement effective
pursuant to Rule 415 until the Registration Termination Date. Upon the
effectiveness of such Registration Statement on Form S-3, the Investors shall no
longer be permitted to effect a Demand Registration.
3.
Obligations of the Company. In connection with the registration of the
Registrable Securities pursuant to this Agreement, the Company shall:
(a)
prepare promptly and file with the SEC promptly (but in no event later than as
is set forth in Section 2 hereof) a Registration Statement with respect to all
Registrable Securities to be included therein, and thereafter use its best
efforts to cause the Registration Statement to become effective as soon as
reasonably possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 (except in the case of an underwritten offering,
for which Rule 415 will not be used) at all times during the Effectiveness
Period or until the Registration Termination Date, whichever occurs first, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading provided, however, that each Investor shall have
complied with its obligations under Section 4 with respect to the Registrable
Securities of such Investor to be included in the Registration Statement.
Notwithstanding the foregoing, in the event that (i) any request is made by the
SEC or any other federal or state governmental authority during the
Effectiveness Period for amendments or supplements to a Registration Statement
or related prospectus, (ii) any event occurs that makes any statement made in
such Registration Statement or related prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or which requires the making of any changes in the Registration Statement or
prospectus so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, (iii) during the Effective Period for the Shelf
Registration, the Company becomes eligible to utilize From S-3 (in which case,
the Company shall be permitted to terminate the effectiveness of the Initial
Registration and file a Registration Statement on Form S-3 and use its best
efforts to cause such Registration Statement to become effective within thirty
(30) days with respect to the Registrable Securities), or (iv) in the judgment
of the Company, it is advisable to suspend use of the prospectus included in
such Registration Statement for a discrete period of time due to pending
corporate developments (including the pending automatic conversion of the Series
A Shares referred to in Section 7.2(a) of Article III of the Company's Articles
of Incorporation, as amended, in which case such discrete period shall be one
day), public filings with the SEC or similar events, then the Company shall
deliver a certificate in writing to the Investors whose Registrable Securities
are included in the Registration Statement to the effect of the foregoing and,
upon receipt of such certificate, the use of the Registration Statement and
prospectus will be deferred or suspended and will not recommence until such
Investor's receipt of copies of the supplemented or amended prospectus, or until
such Investors are advised in writing by the Company that the prospectus may be
used, and until such Investors have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus. The Company will use its best efforts to ensure that the use
of the Registration Statement and prospectus may be resumed, as soon as
practicable and, in the case of a pending development, filing or event referred
to in (iv) above, as soon, in the judgment of the Company, as disclosure of the
material information relating to such pending development, filing or event would
not have a materially adverse effect on the Company's ability to consummate the
transaction, if any, to which such development, filing or event relates.
Notwithstanding the foregoing or any other provision of this Agreement, the
period during which the Company shall be required to maintain the effectiveness
of a Registration Statement with respect to a Demand Registration shall be
extended by 1 day for each full or partial day during which the use of such
Registration Statement or prospectus is deferred or suspended by the Company in
accordance with this Section 2(b);
(b)
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Shelf Registration or Demand Registration effective at all times until the
end of the Effectiveness Period or the Registration Termination Date, whichever
occurs first, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement, such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d)
use reasonable efforts to (i) register and qualify the Registrable Securities
covered by the Shelf Registration or Demand Registration under such other
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities or Demand Securities, as
applicable, being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times until the end of the
Effectiveness Period or the Registration Termination Date, whichever occurs
first, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities or Demand Securities, as applicable, for sale
in such jurisdictions; provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to (I) quality to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) subject itself to general taxation in any such
jurisdiction, (III) file a general consent to service of process in any such
jurisdiction, (IV) provide any undertakings that cause more than nominal expense
or burden to the Company or (V) make any change in its charter or by-laws;
(e)
as promptly as practicable after becoming aware of such event, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Shelf Registration or Demand
Registration, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(f)
as promptly as practicable after becoming aware of such event, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
Underwritten Offering, the managing underwriters) of the issuance by the SEC (or
any state agency) of any stop order or other suspension of effectiveness of any
Registration Statement (or state qualification) at the earliest possible time;
(g)
permit a single firm of counsel designated as selling shareholders' counsel by
the Investors to review a Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, provided, however, any such objection to the filing of any Registration
Statement or amendment thereto or any prospectus or supplement thereto shall be
made by written notice (the "Objection Notice") delivered to the Company no
later than three (3) Business Days after the party or parties asserting such
objection receives draft copies of the documents that the Company proposes to
file. The Objection Notice shall set forth the objections and the specific areas
in the draft documents where such objections arise, and shall not file any
document in a form to which such counsel reasonably objects, provided that the
Company shall be permitted to take such actions that are required to comply with
applicable law;
(h)
make generally available to its security holders as soon as practical, but not
later than ninety (90) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a twelve-month period beginning not later than the
first day of the Company's fiscal quarter next following the effective date of
any Registration Statement and any post effective amendment thereto;
(i)
make available for inspection by any Investor, any underwriter participating to
any Underwritten Offering, and any attorney, accountant or other agent retained
by any such Investor or underwriter (collectively, the "Inspectors"), all
pertinent documents of the Company (collectively, the "Records"), as shall be
reasonably necessary to enable each Inspector to exercise its due diligence
responsibility, if and to the extent it has any such responsibility under the
Securities Act, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of any
Record or other non-public information relating to the Company received by such
Inspector unless (i) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction or (iii) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement; and provided further,
however, that in the event any Investor obtains material nonpublic information
concerning the Company pursuant to this Section 3(i) or Section 3(a) or 3(e) or
otherwise, such Investor shall not purchase or sell or otherwise trade in any
securities of the Company in violation of applicable law until such information
is made public by the Company. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(i). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction, given prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential;
(j)
use its best efforts either to (i) cause all the Registrable Securities covered
by any Registration Statement to be listed on a national securities exchange, if
the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure the quotation of the Registrable Securities on the
Nasdaq National Market if such quotation is then permitted under the rules of
the Nasdaq;
(k)
provide a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of any Registration
Statement;
(l)
cooperate with the Investors who hold Registrable Securities being sold and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be sold pursuant to the Shelf
Registration or Demand Registration, as the case may be, and enable such
certificates to be in such denominations or amounts as the case may be, and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may reasonable request; and
(m)
take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4.
Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a)
It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to any Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to the effect
the registration of the Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request. At
least fifteen (15) days prior to the first anticipated filing date of the Shelf
Registration or the Demand Registration, as the case may be, the Company shall
notify each Investor of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration Statement.
If within five (5) business days prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Shelf Registration or the Demand
Registration, as the case may be, without including Registrable Securities of
such Non-Responsive Investor;
(b)
Each Investor by such Investor's acceptance of the Registrable Securities agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement;
(c)
Each Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of any kind described in Section 3(e) or 3(f), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(d)
No Investor may participate in any Underwritten Offering hereunder unless such
Investor (i) agrees to sell such Investor's Registrable Securities on the basis
provided in any underwriting arrangements approved by the Investors entitled
hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and other fees and expenses of investment bankers and
any manager or managers of such underwriting and legal expenses of the
underwriters applicable with respect to its Registrable Securities, in each case
to the extent not payable by the Company pursuant to the terms of this
Agreement;
(e)
No Investor shall include the Investor's Registrable Securities in any
Registration Statement relating to a Demand Registration unless the Investor has
at such time a current intent to sell such Registrable Securities, and by
including such Registrable Securities in such Registration Statement, the
Investor will be deemed to represent to the Company that the Investor has such
intent. Any sale of any Registrable Securities by any Investor under any
Registration Statement will constitute a representation and warranty by such
Investor that the information relating to such Investor and its plan of
distribution is as set forth in the prospectus prepared by the Company and
furnished to such Investor for use in connection with such disposition, and such
prospectus does not as of the time of such sale contain any untrue statement of
a material fact relating to such Investor or its plan of distribution and that
such prospectus does not as of the time of such sale omit to state any material
fact relating to such Investor or its plan of distribution necessary to make the
statements in such Prospectus, in light of the circumstances under which they
were made, not misleading;
(f)
Each Investor agrees that, in disposing of any Registrable Securities pursuant
to any Registration Statement, the Investor will cause the disposition to be
made in accordance with the terms of the Registration Statement, including the
plan of distribution described therein, and will comply with all applicable
securities laws, including Rules 10b-2, 10b-5, 10b-6 and 10b-7 promulgated under
the Exchange Act. Each Investor agrees that in selling any Registrable
Securities under any Registration Statement, the Investor will deliver the
current prospectus contained in the Registration Statement, as amended and
supplemented, to all persons as required by the Securities Act and the
regulations thereunder and will comply with any applicable "blue sky" laws and
regulations in connection with the disposition of such shares.
(g)
Each Investor hereby agrees that it shall not, to the extent requested by
an underwriter of securities of the Company, sell or otherwise transfer or
dispose of any Registrable Securities or other securities of the Company then
owned by such Investor (other than to donees or affiliates of the Investor who
agree to be similarly bound) for up to one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that all executive officers and directors of
the Company then holding Common Stock of the Company enter into similar
agreements. In order to enforce the foregoing covenant, the Company shall have
the right to place restrictive legends on the certificates representing the
shares subject to this Section and to impose stop transfer instructions with
respect to the Registrable Securities and such other shares of stock of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
5.
Expenses of Registration. All expenses, other than underwriting discounts and
commissions and brokerage commissions and other fees and expenses of investment
bankers, incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company and counsel for the Investors as
provided in Section 3(g), shall be borne by the Company; provided, however, that
the Investors shall bear the fees and out-of-pocket expenses of their legal
counsel, if any, selected by the Investors pursuant to Subsection (ii) of
Section 2(b) hereof in the case of an Underwritten Offering. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2(b) if the registration
request is subsequently withdrawn at the request of the Investors of a majority
of the Demand Securities to be registered, unless the Investors of a majority of
the Demand Securities then outstanding agree to forfeit their right to one (1)
demand registration pursuant to this Section 2(b) (in which case such right
shall be forfeited by all Investors holding Demand Securities).
6.
Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a)
To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act, and, in the case of a Demand Registration, if the Registration
Statement is for an underwritten offering, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively, "Claims") to
which any of them may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations in any Registration
Statement, or any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or any post-effective amendment thereof
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
any state securities law or any rule or regulation by the Company of the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Indemnified Persons, promptly as
such expense are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (I) shall
not apply to a Claim arising out of or based upon (A) a Violation which occurs
in reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person (to
the extent such information was provided by or on behalf of such Indemnified
Person)expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof or (B) any violation by an Investor of the Investor's obligations under
this Agreement; (II) with respect to any preliminary prospectus shall not inure
to the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; and (III)
shall not apply to amounts paid in settlement of any claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld, provided, however, that if such claim is settled
without the consent of the Company and such claim is subsequently reduced to a
final, non appealable judgment or settlement which is adverse to the Company,
then the provisions of this clause III shall be of no effect. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b)
In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, any other shareholder and, in the case of a
Demand Registration, any underwriter selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such shareholder or underwriter within the meaning of the Securities
Act or the Exchange Act (collectively and together with an Indemnified Person,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon (i) any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim or (ii) any
violation by any Investor of such Investor's obligations under this Agreement;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c)
The Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d)
Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the reasonable fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential conflicts of interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay for only one separate legal
counsel for the Indemnified Persons; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities and shall
be approved by the Company, such approval not to be unreasonably withheld. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7.
Contribution. To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8.
Reports under Exchange Act. With a view to making available to the Investors the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
(a)
make and keep public information available, as those terms are understood
and defined in Rule 144;
(b)
file with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act; and
(c)
furnish to each Investor so long as such Investor owns Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.
9.
Assignment of the Registration Rights. The rights to have the Company register
Registrable Securities other than Rights Shares pursuant to this Agreement shall
be automatically assigned by the Investors to transferees or assignees of all of
any portion of such securities only if: (a) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein
and (e) the transfer or assignment is made in compliance with the transfer
restrictions in any Subscription Agreement, Rights Agreement, Warrant Agreement,
or Series A Preferred Purchase Agreement, as applicable.
10.
Amendment of Registration Rights. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority in interest of the
Registrable Securities with each share of Series A Preferred and each Series A
Share being treated as one security and each Warrant and each Warrant Share
being treated as one security. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
11.
Term. The term of this Agreement and the obligations of the parties hereunder
(other than their obligations under Sections 5, 6 and 7, which will continue)
will end (the "Registration Termination Date") (i) with respect to Registrable
Securities other than Demand Shares or Holdover Securities, on the earlier to
occur of (A) the sale of the Registrable Securities, or (B) at the end of the
Effectiveness Period for the Shelf Registration, and (ii) with respect to the
Demand Shares and Holdover Securities, on the earlier to occur of (A) the sale
of the Demand Securities and Holdover Securities, or (B) 24 months from the date
of issuance of such securities. In no event will the Company be required to
register hereunder or maintain any registration hereunder of any Registrable
Securities that are then eligible for resale under Rule 144.
12.
Miscellaneous.
(a)
A person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b)
Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered (by hand, by
courier or overnight delivery service, by telephone, facsimile transmission or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage prepaid (i) if to the Company, at Radius Inc.,
215 Moffett Park Drive, Sunnyvale, California 94089, Attention: President,
(ii) if to the Initial Investor, at the address set forth under its name in the
Subscription Agreement and (iii) if to any other Investor, at such address as
such Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 12(b), and shall be effective, when personally delivered, upon receipt
and, when so sent by certified mail, four days after deposit with the United
States Postal Service.
(c)
Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a wavier thereof.
(d)
This Agreement shall be enforced, governed by and construed in accordance with
the laws of the State of California applicable to agreements made and to be
performed entirely within such State. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e)
This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f)
Subject to the requirements of Section 9 hereof, this Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
(g)
All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(h)
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
(i)
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
RADIUS INC.
By:
Name:
Title:
INITIAL INVESTOR:
Name: SCI SYSTEMS, INC.
By:
Name:
Title:
Permanent Address:
Taxpayer Identification Number (required by transfer agent):
EXHIBIT 6
CREDITOR TRUST AGREEMENT
This Creditor Trust Agreement dated as of August __, 1996, by and between
Radius, Inc., a California corporation ("Radius"), and the Unofficial Unsecured
Creditors' Committee of Radius and their successors ("Creditors' Committee") and
is based upon the following:
A. Radius and the Creditors' Committee have entered into an agreement in
principle, as set forth in those certain documents entitled "Term Sheet" and
Addendum to Term Sheet, copies of which are attached hereto and incorporated
herein by reference (the "Term Sheet"). Any capitalized term not defined herein
shall have the same meaning as defined in the Term Sheet. In the event of any
inconsistency between the Term Sheet and this Creditor Trust Agreement, as
between the parties hereto, this Creditor Trust Agreement shall control.
B. The Term Sheet provides that substantially all of the unsecured creditors of
Radius, including the members of the Creditors' Committee, will exchange certain
of their claims against Radius into Radius' common stock, upon the terms and
conditions set forth in the Term Sheet. The plan of recapitalization of Radius
set forth in the Term Sheet shall be referred to herein as the "Plan".
C. The Plan contemplates the creation of a Creditor Trust into which all of the
Major Creditors and the members of the Convenience Class electing to convert
their debt into common stock ("Creditors") shall allow the portion of their
shares attributable to their disputed claims to be held by a Creditors' Trust
until the disputed claims are resolved. The shares of said common stock to be so
deposited shall be referred to herein as the "Stock".
NOW, THEREFORE, in consideration of the premises and of the acceptance by the
Trustees of the Creditor Trust hereby created and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, Radius and the Committee do hereby agree that the Stock and
any other trust assets shall be held, administered and distributed as follows:
ARTICLE I.
APPOINTMENT OF TRUSTEES OF CREDITOR TRUST
__________________ of ___________________ and ____________ or ______________ are
hereby appointed as the trustees of the Creditor Trust. The Creditors' Committee
shall be empowered to replace any trustee(s) of the Creditor Trust who resigns,
is removed or is unable to serve as provided ARTICLE IV herein.
ARTICLE II.
CREATION OF CREDITOR TRUST AND CONTRIBUTION OF STOCK.
By execution of this Creditor Trust Agreement Radius and the Creditors'
Committee hereby create the Creditor Trust. Upon the Closing of conversion of
claims into Stock, pursuant to the Plan, Radius shall issue to the Creditor
Trust the Stock which is required by the Plan to be issued to those of the
Creditors who have claims which are disputed in whole or in part. Said shares
shall be held by the Trustees in trust for the uses and purposes and on the
terms and conditions set forth herein and as set forth in the Plan. By execution
of this Creditor Trust Agreement, the Trustees hereby accept all of the Stock
and agree to hold, administer and distribute the Stock as provided in the Plan
and this Creditor Trust Agreement. Radius and the Creditors' Committee shall
execute, acknowledge and deliver such documents and do such further acts as the
Trustees shall deem necessary to effect the aforesaid transfer of rights and
powers under this Creditor Trust Agreement. Radius shall, from time to time,
deposit such sums as are necessary to pay the expenses of the Trustee incurred
in administering the Trust.
ARTICLE III.
RESPONSIBILITIES AND POWERS OF THE TRUSTEES
A.Rights, Powers and Responsibilities of the Trustees. The Trustees shall have
all of the rights and powers and shall perform all the functions and duties set
forth in the Plan and this Creditor Trust Agreement, and such duties
and functions that are necessary to the proper performance of their duties as
set forth herein, which rights, powers, functions and duties shall include,
without limitation, the following:
1. subject to any limitations set forth in the Plan, the right and power to
vote the Stock in accordance with instructions as follows:
(a) as to any particular shares of the Stock, in accordance with the
instructions given by the Creditor for whose benefit the shares are held;
(b) in the absence of instructions given by the Creditor for whose benefit the
shares are held or in the case of Stock held in respect of a disputed claim, in
accordance with the instructions given by the Creditors' Committee;
(c) in the absence of instructions given by the Creditor for whose benefit the
shares are held or the Creditors' Committee, as the Trustees shall, in their
absolute discretion, believe is in the best interest of the Creditor for whose
benefit the shares are held or the Creditors entitled to said shares upon
resolution of any disputed claim;
2.subject to any limitations set forth in the Plan, the right and power to
employ, retain or replace such professionals as the Trustees may deem necessary
and appropriate;
3.the right to incur and pay out of the Trust Assets, without prior court
approval, such expenses as may be reasonable and appropriate in carrying out the
Trustees' duties and responsibilities hereunder at a rate not to exceed, in the
aggregate, the sum of $1,000 per month without the approval of the Creditors'
Committee, plus such additional expenses as may be agreed upon by the Trustees
and the Creditors' Committee;
4.the power and the duty to make distributions of the Stock from the Creditor
Trust in accordance with the provisions of the Plan and Creditor Trust
Agreement;
5.such other rights, powers, functions and duties as may be set forth in this
Creditor Trust Agreement or the Plan, which rights, powers, functions and duties
shall include (i) the maintenance and administration of bank and other
investment accounts, (ii) the calculation and implementation of distributions of
Stock from the Creditor Trust in accordance with the Plan and the Creditor Trust
Agreement unless instructed by Radius and the Creditors' Committee, (iii) the
investment of any cash on deposit in the Trust in accordance with the
restrictions placed on such investments by the Plan or applicable law, and (iv)
the ability to liquidate shares of stock which the Trustees hold in trust if, in
the exercise of their discretion, the Trustees determine that cashing a creditor
or group of creditors out is in the best interest of the estate and remaining
creditors; and
6.such other rights, powers, functions and duties as may be necessary and
appropriate for the Trustees to accomplish the purposes for which they were
appointed hereunder or such other responsibilities and obligations as may be
vested in the Creditor Trust or the Trustees, as they may assume pursuant to
court order or that are vested in the Trustees pursuant to the Plan.
7. Notwithstanding anything contained herein to the contrary, the Trustees shall
be authorized to expend any such sums they deem necessary in the execution of
this agreement, however the Trustees shall not, without the express prior
written consent of Radius, commit to expenditures that it expects Radius to
either fund or reimburse it for.
B.Records. The Trustees shall maintain accurate books and records concerning the
Trust Assets in accordance with generally accepted accounting principles
consistently applied, to the extent applicable. The Trustees shall maintain a
record of all distributions from the Trust. The Trustees shall grant the
Creditors' Committee or its representatives or any other party in interest,
access to the books and records of the Creditor Trust during normal business
hours of the Trustees as often as requested.
1. Reporting Requirements. The Trustees shall periodically, but not less than
once per calendar quarter, apprise the Creditors' Committee of any developments
that they consider significant during the administration of the Trust. The
Creditors' Committee shall have the right to request, and the Trustees shall be
obliged to provide, not more than once every 30 days, a written report on the
status of all active matters affecting the Creditor Trust. The Trustees also
shall annually provide all information reasonably available to the Trustees
which is reasonably necessary for the preparation of appropriate tax returns.
2. Maintenance of Records; Information to be Supplied to Trustees. At all times
until the termination of the Creditor Trust, Radius shall maintain all of the
books and records of Radius in good and readable condition, and promptly provide
the Trustees with all documents and information which the Trustees determine, in
their sole discretion, to be necessary to effectuate the purpose of the Plan or
this Creditor Trust Agreement.
C. Reliance by Third Parties on Trustees' Authority. No person or Entity (as
those terms are defined in 11 U.S.C. ss. 101) dealing with the Trustees with
reference to the trust assets, if acting in good faith, shall be required to
ascertain the authority of the Trustees nor to see to the performance by the
Trustees of any of the provisions hereof, nor be responsible in any way for the
proper application of funds or properties paid or delivered to the Trustees,
but, if acting in good faith, may deal with the Trustees as though the Trustees
were the unconditional owner of the trust assets.
D. Delegation of Powers and Employment of Counsel. The Trustees shall be
entitled to delegate such authority to their employees and agents and employ
such professionals as the Trustees shall reasonably deem necessary to perform
their duties under this Creditor Trust Agreement and the Plan.
E. Disputes. The reconciliation of the claims of the Creditors and the
determination of which claims should be allowed and which claims should be
disputed shall be made by Radius, with the concurrence of the Creditors'
Committee, as provided by the Plan. The Trustees shall take direction from the
Creditors' Committee, concerning which claims are allowed and which are
disputed. In the event that there are claims which are disputed in part, then in
that event the Trustees shall make a distribution of so much of the Stock then
available as to which no dispute or controversy exists and shall be protected in
holding the amounts of Stock as to which a dispute or controversy exists pending
a determination as to resolution in respect of the amount in dispute by
adjudication by the appropriate Court or otherwise. In the event that Radius
recommends, and the Creditors' Committee concurs, that a reserve is no longer
necessary for a party claiming any shares, the Trustees may elect to distribute
the previously reserved shares pro-rata to those creditors participating in the
debt to equity conversion, at such time as the Trustees deem prudent.
ARTICLE IV.
TERMINATION, SUCCESSION AND DISSOLUTION
A. Resignation, Death or Removal of the Trustees; Termination and Succession.
The Trustees, or either of them, may resign at any time upon thirty (30) days'
prior written notice to the Creditors' Committee, and the Creditors' Committee
may terminate the tenure of the Trustees, or either of them, for cause upon
thirty (30) days' prior written notice to the Trustees. In the event of any such
removal or resignation, or in the event of death or incapacity of the Trustees,
or either of them, the Creditors' Committee may appoint a new Trustee(s),
subject to any requirement that the appointment of such Trustee(s) be approved
by any Court. In the event that the Creditors' Committee fails to appoint a new
Trustee(s) within thirty (30) days after service of the notice of their death,
resignation or removal, the Trustees or a representative of their estate may do
so. No successor Trustee(s) hereunder shall in any event have any liability or
responsibility for the acts or omissions of any of their predecessors. Every
successor Trustee appointed pursuant hereto shall execute, acknowledge and
deliver to his predecessor, to the Creditors' Committee and to the appropriate
Court if required, an instrument in writing accepting such appointment
hereunder, and thereupon such successor Trustee without any further act, deed or
conveyance shall become fully vested with all of the estates, properties,
rights, powers, trusts, duties, responsibilities and obligations of his
predecessor. Should any instrument in writing from a prior Trustee be required
to more fully and certainly vest in such successor Trustee(s) the estates,
rights, titles, powers and duties hereby vested, any and all such instruments
shall, on request of the successor Trustee(s), be executed, acknowledged and
delivered by the predecessor Trustee, his executor or administrator. The
Creditors' Committee shall serve written notice of any such termination,
removal, resignation or death of the Trustees upon Radius and (if required) the
U.S. Trustee, along with notice of the appointment of any successor Trustee and
of the name, address and telephone number of such successor Trustees.
B. Termination Date and Dissolution of Trust. After all trust assets have been
fully administered and distributed, the Trustees, upon notice to Radius and the
Creditors' Committee, shall certify that all conditions precedent to the
termination of the Trust have been satisfied or waived. Thereupon, (subject to
any necessary court approval required) the Creditor Trust shall be dissolved and
the Trustees shall be discharged of their duties.
ARTICLE V.
COMPENSATION AND PROTECTION AFFORDED TO THE TRUSTEES
A. Compensation. The Trustees shall receive reasonable compensation for
their services hereunder (the "Trustees' Compensation") as may be mutually
agreed upon between the Trustees, Radius and the Creditors' Committee.
B. Limitation of Liability of Trustees. The Trustees may serve without bond.
Neither the Trustees, the Creditors' Committee nor any of the agents,
representatives, employees or professionals of either the Trustees or the
Creditors' Committee shall be liable to Radius or any Creditor for any delay in
the distribution of the Stock to a Creditor, any change in the market price of
said Stock occurring during such delay, or any error of judgment made in good
faith other than as a result of gross negligence, willful misconduct, or fraud.
The Trustees shall not be liable for any action taken or omitted in good faith
and believed by them to be authorized within the discretion or rights or powers
conferred upon them by this Creditor Trust Agreement, or the Plan. The Trustees
make no representations as to the value or condition of the Stock, trust assets
or any part thereof, or as to the security or protection afforded by this
Creditor Trust Agreement, or as to the validity, execution (except their own
execution), enforceability, legality or sufficiency of this Creditor Trust
Agreement, and the Trustees shall incur no liability or responsibility with
respect to such matters. In performing their duties hereunder, the Trustees may
consult with counsel selected by them, at the expense of the Trust, and shall
have no liability for any action taken upon the advice of such counsel. None of
the provisions of this Creditor Trust Agreement shall require the Trustees to
expend or risk their own funds or otherwise incur personal financial liability
in the performance of any of their duties hereunder or in the exercise of any of
their rights and powers. The Trustees may rely without inquiry upon any writing
delivered to them hereunder which they believe in good faith to be genuine and
to have been given by a proper person. Further, in accepting the Trust hereby
created, the Trustees shall act solely as trustee hereunder, and all persons
having any claim against the Trustees as allowed by this Section in connection
with their performance of their rights, powers and duties as such Trustees shall
look only to the trust assets for payment or satisfaction thereof.
C. Limitation of Liability of Radius and Creditors' Committee. Neither
Radius nor the Creditors' Committee, nor any of their agents, representatives,
successors or assigns, shall be liable for actions of the Trustees pursuant to
this Creditor Trust Agreement.
D. Insurance. As further protection for the Trustees and any of the agents,
representatives, employees or professionals of the Trustees or the Creditors'
Committee (the "Insured Parties"), Radius shall obtain and maintain in force a
policy of insurance insuring the Insured Parties against any claim by any person
based upon alleged liability for any actions or omissions as described in
Article V.B. above.
E. No Other Third Party Beneficiary. This Creditor Trust Agreement is entered
into for the sole and exclusive benefit of Radius and each of the Creditors and
the successors, designees and assigns of the foregoing persons, and other than
the foregoing persons; no other person shall have any rights hereunder.
ARTICLE VI.
MISCELLANEOUS
A. Successors and Assigns. This Creditor Trust Agreement shall be binding
upon each of the parties hereto and their respective successors and assigns and
shall inure to the benefit of the parties and their respective successors and
assigns.
B. Savings Clause. In the event any clause, provision or provisions hereof prove
to be or are judged to be invalid for any reasons, such invalid or void clause,
provision or provisions shall not affect the whole of this instrument, but the
balance of the provisions hereof shall remain operative and shall be carried
into effect insofar as legally possible.
C. Articles and Section Headings. Article and section headings herein are
for convenience of reference only and shall not affect the meaning or
interpretation of any provision hereof.
D. Governing Law. This Creditor Trust Agreement shall be construed in
accordance with and governed by the laws of the State of California, and in the
event of a filing of a petition in bankruptcy, the United States Bankruptcy
Code.
IN WITNESS WHEREOF, Radius and the Creditors' Committee have executed this
Creditor Trust Agreement as of the date first hereinabove written.
RADIUS, INC.,
a California corporation
By:___________________________
Charles Berger, President
THE UNOFFICIAL CREDITORS COMMITTEE
OF RADIUS, INC.
MITSUBISHI ELECTRONICS AMERICA SCI SYSTEMS
by ____________________________ by __________________
Carl Carlson, Co-Chairman Michael Ledbetter, Co-Chairman
AVNET EMG MANUFACTURERS' SERVICES LTD.
by ____________________________ by __________________
Dennis E. Losik Rick Bettes
MITSUBISHI INTERNATIONAL
QUANTUM ELECTRONICS
by ____________________________ by ________________________
Takahiro Kitamoto Aimee Takamoto
The undersigned hereby accept appointment as Trustees and agree to be bound by
the foregoing provisions of this Creditor Trust Agreement and to hold any
property transferred to the undersigned pursuant to the terms of the Creditor
Trust Agreement.
EXHIBIT 7
THIS JOINT FILING AGREEMENT (this "Agreement"), dated as of October 8,
1996, is between and among SCI SYSTEMS, INC., a Delaware corporation, and SCI
TECHNOLOGY, INC., an Alabama corporation.
The parties hereto hereby agree that the Statement of Beneficial
Ownership on Schedule 13D relating, among other things, to the beneficial
ownership by the parties hereto of shares of the Common Stock, No Par Value, of
Radius, Inc., shall be filed with the Securities and Exchange Commission and
delivered to Radius, Inc. on behalf of each of the parties.
IN WITNESS WHEREOF, each of the undersigned have set their hand
hereunto as of this 8th day of October, 1996.
SCI SYSTEMS, INC.
By:_________________________
Name: Michael M. Sullivan
Title: Secretary
SCI TECHNOLOGY, INC.
By:__________________________
Name: Michael M. Sullivan
Title: Secretary
