<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number 0-19640
---------------------
RETIX
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3948704
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4640 ADMIRALTY WAY
MARINA DEL REY, CALIFORNIA 90292
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 828-3400
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period as the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
YES X NO
--- ---
As of August 9, 1996 there were 22,512,023 shares of common stock outstanding.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
RETIX
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and short-term investments. . . . . . . . . . . . . . . . . . . . $18,386 $14,950
Trade accounts receivable (net of allowances of $1,878 as of
December 31, 1995 and $1,775 as of June 30, 1996) . . . . . . . . . . 5,486 5,445
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,665 2,855
Prepaid expenses and other current assets. . . . . . . . . . . . . . . 1,637 1,730
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 28,174 24,980
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 2,597 3,073
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,597 1,345
------- -------
$32,368 $29,398
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term obligations . . . . . . . . . . . . . . . $ -- $ 54
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,313 1,336
Accrued wages and related liabilities . . . . . . . . . . . . . . . . 839 1,060
Accrued restructuring expenses . . . . . . . . . . . . . . . . . . . . 2,158 4,334
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 3,135 3,012
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 1,058
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 9,503 10,854
Long-term obligations, less current portion . . . . . . . . . . . . . . 4,002 4,184
------- -------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 13,505 15,038
------- -------
Shareholders' equity:
Preferred stock, par value $.01, 2,000,000 shares authorized;
none issued and outstanding . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, par value $.01, 50,000,000 shares authorized;
shares issued and outstanding 1995, 18,052,582; 1996, 22,487,608. . . 225 181
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 77,545 65,821
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (52,369) (50,009)
Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . (1,636) (1,633)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,765 14,360
Less notes receivable from issuance of common stock. . . . . . . . . . (4,902) --
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 18,863 14,360
------- -------
$32,368 $29,398
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
RETIX
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
------ ------- ------- -------
Revenues . . . . . . . . . . . . . $8,190 $10,525 $15,771 $23,653
Cost of revenues . . . . . . . . . 2,810 4,203 5,588 10,387
------ ------- ------- -------
Gross profit . . . . . . . . . . . 5,380 6,322 10,183 13,266
------ ------- ------- -------
Operating expenses:
Research and development . . . . 2,593 3,499 5,126 6,680
Sales and marketing . . . . . . 2,807 4,640 5,359 9,100
General and administrative . . . 1,142 1,462 2,370 2,821
------ ------- ------- -------
Total . . . . . . . . . . . . 6,542 9,601 12,855 18,601
------ ------- ------- -------
Loss from operations . . . . . . . (1,162) (3,279) (2,672) (5,335)
Other income, net . . . . . . . . 211 78 312 320
------ ------- ------- -------
Loss before provision for income
taxes . . . . . . . . . . . . . (951) (3,201) (2,360) (5,015)
Provision for income taxes . . . . -- -- -- --
------ ------- ------- -------
Net loss . . . . . . . . . . . . . $ (951) $(3,201) $(2,360) $(5,015)
====== ======= ======= =======
Net loss per common and
common equivalent share . . . . $(0.05) $ (0.18) $ (0.12) $ (0.28)
------ ------- ------- -------
Common and common equivalent
shares used in computing
per share amount . . . . . . . . 20,365 17,892 19,894 17,804
------ ------- ------- -------
See accompanying notes to consolidated financial statements.
3
<PAGE>
RETIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1995
------- -------
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . $(2,360) $(5,015)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Depreciation and amortization . . . . . . . . 1,126 2,207
Reserve for returns and bad debts . . . . . . (103) (989)
Changes in operating assets and
liabilities (Note 4) . . . . . . . . . . . . (1,089) 2,817
------- -------
Net cash used for operating activities. . . . . (2,426) (980)
------- -------
Cash flows from investing activities:
Increase in short-term investments . . . . . . (96) (565)
Additions to property and equipment . . . . . . (394) (1,173)
Increase in other assets . . . . . . . . . . . (508) (321)
------- -------
Net cash provided by (used for) investing
activities . . . . . . . . . . . . . . . . . (998) (2,059)
------- -------
Cash flows from financing activities:
Repayment of long term obligations . . . . . . (98) (27)
Proceeds from issuance of common stock. . . . . 6,866 895
------- -------
Net cash provided by financing activities . . 6,768 868
------- -------
Effect of exchange rate changes on cash . . . . . (5) 204
------- -------
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . 3,339 (1,967)
Cash and cash equivalents, beginning of
period . . . . . . . . . . . . . . . . . . . . . 5,518 12,695
------- -------
Cash and cash equivalents, end of period. . . . . $8,857 $10,728
======= =======
See accompanying notes to consolidated financial statements.
4
<PAGE>
RETIX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The consolidated financial statements include the accounts of Retix and
its wholly-owned subsidiaries (the "Company"), including the newly formed
subsidiaries for the Company's internetworking business unit and wireless
business unit as announced in the second quarter of 1996. All significant
intercompany balances and transactions have been eliminated in consolidation.
The interim consolidated financial statements are unaudited. In the opinion
of management, the interim financial statements include all adjustments,
consisting of only normal, recurring adjustments, necessary for a fair
presentation of the Company's financial position, results of operations and
cash flows. The Company's fiscal year ends on the Saturday nearest to
December 31. For simplicity of presentation, the Company has described the
fiscal year ended December 30, 1995 as December 31, 1995 and has described
the thirteen weeks ended July 1, 1995 and June 29, 1996 as the three months
ended June 30, 1995 and 1996, respectively.
It is suggested that these consolidated financial statements and the
accompanying notes be read in conjunction with the audited consolidated
financial statements and the accompanying notes for the year ended December
31, 1995 included in the Company's Annual Report. The results of operations
for the three month period ended June 30, 1996 are not necessarily indicative
of results that may be expected for the full year.
2. CASH AND SHORT-TERM INVESTMENTS
Cash and short term investments consist of the following (in thousands):
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
Cash and cash equivalents. . . . . . . . $ 8,857 $ 5,518
Short-term investments . . . . . . . . . 9,529 9,432
-------- --------
$ 18,386 $ 14,950
======== ========
Cash equivalents consist of short term investments with original
maturities of three months or less.
3. INVENTORIES
Inventories consist of the following (in thousands):
June 30, December 31,
1996 1995
-------- ------------
(unaudited)
Raw materials and component parts. . . . . . $ 690 $ 1,718
Work-in-process. . . . . . . . . . . . . . . 711 491
Finished goods. . . . . . . . . . . . . 1,264 646
----- ------
$ 2,665 $ 2,855
======= =======
Work-in-process and finished goods inventories consist of material,
direct labor and overhead associated with the manufacturing process.
5
<PAGE>
RETIX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. STATEMENT OF CASH FLOWS
Increases (decreases) in operating cash flows arising from changes in
operating assets and liabilities consist of the following (in thousands):
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1995
---- ----
Trade accounts receivable . . . . . . . . . . $ 62 $ 5,234
Inventories . . . . . . . . . . . . . . . . . 190 48
Prepaid expenses and other current assets . . 94 459
Accounts payable. . . . . . . . . . . . . . . 978 (1,006)
Accrued wages and related liabilities . . . . (221) (513)
Accrued restructuring expenses. . . . . . . . (2,176) --
Other accrued liabilities . . . . . . . . . . (16) (1,574)
Deferred revenue. . . . . . . . . . . . . . . -- 169
------- ------
Increase (decrease) in operating assets
and liabilities . . . . . . . . . . . . . $(1,089) $2,817
======= ======
Financing and investing activities during the six months ended June 30,
1995 and 1996 which affected recognized assets or liabilities but that did
not result in cash receipts or cash payments were not significant, except as
noted in Note 5, Shareholders' Equity.
5. SHAREHOLDERS' EQUITY
Effective January 30, 1996, Sierra Ventures V, L.P. ("Sierra"), a
venture capital firm, purchased 2,000,000 shares of the Company's Common
Stock in a private placement at $2.00 per share. Additionally, Sierra was
granted a warrant to purchase an additional 2,000,000 shares of the Company's
Common Stock at prices ranging from $2.00 to $5.00 per share over the three
year term of the warrant. Sierra's equity investment totaled $4.2 million
and was recorded in common stock and additional paid-in capital.
Notes receivable from issuance of common stock arose from the exercise
of stock options. During the first quarter of 1996, the Board of Directors
approved the exercise of stock options held and outstanding by certain key
employees and consultants in exchange for promissory notes. The common stock
issued upon such exercise of options is subject to repurchase by the Company
based upon continuation of the terms of employment or consultancy agreements,
with vesting and release from the Company's repurchase right on a cumulative
basis from original date of option grant at a rate of 25% one year after the
vesting commencement date and 1/48th of the shares subject to the original
option in equal monthly installments thereafter. For purposes of computing
earnings per share, the common stock issued subject to notes receivable are
treated as options and are excluded from the calculation of earnings per
share because they are considered antidilutive.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained in this Quarterly Report
on Form 10-Q, the matters discussed herein are forward-looking statements
that are subject to certain risks and uncertainties that could cause the
actual results to differ materially from those projected, including the risks
detailed below and included from time to time in the Company's other SEC
reports and press releases, copies of which are available from the Company
upon request. The Company assumes no obligation to update any
forward-looking statements contained herein.
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and accompanying notes, included
in Part I - Item 1 of this Quarterly Report, and the audited consolidated
financial statements and accompanying notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1995 contained in the Company's Annual Report.
RESULTS OF OPERATIONS
In response to the losses experienced over the past three years, the
Company commenced a major reorganization during the fourth quarter of 1995
with an emphasis on focusing resources toward leveraging identified areas of
value within Retix's primary lines of business. The reorganization included
a significant restructuring of the Company's internetworking business unit,
including staff reductions, consolidation within channels of distribution and
abandonment of facilities, as well as continued transition within the
Company's telecommunications management networks (TMN) from mature
OSI-related products and wireless data networking operations to narrowband
PCS two-way messaging. While substantial progress was made in support of the
Company's recovery during the first six months of 1996, ongoing efforts
throughout the year will be required to further stabilize operating results
and capitalize on the values within the Company's businesses.
Although year-over-year net revenues have declined in 1996 as compared
to 1995, the Company has shown recovery from the first quarter to the second
quarter of 1996 as it achieved sequential revenue growth of 8.0% and an
improvement in gross margins from 63.4% to 65.7% during this period.
Additionally, efficiencies were gained from the Company's reorganization
resulted in the reduction of recurring operating expenses by 30.4% from
$9,397,000 in the fourth quarter of 1995 to $6,542,000 in the second quarter
of 1996. As a result of improving operating efficiencies and stabilized
revenues, the Company's net loss was reduced 70.3% to $951,000, or $0.05 per
share, for the three months ended June 30, 1996 as compared to $3,201,000, or
$0.18 per share, for the same period of 1995. The Company believes that the
revenue and margin improvements noted in the first half of 1996 relative to
the last half of 1995, the operating expense reductions achieved as a result
of the restructuring initiated in October 1995, and the 23.0% increase in
cash balances since December 31, 1995, provide financial support to the
Company's ongoing reorganization.
NET REVENUES. Net revenues decreased 22.2% to $8,190,000 for the three
months ended June 30, 1996 and decreased 33.3% to $15,771,000 for the six
months ended June 30, 1996 as compared to $10,525,000 and $23,653,000,
respectively, for the three and six month periods ended June 30, 1995.
Revenues generated by the Company's TMN software product lines increased
16.4% to $3,229,000 and 15.8% to $6,609,000 during the three and six month
periods, respectively, ended June 30, 1996 as compared to the same periods of
1995. Sales of internetworking products declined 25.6% to $4,433,000 and
46.5% to $8,237,000, respectively, for the three and six months ended June
30, 1996 as compared to the same periods of 1995. Revenues generated by the
Company's wireless data products during the quarter and for the six months
ended June 30, 1996 decreased by 70.5% to $528,000 and 63.7% to $925,000,
respectively, as compared to the same periods during 1995.
Demand for the Company's telecommunications management networks (TMN)
products sold through its subsidiary, Vertel, increased in the second quarter
and first half of 1996 as compared to the corresponding three and six month
periods of 1995. This trend is a result of an ongoing effort to transition
Vertel's product development and distribution focus, from mature OSI-related
products toward providing solutions to enable telecommunications service
providers and equipment manufacturers to implement services based upon TMN
specifications. In support of this effort, Vertel introduced its Power Cats
TMN software solutions platforms during the second quarter of 1996. Sales of
TMN-based products and services accounted for 39.4% and 41.9%, respectively,
of net revenues during the first quarter and six months of 1996.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The decline in wireless data product revenues during 1996 as compared to
the three and six months ended June 30, 1995 was attributable to the
transition from nonrecurring engineering project revenues during 1995 to a
strategy focusing on the sales of wireless data networking software products
in 1996. The decrease in revenues during the second quarter of 1996 as
compared to the same quarter of 1995 was the result of a significant
nonrecurring sale of a source license from the company's CDPD product line in
1995. During 1996, the Company has announced enhancements to its wireless
data technology for narrowband PCS based software applications, including
network management system applications which enable wireless communications
providers to expand service offerings within the two-way messaging
marketplace.
Software product revenues, including from TMN and wireless data
products, may continue to fluctuate from period to period due to nonrecurring
software license agreements or royalties derived from these agreements or
certain government contracts. Additionally, there can be no assurance that
software product markets will attain broad acceptance or generate long-term
growth opportunities in line with the Company's past performance or future
objectives.
Internetworking revenues are primarily comprised of sales of
multi-protocol routers, local and remote LAN bridges, Ethernet switch and
broadband products. As a consequence of declining revenues, the Company
initiated a significant restructuring of its internetworking business unit in
the fourth quarter of 1995. Such activities included staff reductions
focused primarily within the business unit's selling, general and
administrative functions and a consolidation within its channels of
distribution in an effort to leverage field selling activities and increase
return on sales. Despite the Company's aggressive restructuring activities
to downsize staffing and facility levels, revenues generated by the
internetworking business unit demonstrated sequential growth of 16.5% during
the three months ended June 30, 1996 as compared to the first quarter of 1996.
On a year-over-year basis, sales of internetworking products declined
25.6% and 46.5%, respectively, during the three and six months ended June 30,
1996 as compared to the same periods of 1995. Broadband product revenues,
including MetroLAN and FIBERring products, increased 8.7% and 10.8% during
the three and six month periods, respectively, ended June 30, 1996 as
compared to the same periods of 1995 and increased to 12.7% of
internetworking revenues during the first six months of 1996. Router, bridge
and Ethernet switch product revenues declined 39.9%, 3.7% and 2.9%,
respectively, during the three months ended June 30, 1996 versus the second
quarter of 1995 and declined 51.4%, 46.0% and 31.9%, respectively, during the
six months ended June 30, 1996 as compared to the same period of 1995.
The change in mix of the Company's internetworking product revenues
reflects the development of networking technologies, convergence of bridging,
Ethernet switching and routing technologies and market trends toward
solutions that are expandable, modular and provide high-speed connections
with increasing bandwidth. Revenues from the Company's bridge and router
sales may continue to decrease as networking technologies advance. Although
the Company believes the features of its products are competitive, greater
marketing and distribution resources of larger competitors, increasing price
pressures and delays in releasing new products and features in previous
periods have affected the Company's ability to gain or retain market share.
Increased internetworking revenues will be primarily dependent on the success
of the Company with regard to enhancing its presence in the rapidly evolving
networking markets through the development of broad channels of product
distribution and innovative products to increase competitiveness of its
enterprise networking product lines. The Company plans to develop on its
core engineering competencies and leverage its technologies in routing
combined with bridging and Ethernet switching to target integrated solutions
that capitalize on industry available components, are standards-based,
upgradable, expandable, modular and stackable.
Sales to third party customers outside of North America comprised
approximately 58.8% of net revenues for the six months ended June 30, 1996 as
compared to 54.4% for the same period in 1995. The Company's high percentage
of sales to customers outside of North America has historically been due
primarily to relatively strong demand for internetworking products within
Europe and Asia Pacific and to strong international demand for its TMN and
OSI technology software.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
GROSS MARGIN. Cost of revenues consists primarily of manufacturing
costs (material, labor, packaging, documentation and overhead) and, to a
lesser extent, royalties paid under licensing agreements and warranty costs.
Gross margin increased to 65.7% and 64.6% of net revenues for the three and
six months ended June 30, 1996, respectively, from 60.1% and 56.1% for the
same periods in 1995. The increase in gross margin was attributable
primarily to a shift in revenue mix toward software-based products which have
significantly higher gross margins than engineering services or
internetworking products and further progress in the reduction in excess
capacity and associated costs of the Company's manufacturing operations. The
Company is transitioning to an outsourcing strategy for the manufacture of
its products during 1996. Effective June 1996, the Company sublet a majority
of its manufacturing facility located in Moorpark, California. Failure to
complete this transition on a timely basis or any difficulties experienced by
the Company's manufacturing partners, on which the Company could become
solely dependent for the supply of its products, could adversely affect the
Company's operating results. The Company anticipates continued pricing
pressures within its internetworking product areas, and while the Company is
responding with reductions in manufacturing overhead and product costs as
well as changes to pricing structures and distribution strategies, margins
may decline in future periods.
RESEARCH AND DEVELOPMENT. The Company continues to make significant
investments in research and development to expand its expertise in TMN and
wireless data technologies, to develop new internetworking products and to
support its product offerings. As a percentage of revenue, research and
development expenses were 31.7% and 32.5% for the three and six months ended
June 30, 1996, respectively, as compared to 33.2% and 28.2% for the same
period in 1995. The major components of research and development expenses are
engineering salaries, employee benefits and associated overhead. For the
three months ended June 30, 1996, the Company's research and development
expenses decreased 25.9% to $2,593,000 from $3,499,000 for the same period in
1995. For the six months ended June 30, 1996, the Company's research and
development expenses decreased 23.3% to $5,126,000 from $6,680,000 for the
same period in 1995. The decrease in research and development expense for
the three and six months ended June 30, 1996 as compared to the same periods
in 1995 is primarily due to reductions in spending within the Company's
internetworking business unit due to consolidation of facilities and
realignment to more efficient staffing levels as a result of the
restructuring activities announced and executed in late 1995. This decrease
was offset by a reduction in customer reimbursements for engineering costs in
connection with nonrecurring engineering projects. The Company expects to
continue significant investments in the development of new products and
feature enhancements to existing product lines.
The markets for the Company's products are characterized by rapidly
changing technology and frequent new product introductions. Accordingly, the
Company believes that its future success will depend on its ability to enhance
its existing products and to develop and introduce in a timely fashion new
products that achieve market acceptance. Delays in new product introductions or
product enhancements, or the introduction of products that are not successful in
the market, could adversely affect the Company. The Company's revenues are
dependent on, among other things, the acceptance of these products by customers,
and no assurance concerning their acceptance can be given.
SALES AND MARKETING. Sales and marketing expenses decreased 39.5% to
$2,807,000 for the three months ended June 30, 1996 as compared to $4,640,000
for the same period in 1995. For the six months ended June 30, 1996 sales
and marketing expenses decreased 41.1% to $5,359,000 as compared to
$9,100,000 for the same period in 1995. Sales and marketing expenses as a
percentage of net revenues decreased to 34.3% and 34.0% for the three and six
months ended June 30, 1996, respectively, as compared to 44.1% and 38.5% for
the same period in 1995. The significant decrease in the absolute spending
for sales and marketing and the decrease as a percentage of revenue in the
second quarter of 1996 as compared to the same period of 1995 reflected
efforts to restructure the Company's internetworking sales and marketing
activities, including the consolidation of field sales offices, streamlining
of sales organizations and elimination of other nonperforming selling
infrastructure costs worldwide. Partially offsetting these efficiencies was
the increased staffing of sales and marketing functions by Vertel during the
three months ended June 30, 1996.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Sales and marketing expenses consist primarily of personnel and related
costs relative to the selling, sales support and marketing activities,
including marketing programs such as trade shows and other promotional costs.
The Company believes that substantial sales and marketing expenditures are
essential to developing the opportunities for revenue growth and to renewing
the Company's competitive position. Sales and marketing expenses are
expected to continue to comprise a significant percentage of the Company's
total expenses because of costs associated with supporting a worldwide
organization of sales and service functions necessary to meet the needs of
the Company's customer base and to respond to the opportunities in the
rapidly growing telecommunications management and networking markets.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
decreased 21.9% to $1,142,000 for the three months ended June 30, 1996 as
compared to $1,462,000 for the same period in 1995, and decreased 16.0% to
$2,370,000 for the six months ended June 30, 1996 as compared to $2,821,000
for the same period in 1995. General and administrative expenses as a
percentage of net revenues remained unchanged at 13.9% for the three months
ended June 30, 1996 despite a 22.2% decrease in net revenues as compared to
the same period of 1995. General and administrative expenses increased to
15.0% of net revenues for the six months ended June 30, 1996 as compared to
11.9% for the same period in 1995 due to the corresponding 33.3% decrease in
net revenues. The decrease in absolute spending for general and
administrative services in the first half of 1996 as compared to the same
period of 1995 is primarily attributable to the net effect of headcount
reductions and elimination of non-critical infrastructure costs worldwide in
connection with restructuring efforts executed in late 1995 related to the
Company's internetworking business unit, partially offset by increases in
spending by the Company's Vertel subsidiary.
LOSS FROM OPERATIONS. Despite a 22.2% decline in quarterly revenues for
the three months ended June 30, 1996 as compared to the same period of 1995,
the Company's loss from operations decreased 64.6% to $1,162,000 for the
three months ended June 30, 1996 as compared to $3,279,000 for the same
period of 1995. Additionally, the Company's loss from operations decreased
49.9% to $2,672,000 for the six months ended June 30, 1996 as compared to
$5,335,000 for the same period of 1995 despite a 33.3% decline in revenues
for the comparable periods. The reductions achieved in losses from
operations were due to an increase in gross margin percentages and
significant decreases in operating expenses as a result of the restructuring
activities within the Company's internetworking business unit. Total
operating expenses decreased 31.9% to $6,542,000 for the three months ended
June 30, 1996 as compared to $9,601,000 for the same period of 1995, and
decreased 30.9% to $12,855,000 for the six months ended June 30, 1996 as
compared to $18,601,000 for the same period of 1995.
In 1994, 1995 and the first half of 1996, the Company has experienced
operating losses and a decrease in revenues from the results of the prior
year. There can be no assurance that the Company will be able to regain
profitability or resume or maintain revenue growth on a quarterly or annual
basis. The Company's expense levels are based in part on its expectation of
future revenues. As a result of failure to meet these expectations, the
Company has had to undertake several reorganizations in the past, including
in 1995. Delays in new product introductions or product enhancements or the
introduction of products that are not successful in the market could
adversely affect the Company. If revenues are below expectations, results of
operations may be adversely affected.
OTHER INCOME. For the three months ended June 30, 1996 other income,
consisting of interest income, net of interest expense, currency gains and
losses, and various other items increased by $133,000, or 170.5% as compared to
the same period in 1995. For the six months ended June 30, 1996, other income
remained relatively unchanged at $312,000 versus $320,000 for the same period of
1995. The increase in the second quarter of 1996 is primarily due to reduced
foreign tax expenses in the second quarter of 1996 as compared to the same
period in 1995.
PROVISION FOR INCOME TAXES. The Company recorded no provision for
income taxes on a loss before income taxes of $951,000 in the second quarter
of 1996 and $2,360,000 for the first half of 1996. A valuation allowance
against the total amount of net deferred tax assets has been established. As
a result of the increase in the valuation allowance, the Company has net
deferred tax assets of approximately $23,000,000 for which no benefit has
been provided at June 30, 1996. These net deferred tax assets will be
realized to the extent that the Company operates profitably in the future
during the respective carryforward periods.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 the Company's principal sources of liquidity consisted
of $18,386,000 in cash, cash equivalents and short-term investments. The
Company's cash management system includes a sweep account which enables the
Company to consolidate its operating cash into a central account daily and
advance cash to its subsidiaries to fund operating cash requirements.
Cash, cash equivalents and short-term investments increased $3,436,000,
or 23.0%, during the six months ended June 30, 1996. The increase in cash is
primarily attributable to a $6,866,000 capital infusion from a private
placement of the Company's Common Stock and the exercise of stock options by
employees and consultants during the six months ended June 30, 1996.
The use of cash for operations was attributable primarily to the loss
from operations of $2,672,000 for the six months ended June 30, 1996. The
largest component of the use of cash from operations was $2,176,000 in
payments for restructuring activities within the internetworking business
unit. The restructuring activities, announced in October, 1995, related to
streamlining of specific sales channels, territories and product lines, and
included costs of elimination of excess manufacturing capacity, inventory
reductions related to product line and distribution streamlining, facility
and asset consolidation, employee severance pay and other related charges.
The restructuring plan entailed work force reductions of 108 employees within
manufacturing, engineering, sales, marketing and administration, as well as
the disposition of various sales, service and engineering facilities. As of
June 30, 1996, $4,025,000 of the restructuring costs had been paid and
substantially all reserves related to the write down of inventories and fixed
assets have been utilized. Also, as of June 30, 1996, 100 positions had been
eliminated while the remaining reserves relating to severance totaled
$401,000 and are expected to be paid in the remainder of 1996. Facility
reduction costs include the lease cost of vacated space for the estimated
period of time required to sublet the facilities. Of the $1,961,000 in
facility related reserves remaining as of June 30, 1996, $761,000 are
expected to be incurred in the remainder of 1996. The Company is attempting
to sublease or renegotiate all remaining lease terms for affected facilities.
Other restructuring reserves remaining as of June 30, 1996 totaled
$1,042,000, primarily related to costs associated with customer returns,
consolidation of repair depots and warranties, and are expected to be
utilized by year end and to require approximately $350,000 in cash
disbursements in 1996.
In response to the operating losses experienced over the past three
years, the Company commenced a major restructuring of its internetworking
business unit during the fourth quarter of 1995. The Company believes that
the quarterly cost reductions gained as a result of the 1995 restructuring
and the $6,866,000 capital infusion resulting from the private placement of
Retix's common stock and exercise of stock options during the six months
ended June 30, 1996 along with existing sources of liquidity, capital
resources and funds from operations will satisfy the Company's anticipated
cash needs for at least the next twelve months. From time to time, the
Company may also consider the acquisition of, or evaluate investments in,
certain products and businesses complementary to the Company's business. Any
such acquisition or investment may require additional capital resources.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to, nor is
their property the subject of, any material pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's annual meeting of shareholders was held on
June 19, 1996.
(b) The following Class II directors were elected at the meeting:
Neil Hynes and Craig Johnson. Voting results for the election
of all Director nominees were as follows:
For Withheld Broker Non-Votes
--- -------- ----------------
Neil Hynes 19,590,610 174,274 not applicable
Craig Johnson 19,582,911 181,973 not applicable
Only Class II directors were elected at the meeting. The
current term for Class I directors, including Joe Stephan,
Gil Williamson and Jeffrey Drazan, will continue until the
1997 Annual Meeting of Shareholders.
(c) The other matters voted upon at the meeting and results of
those votes were as follows:
(i) Proposal to amend the 1988 Stock Option Plan, including
an amendment to increase thenumber of shares of Common
Stock reserved for issuance thereunder by 100,000 shares
and certain other amendments.
For Opposed Abstained Broker Non-Votes
--- ------- --------- ----------------
16,750,377 2,807,602 169,905 37,000
(ii) Proposal to amend the 1991 Employee Stock Purchase Plan
to increase the number of shares ofCommon Stock reserved
for issuance thereunder by 150,000 shares.
For Opposed Abstained Broker Non-Votes
--- ------- --------- ----------------
17,260,889 2,303,010 163,985 37,000
(iii) Proposal to approve the Company's 1996 Directors' Stock
Option Plan with respect to the grant ofoptions to
purchase shares of the Company's Common Stock made after
the date of the Annual Meeting, and the reservation of
200,000 shares of Common Stock for issuance pursuant to
such future grants.
For Opposed Abstained Broker Non-Votes
--- ------- --------- ----------------
16,676,430 2,664,620 160,142 263,692
(iv) Proposal to approve the appointment of Deloitte and
Touche LLP as the independent auditors of the corporation
for the fiscal year ended December 31, 1996.
For Opposed Abstained Broker Non-Votes
--- ------- --------- ----------------
19,555,275 86,193 123,416 0
12
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.45 Sublease Agreement dated May, 1996 between Value Behavioral
Health and Retix.
10.46 Master Agreement between Retix and Internetworking Solutions
dated May 31, 1996.
10.47 Master Agreement between Retix and Wireless Solutions dated
May 31, 1996.
(b) REPORTS ON FORM 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RETIX
(Registrant)
Date: August 12, 1996 /s/ STEVEN M. WASZAK
----------------------
Steven M. Waszak
Vice President of Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<PAGE>
RETIX
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
10.45 Sublease Agreement dated May, 1996 between
Value Behavioral Health and Retix.
10.46 Master Agreement between Retix and
Internetworking Solutions dated May 31, 1996.
10.47 Master Agreement between Retix and Wireless
Solutions dated May 31, 1996.
15
<PAGE>
EXHIBIT 10.45
SUBLEASE AGREEMENT
THIS SUBLEASE ("Sublease"), dated as of the ___ day of May, 1996 for
reference purposes only, between Value Behavioral Health of California, Inc.,
a California corporation, formerly known as American PsychManagement of
California, Inc., having an office at 340 Golden Shore Avenue, Long Beach,
California 90802 ("Sublessor"), and Retix, a California corporation having
an office prior to the Commencement Date at 2401 Colorado Avenue, Santa
Monica, California 90404 ("Subtenant").
W I T N E S E T H:
1. DEMISE AND TERM. Sublessor hereby leases to Subtenant, and
Subtenant hereby hires from Sublessor, in the building known as 4640
Admiralty Way, Marina Del Rey, California 90292 (the "Building"), Suites 500
and 600 as shown hatched on the plan attached hereto as Exhibit A (the
"Subleased Premises"), containing approximately 30,180 rentable square feet,
which Subleased Premises are leased under the Main Lease (as hereinafter
defined) to Sublessor. The term of this Sublease shall be for the period
commencing on the later of (a) the date that the consents referred to in
Section 26(a) of this Sublease has been obtained and (b) July 1, 1996 (the
"Commencement Date"), and ending on October 31, 1999, unless sooner
terminated as herein provided. Notwithstanding the foregoing, if the
Commencement Date does not occur on or before August 1, 1996, this Sublease
shall be voidable by either party hereto, and in such event neither Sublessor
nor Sublessee shall be liable for any resulting damage, cost or expense, and
Sublessor promptly shall return to Subtenant all sums paid by Subtenant (as
described in Paragraph 26(b) hereof) to Sublessor in connection with
Subtenant's execution hereof. Within five (5) business days following the
Commencement Date, Sublessor and Subtenant will mutually agree as to
computation of actual rentable square footage for the Subleased Premises.
2. SUBORDINATE TO MAIN LEASE. This Sublease is and shall be subject
and subordinate to the office space lease dated as of April 2, 1993, as
amended (such lease, as so amended, herein called the "Main Lease") between
Marina Airport Buildings, Ltd., a California limited partnership, as
landlord, and Sublessor (under its former name of American PsychManagement of
California, Inc.), as tenant, and to the matters to which the Main Lease is
or shall be subject and subordinate.
3. INCORPORATION BY REFERENCE. The terms, covenants and conditions of
the Main Lease are incorporated herein by reference so that, except to the
extent that they are inapplicable or modified by the provisions of this
Sublease for the purpose of incorporation by reference, each and every term,
covenant and condition of the Main Lease binding or inuring to the benefit of
the landlord thereunder shall, in respect of this Sublease, bind or inure to
the benefit of Sublessor, and each and every term, covenant and condition of
the Main Lease binding or inuring to the benefit of the tenant thereunder
shall, in respect of this Sublease, bind or inure to the benefit of
Subtenant, with the same force and effect as if such terms, covenants and
conditions were completely set fort in this Sublease, and as if the words
"Landlord" and "Tenant," or words of similar import, wherever the same appear
in the Main Lease, were construed to mean, respectively, "Sublessor" and
"Subtenant" in this Sublease, and as if the word "Premises," or words of
similar import, wherever the same appear in the Main Lease, were construed to
mean "Subleased Premises" in this Sublease, and as if the word "Lease," or
words of similar import, wherever the same appear in the Main Lease, were
construed to mean this "Sublease." Subtenant shall not be required to pay
any rent or additional rent due
16
<PAGE>
under the Main Lease, except that Subtenant shall pay for any special
services or requirements of Subtenant, including, without limitation,
overtime air conditioning, extra cleaning, extra elevator use, and extra
water use. Subtenant shall have the right to request such special services
or requirements of Subtenant, including, without limitation, overtime air
conditioning, extra cleaning, extra elevator use, and extra water use.
Subtenant shall have the right to request such special services or
requirements directly from the landlord under the Main Lease. The time
limits contained in the Main Lease for the giving of notices, making of
demands or performing of any act, condition or covenant on the part of the
tenant thereunder, or for the exercise by the tenant thereunder of any right,
remedy or option, are changed for the purposes of incorporation herein by
reference by shortening the same in each instance by two (2) days, so that in
each instance (other than for the times of performance set forth in Article
36 of the Main Lease) Subtenant shall have two (2) days less time to observe
or perform hereunder than Sublessor has as the tenant under the Main Lease.
Notwithstanding the foregoing, the following articles or sections of the Main
Lease shall be deemed deleted for the purpose of incorporation by reference
in this Sublease: Sections 1(a), (b), (e), (f), (h), (i) and (k); Article
2; the words "together with any monthly installments of "Operating Expense
Rent" and "Capital Expenditure Rent" in Section 3.1; the first and fourth
sentences of Section 4.1; the last sentence of Section 5.1; Article 6;
Article 7; the first sentence of Section 12.1; the words "provided, however,
that Tenant shall not be required to demolish or remove any Leasehold
Improvements" in Section 12.2; Article 17; Article 25; the first sentence of
Section 34.1; the words "Seven Hundred Forty-One Thousand Nine Hundred
Twenty-Two and 26/100 Dollars ($741,922.26), calculated as set forth on
Exhibit A-1" in Section 36.1 (which words shall be replaced with "Three
Hundred Thousand Dollars ($300,00.00)"); Section 36.2; all but the first
sentence of Section 36.4; Sections 36.7 (c); Sections 36.9 through 36.12;
Article 37; Article 38; Article 39; Addendum to Article 3 Section 3.8;
Addendum to Article 34; Exhibit A-1; Broker Registration Agreement; Addendum
No. 2, Article 45; and Addendum No. 2, Addendum to Article 1, Sections 1.2
(a) and (c). Also notwithstanding the foregoing, Sublessor shall not
exercise any right to terminate granted to tenant pursuant to the Main Lease
without first having obtained the prior written consent of Subtenant, which
may be withheld in its sole discretion. Also notwithstanding the foregoing,
with respect to Section 36.3, Sublessor shall approve or disapprove
Subtenant's Drawings (as defined therein) within four (4) business days after
receipt thereof from Subtenant. Any non-liability, release, indemnity or
hold harmless provision in the Main Lease for the benefit of the landlord
under the Main Lease, that is incorporated herein by reference, shall be
deemed to inure to the benefit of Sublessor and the landlord under the Main
Lease, for the purpose of incorporation by reference in this Sublease. Any
right of the landlord under the Main Lease of access or inspection and any
right of the landlord under the Main Lease to do work in the premises under
the Main Lease or in the Building and any right of the landlord under the
Main Lease in respect of rules and regulations shall be deemed to inure to
the benefit of Sublessor and the landlord under the Main Lease, for the
purpose of incorporation by reference in this Sublease. If any of the
express provisions of this Sublease shall conflict with any of the provisions
incorporated by reference, such conflict shall be resolved in every instance
in favor of the express provisions of this Sublease.
4. PERFORMANCE BY SUBLESSOR. Any obligation of Sublessor which is
contained in this Sublease by the incorporation by reference of the provisions
of the Main Lease shall be observed or performed by Sublessor using reasonable
efforts to cause the landlord under the Main Lease to observe and/or perform the
same, and Sublessor shall have a reasonable time to enforce its rights to cause
such observance or performance. Sublessor shall not be required to furnish,
supply or install anything under any article of the Main Lease. Subtenant shall
not in any event have any rights in respect of the Subleased Premises greater
than Sublessor's rights under the Main Lease, and notwithstanding any provision
to the contrary, as to obligations that pertain to the Subleased Premises and
are contained in this Sublease by the incorporation by reference of the
provisions of the Main Lease, Sublessor shall not be required to make any
payment or
17
<PAGE>
perform any obligation, and Sublessor shall have no liability to Subtenant
for any matter whatsoever, except for Sublessor's obligation to pay the rent
and additional rent due under the Main Lease and for Sublessor's obligation
to use reasonable efforts, upon request of Subtenant, to cause the landlord
under the Main Lease to observe and/or perform its obligations under the Main
Lease. If Sublessor fails, after using reasonable efforts, to cause the
landlord under the Main Lease to observe and/or perform its obligation under
the Main Lease, Subtenant shall have the right, upon notice to Sublessor, to
bring an action in Sublessor's name, to accomplish such purpose. Sublessor
shall not be responsible for any failure or interruption, for any reason
whatsoever, of the services or facilities that may be appurtenant to or
supplied at the Building by the landlord under the Main Lease or otherwise,
including, without limitation, heat, air conditioning, water, electricity,
elevator service and cleaning service, if any; and no failure to furnish, or
interruption of, any such services or facilities shall give rise to any
liability on the part of Sublessor except to the extent caused by Sublessor's
failure to use reasonable efforts to cause landlord to perform such
obligations under the Main Lease.
5. NO BREACH OF MAIN LEASE. Subtenant and Sublessor shall not do or
permit to be done any act or thing which may constitute a breach or violation
of any term, covenant or condition of the Main Lease by the tenant
thereunder, whether or not such act or thing is permitted under the
provisions of this Sublease. Sublessor shall perform its obligations under
the Main Lease except to the extent Subtenant is obligated herein to perform
same.
6. NO PRIVITY OF ESTATE. Nothing containing in this Sublease shall be
construed to create privity or estate or of contract between Subtenant and
the landlord under the Main Lease.
7. INDEMNITY. Subtenant shall indemnify, protect, defend with counsel
reasonably acceptable to Sublessor and hold harmless Sublessor and the
landlord under the Main Lease from and against all losses, costs, damages,
expenses and liabilities, including, without limitation, reasonable
attorneys' fees, which Sublessor may incur or pay out by reason of (a) any
accidents, damages or injuries to persons or property occurring in, on or
about the Subleased Premises, (b) any breach or default hereunder on
Subtenant's part, (c) the enforcement of Sublessor's rights under this
Section or any other section of this Sublease, (d) any work done after the
date hereof in or to the Subleased Premises except if done by Sublessor, (e)
the negligence or willful misconduct on the part of Subtenant and/or its
officers, employees, agents, contractors and/or invitees, or any person
claiming through or under Subtenant, (f) with respect to Sublessor only, any
action brought by Subtenant against the landlord under the Main Lease
pursuant to Sections 4 and 15 of this Sublease, or (g) the existence of any
hazardous substances (as defined in the Main Lease) which are proven to have
been present in or about the Subleased Premises only after the Early Entry
Date (as defined below) which resulted from Subtenant's storage, use or
disposal of hazardous substances in or about the Subleased Premises, or the
storage, use or disposal of Subtenant's agents, employees, contractors or
invitees.
Sublessor shall indemnify, protect, defend with counsel reasonably
acceptable to Subtenant and hold harmless Subtenant from and against all
losses, costs, damages, expenses and liabilities, including without
limitation, reasonable attorney's fees, which Subtenant may incur or pay out
by reason of (a) any accidents, damages or injuries to persons or property
occurring in, on or about the Subleased Premises if the same shall have been
caused by Sublessor's negligence or willful misconduct, or that of its
agents, employees, contractors or invitees, (b) any breach or default
hereunder or under the Main Lease on Sublessor's part, (c) the enforcement of
Subtenant's rights under this Section or any other section of this Sublease,
(d) any negligence or willful misconduct on the part of Sublessor and/or its
officers, employees, agents or contractors, or (e) the
18
<PAGE>
existence of any hazardous substances which are proven to have been present
in or about the Subleased Premises on the Early Entry Date which resulted
from Sublessor's storage, use or disposal of hazardous substances in or about
the Subleased Premises, or the storage, use or disposal of Sublessor's
agents, employees, contractors or invitees.
8. BASIC RENT. From and after the Commencement Date, Subtenant shall
pay without deduction or offset, monthly basic rent ("Basic Rent") in the
following amounts:
MONTH BASIC RENT
----- ----------
1-6 No Base Rent
7-28 $47,684.40
29-40 $53,116.80
Basic Rent shall be payable in advance on the first day of each
month during the term of this Sublease, except that the Basic Rent for the
seventh month of the term has been paid on the execution of this Sublease.
Basic Rent and all other amounts payable by Subtenant to Sublessor under the
provisions of this Sublease (such amounts other than Basic Rent being herein
called the "Operating Expenses") shall be paid when due (within five (5)
business days after receipt of demand as to Operating Expenses but without
notice as to Basic Rent). Sublessor shall have the same rights and remedies
for the non-payment of Operating Expenses as for the non-payment of Basic
Rent. Basic Rent and Operating Expenses shall be paid to Sublessor in lawful
money of the United States at the address of Sublessor set forth at the head
of this Sublease or to such other person and/or at such other address as
Sublessor may from time to time designate by notice to Subtenant. No payment
by Subtenant or receipt by Sublessor of any lesser amount than the amount
stipulated to be paid hereunder shall be deemed other than on account of the
earliest stipulated Basic Rent or Operating Expenses; nor shall any
endorsement or statement on any check or letter be deemed an accord and
satisfaction, and Sublessor may accept any check or payment without prejudice
to Sublessor's right to recover the balance due or to pursue any other remedy
available to Sublessor. Any provision in the Main Lease referring to basic
rent or operating expenses incorporated herein by reference shall be deemed
to refer to the Basic Rent and Operating Expenses due under this Sublease.
9. SECURITY DEPOSIT. Concurrently with the execution of this
Sublease, Subtenant shall deposit with Sublessor the amount of $47,684.40
(the "Security Deposit"). Sublessor shall not be required to pay interest on
the Security Deposit or keep the Security Deposit separate from its general
funds. Upon any Default by Subtenant, Sublessor may use the Security Deposit
to the extent necessary to make good any arrears of sums payable by Subtenant
under this Sublease, or to compensate Sublessor for any damage, injury,
expense or liability caused by Subtenant's Default. If any portion of the
Security Deposit is so used or applied, Sublessor shall, within ten (10) days
after receipt of written demand therefor, deposit a certified or bank
cashier's check with Sublessor in an amount sufficient to restore the
Security Deposit to its amount immediately preceding such use or application
of funds and Subtenant's failure to do so shall be a Default under this
Sublease. The balance of the Security Deposit remaining at the end of the
Sublease Term shall be returned after all of Subtenant's obligations have
been fulfilled.
10. OPERATING EXPENSES. Commencing on the first day of the January,
1997, Subtenant shall pay to Sublessor within five (5) business days after
receipt of demand any amounts that are payable by Sublessor to the landlord
under the Main Lease in respect to the Subleased Premises pursuant to the
19
<PAGE>
provisions thereof in respect of (a) "Tax Rent" (as defined in the Main
Lease) in excess of the annual amount payable therefor by Sublessor for the
calendar year 1996, and (b) "Operating Expense Rent" (as defined in the Main
Lease) in excess of the annual amount payable therefor by Sublessor for the
calendar year 1996. Subtenant shall not be obligated to pay any Tax Rent due
to increases in Property Taxes of more than 102% per annum (compounded) over
the Property Taxes for the 1996 calendar year.
11. USE. Subtenant shall use and occupy the Subleased Premises for
general office purposes and any other legally permitted non-retail uses
compatible with a first class office building. Subtenant shall use the
Subleased Premises for no other purposes without the consent of Sublessor.
12. CONDITION OF SUBLEASED PREMISES; USE OF FACILITIES. Subtenant is
leasing the Subleased Premises "as is." In making and executing this
Sublease, Subtenant has relied solely on such investigations, examinations
and inspections as Subtenant has chosen to make or has made. Subtenant shall
have the right to use the workstations located in the Subleased Premises at
no charge during the term hereof. Subtenant acknowledges that Sublessor has
afforded Subtenant the opportunity for full and complete investigations,
examinations, and inspections. Any improvements to be made by Subtenant
pursuant to this Sublease shall be the sole responsibility of Subtenant,
subject only to Sublessor's obligation to pay an allowance for tenant
improvements of up to $300,000.00 (the "Allowance"). Sublessor shall make
monthly disbursements of the Allowance on a progress payment basis within 10
days after a disbursement request is submitted by Subtenant, which submittal
shall include lien releases and other back up information as Sublessor shall
reasonably require. Notwithstanding anything to the contrary contained in
this Lease, Sublessor shall not be obligated to make monthly disbursements to
Subtenant until ten (10) days after Subtenant has paid the Cancellation Fee
pursuant to Paragraph 31 hereof. In addition, if Subtenant fails to pay the
Cancellation Fee when and as required, Sublessor shall have the right to
offset the Allowance against the Cancellation Fee. Sublessor shall have the
right to inspect the progress of construction in order to insure that the
claimed progress has in fact occurred, provided that Sublessor shall not
unreasonably interfere with work then being performed by Subtenant. Subject
to the foregoing regarding Subtenant's failure to pay the Cancellation Fee,
any unused Allowance shall be applied against rent next coming due.
13. CONSENTS AND APPROVALS. In any instance when Sublessor's consent
or approval is required under this Sublease, Sublessor's refusal to consent
to or approve any matter or thing shall be deemed reasonable if, INTER ALIA,
such consent or approval has not been obtained from the landlord under the
Main Lease. Otherwise, Sublessor's consent or approval as required under
this Sublease shall not be unreasonably withheld or delayed, except with
respect to any use of the Subleased Premises which is not a permitted use.
14. NOTICES. All notices, consents, approvals, demands and requests which
are required or desired to be given by either party to the other hereunder shall
be in writing and shall be either (a) personally delivered or (b) sent by United
States postal service, return receipt requested and postage prepaid or (c) by
nationally recognized overnight courier. Notices, consents, approvals, demands
and requests which are served upon Sublessor or Subtenant in the manner provided
herein shall be deemed to have been given or served for all purposes hereunder
(i) on the date of delivery if personally delivered or sent by courier service
or (ii) on the date on which such notice, consent, approval, demand or request
shall have been mailed if mailed as aforesaid. All notices, consents,
approvals, demands and requests given to Sublessor shall be addressed to
Sublessor at the address for Sublessor set forth above, Attention:
________________, or at such other place
20
<PAGE>
as Sublessor may from time to time designate in a notice given in accordance
with the provisions of this Section. All notices, consents, approvals,
demands and requests given to subtenant shall be addressed to Subtenant at
the Subleased Premises, Attention: Chief Financial Officer, or at such other
place as Subtenant may from time to time designate in a notice given in
accordance with the provisions of this Section. All notices to landlord
shall be addressed to landlord as set forth in the Main Lease.
15. TERMINATION OF MAIN LEASE. If for any reason the term of the Main
Lease shall terminate prior to the expiration date of this Sublease, this
Sublease shall thereupon be terminated and Sublessor shall not be liable to
Subtenant by reason thereof unless said termination shall have been effected
because of the breach or default of Sublessor under the Main Lease or this
Sublease. If the landlord under the Main Lease wrongfully terminates or
attempts to wrongfully terminate the Main Lease, Sublessor shall cooperate
with Subtenant to keep the Main Lease in full force and effect. Such
cooperation shall include permitting Subtenant to bring or defend an action
or proceeding in Sublessor's name (but at Subtenant's expense) in connection
with such termination or attempted termination.
16. INSURANCE. Subtenant shall maintain throughout the term of this
Sublease the insurance required under the Main Lease. All insurance
maintained by Subtenant shall name Sublessor and the landlord under the Main
Lease as additional insureds. Subtenant shall deliver to Sublessor and the
landlord under the Main Lease certificates of insurance issued by the
carriers or their duly authorized agents prior to the Commencement Date.
Subtenant shall procure and pay for renewals of such insurance from time to
time before the expiration thereof, and Subtenant shall deliver to Sublessor
and the landlord under the Main Lease such renewal policies or certificates
at least ten (10) days before the expiration of any existing policy. All
such policies shall meet the requirements in the Main Lease and shall be
issued by companies of recognized responsibility licensed to do business in
the State of California and all such policies shall contain a provision
whereby the same cannot be cancelled or modified unless Sublessor and the
landlord under the Main Lease are given at least 20 days' prior written
notice by certified or registered mail of such cancellation or modification.
17. ESTOPPEL CERTIFICATES. Subtenant and Sublessor shall, within ten
(10) business days after receipt of each and every request by the other party
hereto, execute, acknowledge and deliver to the party that made the request a
statement in writing (a) certifying that this Sublease is unmodified and in
full force and effect (or if there have been modifications, that the same is
in full force and effect as modified and stating the modifications), (b)
specifying the dates to which the Basic Rent and Operating Expenses (as
defined in the Main Lease) have been paid, (c) stating whether or not, to the
best knowledge of the party signing same, Sublessor or Subtenant is in
default in performance or observance of its obligations under this Sublease,
and, if so, specifying each such default, (d) stating whether or not, to the
best knowledge of the party signing same, any event has occurred which with
the giving of notice or passage of time, or both, would constitute a default
by Sublessor or Subtenant under this Sublease, and, if so specifying each
such event, and (e) stating whether Subtenant has exercised any option(s) to
extend the term of this Sublease, and, if so, specifying each such extension.
Any such statement delivered pursuant to this Section may be relied upon by
any prospective assignee or transferee of the leasehold estate under the Main
Lease or the subleasehold estate under this Sublease.
18. ALTERATIONS. Subtenant shall not make, cause or permit the making
of any alterations, addition, change, replacement, or installation in or to
the Subleased Premises without obtaining the prior
21
<PAGE>
consent of the Sublessor (which shall not be unreasonably withheld or
delayed) and Subtenant will be required to obtain the consent of the landlord
under the Main Lease in each instance if required under the Main Lease.
19. OPTION TO EXTEND. Provided Subtenant is not in default of any term
or condition of this Lease as of the commencement of the renewal term,
Subtenant shall have one option to renew the term of the Lease for one
additional forty-seven (47)- month term, on the same terms and conditions of
this Sublease, except that the Base Rent shall be adjusted to equal:
Extension Term Months
1-8 $53,116.80
9-47 $46,477.20
Such option shall be exercised (if at all) by Subtenant giving Sublessor at
least 120 days' prior irrevocable written notice.
If Subtenant does not exercise its option to extend, Subtenant shall be
required to restore the Subleased Premises to their condition existing on the
Early Entry Date, unless Sublessor indicates otherwise in writing not later
than the last day of the thirtieth (30th) month of the Term. Any restoration
by Subtenant shall be completed not later than October 31, 1999. Subtenant
shall not be required to remove any alterations or improvements installed in
the Subleased Premises by Sublessor prior to the Early Entry Date.
20. RIGHT TO CURE SUBTENANT'S DEFAULTS. If Subtenant shall at any time
fail to make any payment or perform any other obligation of Subtenant
hereunder, then Sublessor shall have the right, but not the obligation, after
10 days' notice to Subtenant, or without notice to Subtenant in the case of
any emergency, and without waiving or releasing Subtenant from any
obligations of Subtenant hereunder, to make such payment or perform such
other obligation of Subtenant in such manner and to such extent as Sublessor
shall deem necessary, and in exercising any such right, to pay any incidental
costs and expenses, employ attorneys, and incur and pay reasonable attorneys'
fees. Subtenant shall pay to Sublessor within five (5) days after receipt of
demand all sums so paid by Sublessor and all incidental costs and expenses of
Sublessor in connection therewith, together with interest thereon at the rate
of one and one-half percent per calendar month or any part thereof or the
then maximum lawful interest rate, whichever shall be less, from the date of
the making of such expenditures.
21. BROKERAGE. Subtenant and Sublessor each represents to the other
that it dealt with no broker or other person in bringing about this Sublease
other than Wolf Commercial Brokerage and The Kaufman Group (collectively,
"Brokers"), and each party hereto shall pay, and shall indemnity, defend and
hold harmless, the other party from and against, any loss, liability, damage,
cost and expense (including, without limitation, reasonable attorneys' fees)
in connection with (a) any claims made by any other broker or other person
for a brokerage commission, finder's fee, or similar compensation, by reason
of or in connection with this Sublease if such other broker or other person
claims to have had dealings with the indemnifying party and/or (b) the
enforcement of the indemnified party's rights under this Section. Sublessor
shall pay the Brokers' commissions in connection with this Sublease pursuant
to separate agreements.
22
<PAGE>
22. ARBITRATION. In the event of a dispute under this Sublease or any
exhibit hereto (except as to Basic Rent, unless such dispute involves Basic
Rent as a corollary to such dispute), either party may, but shall not be
required to, refer such dispute to arbitration. Such arbitration shall be
conducted in accordance with the procedures specified in the Main Lease,
which are hereby incorporated herein by reference.
23. NO WAIVER. The failure of Sublessor or Subtenant to insist in any
one or more cases upon the strict performance or observance of any obligation
of Subtenant or Sublessor hereunder or to exercise any right or option
contained herein shall not be construed as a waiver or relinquishment for the
future of any such obligation of Subtenant or Sublessor or any right or
option of Sublessor or Subtenant. Sublessor's receipt and acceptance of
Basic Rent or Operating Expenses, or Sublessor's acceptance of performance of
any other obligation by Subtenant, with knowledge of Subtenant's breach of
any provision of this Sublease, shall not be deemed a waiver of such breach.
No waiver by Sublessor or Subtenant of any term, covenant or condition of
this Sublease shall be deemed to have been made unless expressed in writing
and signed by Sublessor or Subtenant, as the case may be.
24. COMPLETE AGREEMENT. There are no representations, warranties,
agreements, arrangements or understandings, oral or written, between the
parties or their representatives relating to the subject matter of this
Sublease which are not fully expressed in this Sublease. This Sublease
cannot be changed or terminated orally or in any manner other than by a
written agreement executed by both parties.
25. SUCCESSORS AND ASSIGNS. The provisions of this Sublease, except as
herein otherwise specifically provided, shall extend to, bind and inure to
the benefit of the parties hereto and their respective personal
representatives, heirs, successors and permitted assigns. In the event of
any assignment or transfer of Sublessor's interest in the leasehold estate
under the Main Lease, the transferor or assignor, as the vase may be, shall
be and hereby is entirely relieved and freed of all obligations under this
Sublease arising after the date of such assignment or transfer. No such
assignment by Sublessor shall be effective unless and until the transferee
assumes in writing all of Sublessor's obligations under this Sublease.
26. THIRD PARTY CONSENTS. (a) This Sublease shall have no effect
until the landlord under the Main Lease shall have given its written consent
hereto. If the landlord under the Main Lease does not give its consent to
this Sublease for any reason whatsoever on or before thirty (30) days after
the date of execution hereof by Sublessor, then either party may cancel this
Sublease by notice given to the other party.
(b) If this Sublease is cancelled pursuant to Section 26(a) of
this Sublease, (i) this Sublease shall be deemed null and void and of no
effect, (ii) if Subtenant is then in possession of all or any part of the
Subleased Premises, Subtenant shall (x) immediately quit and surrender to
Sublessor the Subleased Premises and (y) remove all of its property and
repair all damage caused by such removal and (z) restore the Subleased
Premises to the condition in which they were prior to the installation of the
items so removed, and (iii) Sublessor shall promptly return to Subtenant the
Security Deposit, the amount paid by Subtenant upon the execution of this
Sublease for the payment of the first full monthly installment of Basic Rent
and the Cancellation Charge required pursuant to Paragraph 31 hereof.
23
<PAGE>
27. NO THIRD PARTY BENEFICIARY. None of the provisions of this
Sublease shall be construed to accrue to the benefit of, or be enforceable
by, any third party, other than the landlord under the Main Lease.
28. INTERPRETATION. Irrespective of the place of execution or
performance, this Sublease shall be governed by and construed in accordance
with the laws of the State of California. If any provision of this Sublease
or the application thereof to any person or circumstances shall, for any
reason and to any extent, be invalid or unenforceable, the remainder of this
Sublease and the application of that provision to other persons or
circumstances shall not be affected but rather shall be enforced to the
extent permitted by law. The captions, headings and titles, if any, in this
Sublease are solely for convenience or reference and shall not affect its
interpretation. This Sublease shall be construed without regard to any
presumption or other rule requiring construction against the party causing
this Sublease to be drafted. If any words or phrases in this Sublease shall
have been stricken out or otherwise eliminated, whether or not any other
words or words or phrases so stricken out or otherwise eliminated. Each
covenant, agreement, obligation or separate and independent covenant of the
party bound by, undertaking or making same, not dependent on any other
provision of this Sublease unless otherwise expressly provided. All terms
and words used in this Sublease shall mean a natural person or persons, a
partnership, a corporation or any other form of business or legal association
or entity.
29. MOVING ALLOWANCE. Upon the Commencement Date, Sublessor shall pay
to Subtenant as a moving allowance the sum of $31,689.00
30. REPRESENTATIONS. Sublessor represents and warrants that:
(a) the Main Lease consists of the instruments listed on EXHIBIT
B, copies of which are attached hereto, and is in full force and effect, has
not been further modified or amended, and, to the best knowledge of
Sublessor, there exists under the Main Lease no default or event of default,
nor has there occurred any event which, with the giving of notice or passage
of time or both, could constitute such a default or event of default;
(b) to the best knowledge of Sublessor, there is no pending
termination of the Main Lease. Sublessor will notify Subtenant promptly if
it becomes aware of any impending termination of the Main Lease;
(c) there are no pending or threatened actions, suits or
proceedings before any court or administrative agency against Sublessor or,
to the best of Sublessor's knowledge, against landlord or third parties which
could, in the aggregate, adversely affect the Subleased Premises or any part
thereof or the ability of landlord to perform its obligations under the Main
Lease or of Sublessor to perform its obligations under this Sublease, and
Sublessor is not aware of any facts which might result in any such actions,
suits or proceedings; and
(d) Sublessor has not received any written notice from any
insurance company of any defects or inadequacies in the Subleased Premises or
any part thereof which could adversely affect the insurability of the
Subleased Premises or the premiums for the insurance thereof.
24
<PAGE>
31. CANCELLATION CHARGE. Not later than June 29, 1996, Subtenant shall
pay to Sublessor by check the sum of $200,000.00 (the "Cancellation Fee") in
consideration of the shortened term of this Sublease. In no event, however,
shall Subtenant have the right to cancel this Sublease except as expressly
provided in Sections 1 and 26(a) hereof.
32. EARLY ENTRY. Notwithstanding anything to the contrary contained in
this Sublease, immediately upon Sublessor's execution of this Sublease
("Early Entry Date"), Sublessor shall deliver the Subleased Premises to
Subtenant for the purpose of constructing the tenant improvements referred to
in Paragraph 12 hereof. Such early entry shall be subject to all of the
terms and conditions of this Sublease except for the obligation to pay Basic
Rent and Operating Expenses.
33. ASBESTOS. To the best of Sublessor's actual knowledge, there is no
ACM (as defined in the Main Lease) in the Subleased Premises. If, however,
in constructing the tenant improvements, Sublessee shall find ACM within the
Subleased Premises, Sublessee shall stop all work and notify Sublessor and
landlord of the discovery, and permit landlord's contractors, pursuant to
Exhibit D of the Main Lease, to handle the ACM, which shall occur at no cost
to Sublessee. If, solely as a result of the discovery and treatment of ACM,
the tenant improvements are not completed by July 1, 1996, then, for each day
of delay in completing the tenant improvements beyond July 1, 1996, Subtenant
shall receive one (1) day of rent abatement.
35. AMENDMENT OR MODIFICATION. Sublessor and landlord shall not amend
or modify the Main Lease in any way so as to materially or adversely affect
Subtenant or its interest hereunder or in the Subleased Premises, materially
increase Subtenant's obligations hereunder or materially restrict Subtenant's
rights hereunder, without the prior written consent of Subtenant, which shall
not be unreasonably withheld or delayed.
36. QUIET ENJOYMENT; RIGHT TO CURE. Subtenant shall peacefully have,
hold and enjoy the Subleased Premises, subject to the terms and conditions of
this Sublease, provided that Subtenant pays all Basic Rent and Operating
Expenses and performs all of Subtenant's covenants and agreements contained
herein. In the event, however, that Sublessor defaults in the performance or
observance of any of Sublessor's obligations hereunder or under the Main
Lease, then Subtenant shall give Sublessor notice specifying in what manner
Sublessor has defaulted, and if such default shall not be cured by Sublessor
within thirty (30) days thereafter (except that if such default cannot be
cured within said thirty (30)-day period, this period shall be extended for
an additional reasonable time, provided that Sublessor commences to cure such
default within such thirty (30)-day period and proceeds diligently thereafter
to effect such cure as quickly as possible), then, upon the passage of five
(5) business days after the date of a second written notice from Subtenant of
the default, if Sublessor has failed to so cure, in addition, Subtenant shall
be entitled, at Subtenant's option, to cure such default and promptly collect
from Sublessor Subtenant's reasonable expenses in so doing (including,
without limitation, reasonable attorneys' fees and court costs). Subtenant
shall not be required, however, to wait the entire cure period described
herein if earlier action is required to comply with the Main Lease or with
any applicable governmental law, regulation or order. Sublessor shall provide
copies to Subtenant of all notices received from landlord pursuant to the
Main Lease.
37. AUTHORIZATION TO DIRECT SUBLEASE PAYMENTS. Sublessor hereby
acknowledges that Sublessor's failure to pay all Basic Monthly Rent,
Operating Expense Rent, Tax Rent and Capital Expense Rent and other sums
owing by Sublessor to landlord under the Main Lease will cause Subtenant to
incur
25
<PAGE>
damages, costs and expenses not contemplated by this Sublease, especially in
those cases where Subtenant has paid sums to Sublessor hereunder which
correspond in whole or in part to the amounts owing by Sublessor to landlord
under the Main Lease. Accordingly, Subtenant shall have the right to pay all
rent and other sums owing by Subtenant to Sublessor hereunder for those items
which also are owed by Sublessor to landlord under the Main Lease directly to
landlord on the following terms and conditions:
A. Subtenant reasonably believes that Sublessor has failed to
make any payment required to be made by Sublessor to landlord under the Main
Lease and Sublessor fails to provide adequate proof of payment within two (2)
business days after Subtenant's written demand requesting such proof.
B. Subtenant shall not prepay any amounts owing by Subtenant
without the consent of Sublessor.
C. Subtenant shall provide to Sublessor concurrently with any
payment to landlord reasonable evidence of such payment.
D. If Sublessor notifies Subtenant that it disputes any amount
demanded by landlord, Subtenant shall not make any such payment to landlord
unless landlord has provided a three-day notice to pay such amount or forfeit
the Main Lease.
Any sums paid directly by Subtenant to landlord in accordance with this
Paragraph shall be credited toward the amounts payable by Subtenant to
Sublessor under this Sublease.
38. TERMINATION OF MAIN LEASE BY SUBLESSOR. Sublessor shall not
voluntarily terminate the Main Lease during the Term unless and until
landlord has agreed in writing to continue this Sublease in full force and
effect as a direct lease between landlord and Subtenant upon and subject to
all of the terms, covenants and conditions of this Sublease for the balance
of the Term hereof. If landlord so consents, Subtenant shall attorn to
landlord in connection with any such voluntary termination and shall execute
an attornment agreement in such form as may reasonably be requested by
landlord; provided, however, that the attornment agreement does not
materially adversely affect the use by Subtenant of the Subleased Premises in
accordance with the terms of this Sublease, materially increase Subtenant's
obligations under this Sublease or materially decrease Subtenant's rights
under this Sublease. If this Sublease terminates as a result of Sublessor's
default under the Main Lease, then, so long as Subtenant is not then in
default beyond any applicable cure period under the terms of this Sublease,
this Sublease shall continue in full force and effect as a direct lease
between Subtenant and landlord, upon and subject to all of the terms,
covenants and conditions of the Sublease for the balance of the Term hereof.
In such event, Subtenant shall attorn to landlord as set forth in this
Paragraph.
39. WAIVER OF SUBROGATION. Landlord expressly agrees that the
provisions of Section 18.4 of the Main Lease regarding waiver of rights of
subrogation shall be extended to and be between landlord and Subtenant.
40. COUNTERPARTS. This Sublease may be executed in counterparts, each
of which, when taken together as a whole, shall constitute one (1) original
document.
IN WITNESS WHEREOF, Sublessor and Subtenant have hereunto executed this
Sublease as of the day and year first above written.
26
<PAGE>
VALUE BEHAVIORAL HEALTH OF CALIFORNIA, INC.,
a California corporation
By:
------------------------------------
RETIX,
a California corporation
By:
------------------------------------
Title:
---------------------------------
27
<PAGE>
EXHIBIT 10.46
MASTER AGREEMENT
This Master Agreement (the "AGREEMENT") is made and entered into as of
May 31, 1996 by and among Retix, a California corporation ("RETIX") and
Internetworking Solutions, a California corporation ("INTERNETWORKING
SOLUTIONS").
RECITALS
A. The parties desire to cause Internetworking Solutions to be formed to
operate as a separate entity the internetworking technology business presently
conducted by Retix.
B. The parties further wish to set forth the terms and conditions
governing the relationships among them.
NOW, THEREFORE, in consideration of the covenants and agreements contained
in this Agreement and the Other Agreements (as defined below), and other good
and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS. The following terms, whenever used in this Agreement,
shall have the following meanings:
1.1 "AFFILIATE" shall mean, with respect to any person, any other
person which, directly or indirectly, controls, is controlled by or is under
common control with, such person. For purposes of this definition,
(i) "control" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person through
the ownership of voting securities or by contract or otherwise, and
(ii) Internetworking Solutions and any corporation which joins with
Internetworking Solutions in the filing of a consolidated federal income tax
return shall not be deemed to be Affiliates of Retix or any corporation which
joins with Retix in the filing of a consolidated federal income tax return, and
vice versa.
1.2 "CHANGE OF CONTROL" shall mean any consolidation, merger, sale of
assets or combination of Internetworking Solutions, whether or not
Internetworking Solutions is the surviving entity, other than where shareholders
of Internetworking Solutions immediately prior to the closing of such
consolidation, merger, sale of assets or combination own at least a majority of
the voting equity securities of the successor entity immediately following such
closing by virtue of voting equity securities of the successor entity received
in connection with such transaction in exchange for shares or other securities
of Internetworking Solutions owned immediately prior to the closing of such
transaction.
1.3 "BUSINESS OF INTERNETWORKING SOLUTIONS" shall mean (i) operation
of the worldwide internetworking business presently conducted within Retix being
transferred to Internetworking Solutions and consisting of the development,
manufacture, sale, licensing, maintenance and service of internetworking
products; (ii) engaging in such other activities as may be approved by the Board
of Directors of Internetworking Solutions; and (iii) performing all things
necessary or incidental to or connected with or growing out of the foregoing
activities in accordance with the terms and provisions of this Agreement and the
Other Agreements.
1.4 "CLOSING" shall have the meaning set forth in Section 2.3 of this
Agreement.
-28-
<PAGE>
1.5 "CLOSING DATE" shall mean the date first set forth above, or such
other date as the parties shall mutually agree upon which the Closing shall
occur.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.7 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.8 "FACILITY" shall mean any property owned, leased, operated or
occupied by the Retix related to or affecting the Transferred Business.
1.9 "GRANT-BACK LICENSE AGREEMENT" shall mean the Grant-Back License
Agreement between Internetworking Solutions and Retix dated as of the date of
this Agreement and attached to this Agreement as EXHIBIT A.
1.10 "GOVERNMENTAL ENTITY" shall mean any court, tribunal,
administrative agency, commission, or other governmental authority or
instrumentality.
1.11 "INITIAL PUBLIC OFFERING" shall mean the initial sale of
Internetworking Solutions' Common Stock to the public pursuant to an effective
registration statement under the Securities Act of 1933, as amended, with an
aggregate offering price, net of underwriting discounts and commissions, in
excess of $10,000,000, and with an offering price to the public of at least
$7.50 per share.
1.12 "LAWS" shall mean all applicable international, federal, state
and local statutes, ordinances, rules and regulations.
1.13 "LIENS" shall mean mortgages, deeds of trust, pledges, security
interests, charges, liens, leases, licenses, liabilities, assessments,
encumbrances, costs, claims, conditions or restrictions of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise (including, without limitation any conditional sale or other title
retention agreement and any agreement to give any security interest).
1.14 "LOAN AGREEMENT" shall mean the Loan Agreement between
Internetworking Solutions and Retix dated as of the date of this Agreement and
attached to this Agreement as EXHIBIT B.
1.15 "KEY EMPLOYEE OPTION AGREEMENT(S)" shall mean any of the Key
Employee Stock Option Agreements between Internetworking Solutions and
Internetworking Solutions Management in the form attached to this Agreement as
EXHIBIT C.
1.16 "INTERNETWORKING SOLUTIONS DISCLOSURE STATEMENT" shall mean the
Disclosure Statement of Internetworking Solutions attached to this Agreement as
EXHIBIT D.
1.17 "INTERNETWORKING SOLUTIONS MANAGEMENT" shall mean the principal
executive officers of Internetworking Solutions, as determined by the Board of
Directors of Internetworking Solutions.
1.18 "OTHER AGREEMENTS" shall mean the Preferred Stock Purchase
Agreement, the Rights Agreement, the Loan Agreement, the Grant-Back License
Agreement, and the Security Agreement.
-29-
<PAGE>
1.19 "PERMITS" shall mean all applicable licenses, permits,
authorizations, approvals, clearances and consents.
1.20 "PERSON" shall mean any individual, firm, trust, partnership,
joint venture, association, corporation, unincorporated organization, or a
government or any department or agency thereof.
1.21 "PREFERRED STOCK PURCHASE AGREEMENT" shall mean the Preferred
Stock Purchase Agreement between Internetworking Solutions and Retix dated as of
the date of this Agreement and attached to this Agreement as EXHIBIT E.
1.22 "PRODUCTS" shall mean the products described on EXHIBIT F to this
Agreement.
1.23 "RETIX DISCLOSURE STATEMENT" shall mean the Disclosure Statement
of Retix attached to this Agreement as EXHIBIT G.
1.24 "RIGHTS AGREEMENT" shall mean the Rights Agreement between
Internetworking Solutions and Retix dated as of the date of this Agreement and
attached to this Agreement as EXHIBIT H.
1.25 "SALE OF INTERNETWORKING SOLUTIONS STOCK" shall mean any sale by
Retix of all of the Internetworking Solutions securities owned by Retix to any
third party, including Internetworking Solutions Management.
1.26 "SECURITY AGREEMENT" shall mean the Security Agreement between
Internetworking Solutions and Retix dated as of the date of this Agreement and
attached to this Agreement as EXHIBIT I.
1.27 "TAX" or "TAXES" shall mean any and all taxes or other liability
imposed by any governmental entity or similarly empowered entity, including
without limitation any charge, obligation, assessment or fee for federal, state,
county, city and foreign income, profits, gross receipts, withholding, payroll,
stamp, sales, use, employment, environmental, occupation, net worth, property,
excise, estimated, recapture, ad valorem, custom, duty, unitary and any other
taxes, obligations and assessments of any kind whatsoever and any withholding
obligation for FICA, FUTA, SSI or analogous or similar state, local and foreign
withholding obligation or employer contribution, together with all interest,
penalties and additions to tax or other assessment imposed with regard thereto;
the foregoing shall include any transferee or secondary liability for any tax
and any liability arising as a result of being a member of any affiliated,
consolidated, combined or unitary group which is required to be included in any
Tax return or report as well as any Tax arising out of a tax sharing agreement,
indemnity agreement or any similar agreement to which one or more of Retix is a
party. "TAX" or "TAXES" shall, however, not include any Taxes arising from
operation of Internetworking Solutions or Retix on or after the Closing Date.
1.28 "TRANSFERRED ASSETS" shall mean the assets to be transferred by
Retix to Internetworking Solutions as described in EXHIBIT J to this Agreement,
which assets shall specifically exclude any accounts receivable accrued by Retix
prior to the Closing Date in accordance with its historical practices for
revenue recognition but which shall include any maintenance revenue received by
Retix prior to the Closing Date which remains unearned as of the Closing Date.
-30-
<PAGE>
1.29 "TRANSFERRED BUSINESS" shall mean the worldwide internetworking
business presently conducted within Retix to be transferred to Internetworking
Solutions pursuant to the provisions of this Agreement and consisting of the
development, manufacture, sale, licensing, maintenance and service of
internetworking products.
1.30 "TRANSFERRED CONTRACTS" shall mean the contracts to be
transferred by Retix to Internetworking Solutions as determined by Retix and
Internetworking Solutions in good faith.
1.31 "TRANSFERRED LIABILITIES" shall mean the liabilities to be
transferred by Retix to Internetworking Solutions as described on EXHIBIT K to
this Agreement.
2. FORMATION OF INTERNETWORKING SOLUTIONS; CLOSING.
2.1 FORMATION OF INTERNETWORKING SOLUTIONS. Upon and subject to the
terms and conditions of this Agreement and in reliance upon the representations,
warranties and agreements contained in this Agreement, Internetworking Solutions
and Retix shall at the Closing execute and deliver (or cause to be executed and
delivered) the Other Agreements, all substantially in the respective forms
attached to this Agreement, together with such other documents and funds as may
be necessary or advisable to form Internetworking Solutions and effect the
transactions described in this Agreement and the Other Agreements.
2.2 TRANSFER OF ASSETS. Subject to the terms and conditions of this
Agreement and the Other Agreements, at the Closing Retix shall transfer to
Internetworking Solutions, and Internetworking Solutions shall receive from
Retix, all of Retix's right, title and interest in and to the Transferred
Business, including without limitation the Transferred Assets, the Transferred
Contracts, the Transferred Liabilities and inventory of the Transferred Business
(collectively, the "TRANSFERRED ITEMS.") Retix will deliver to Internetworking
Solutions possession of the Transferred Items, and will further deliver to
Internetworking Solutions proper instruments sufficient to transfer to
Internetworking Solutions the rights to the Transferred Items specified in this
Agreement and such other instruments of transfer as counsel for Internetworking
Solutions may reasonable deem necessary or desirable to effect or evidence the
transfers contemplated hereby, free and clear of all mortgages, pledges, liens,
licenses, rights of possession, security interests, restrictions, encumbrances,
charges, title retention, conditional sale or other security arrangement except
for the Transferred Liabilities or as may be contained in the Transferred
Contracts or as provided in this Agreement or in the Other Agreements. Except
for the Transferred Liabilities, Internetworking Solutions is not assuming, and
Retix shall remain responsible for and pay on a timely basis, any liabilities of
Retix, whether or not arising from or associated with the Transferred Business
and whether accrued or unaccrued, contingent or actual, or asserted or
unasserted. Retix will promptly pay over to Internetworking Solutions any
amounts received in respect of the Transferred Business following the Closing
Date, except for amounts which Retix is expressly authorized by this Agreement
to retain.
2.3 CLOSING. The transactions contemplated by Section 2.1 (the
"CLOSING") shall be consummated at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Other
Agreements, or at such other place and time as the parties may agree, on the
Closing Date.
2.4 TAX TREATMENT. The parties intend that the transactions
contemplated by this Agreement will constitute a tax-free exchange as described
in Section 351 of the Code.
-31-
<PAGE>
2.5 SALES AND OTHER TAXES. Internetworking Solutions shall pay all
sales, use, transfer, excise or other similar taxes, if any, arising out of the
transfer of the Transferred Assets or Transferred Business, or otherwise as a
consequence of the transactions contemplated by this Agreement or the Other
Agreements. The parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize the above-described
taxes.
3. REPRESENTATIONS AND WARRANTIES OF RETIX. Except as set forth in the
Retix Disclosure Statement, Retix represents and warrants that:
3.1 EXISTENCE AND RIGHTS. Retix (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
(b) has all corporate power and authority to own or lease its properties and to
carry on the Transferred Business as now being conducted, (c) possesses all
licenses, franchises, rights and privileges necessary to the conduct of the
Transferred Business as now being conducted, and (d) has all corporate power and
authority to carry out this Agreement and the Other Agreements to which Retix is
a party and the transactions contemplated herein and therein.
3.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Retix is a party has been, or will
be prior to the Closing, duly authorized by all necessary corporate and other
action and does not require notice to, or the consent or approval of, any
governmental body or other regulatory authority. This Agreement and the Other
Agreements to which Retix is a party have been duly executed or will be at the
Closing, as the case may be, and delivered to Internetworking Solutions by
Retix. This Agreement and the Other Agreements to which Retix is a party
constitute, or when executed and delivered will constitute, legal, valid and
binding obligations of Retix, enforceable in accordance with their terms.
3.3 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Retix's knowledge,
threatened against or affecting Retix or the Transferred Assets, which if
determined adversely to Retix, would have an adverse effect on the conduct of
the Transferred Business, Internetworking Solutions or the Transferred Assets or
in which it is sought to restrain, prohibit or otherwise adversely affect the
ability of Retix to perform any or all of the obligations required of it under
this Agreement or the Other Agreements or the consummation of the transactions
contemplated herein or therein.
3.4 FIXED ASSETS. The fixed assets used in the ordinary course of
the operations of the Transferred Business are in satisfactory operating
condition, reasonable wear and tear excepted and except for such minor defects
as do not substantially interfere with the continued use thereof in the conduct
of normal operations.
3.5 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION OF PROPERTY.
(a) Retix has valid and marketable title to the Transferred
Assets and to all personal property and other assets, tangible or intangible,
required to be used in the conduct of the Transferred Business as it is
currently conducted.
-32-
<PAGE>
(b) The Transferred Assets are free and clear of all title
defects and Liens, except the following: (i) unperfected mechanics', carriers',
workers' and other similar liens arising after the date of this Agreement in the
ordinary course of business consistent with past practice which are or will be
reflected in the balance sheet as of the Closing Date to be delivered pursuant
to this Agreement; (ii) imperfections of title which do not materially or
unreasonably detract from the value, marketability, financial ability or use of
such items; and (iii) property taxes which are a lien not yet due and payable.
(c) The Transferred Assets are in a condition suitable and
adequate for the conduct of the Transferred Business as such business is
presently being conducted. Retix is not aware of any facts which would prevent
Internetworking Solutions from using such assets after the Closing generally in
the manner in which such assets have been used and operated prior to the date of
this Agreement.
3.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to the
best of Retix's knowledge against, Retix for relief under any applicable
bankruptcy, insolvency or similar law; no decree or order for relief has been
entered in respect of Retix, voluntarily or involuntarily, under any such law;
and, no receiver, liquidator, sequestrator, trustee, custodian or other officer
has been appointed with respect to Retix or its assets and liabilities pursuant
to any such law. No warrant of attachment, execution or similar process has
been executed against Retix or any of its assets or properties. Retix has not
made any assignment for the benefit of creditors. The consummation of the
transactions contemplated hereby will not render Retix insolvent or unable to
pay its liabilities as they come due.
3.7 PRODUCTS.
(a) Retix owns, or will own by the Closing Date, or has
sufficient rights to, all rights to make, use and sell the Products. No Product
is subject to any pending or, to the best of Retix's knowledge, any threatened
challenge of infringement of the rights of others, nor to the best of Retix's
knowledge is there any basis for a challenge of infringement of any such rights
of others.
(b) To the best of Retix's knowledge, no party other than Retix
(prior to the Closing) and Internetworking Solutions and their respective agents
and representatives (following the Closing) and their permitted licensees
possesses any copy of all or any part of the designs, flow charts, algorithms,
schematics of the Products or source code contained in the Products (except to
the extent it has been licensed from other persons (including other subsidiaries
of Retix)). No person other than Retix owns any right, title or interest in or
to any such Product, except as set forth in the Retix Disclosure Statement.
(c) Internetworking Solutions shall not by virtue of any
contractual arrangement between Retix and any third party be obligated to
provide to any such third party any modifications, enhancements or upgrades to
the Products or derivative works thereof, other than pursuant to a Transferred
Contract.
3.8 TRADEMARKS, COPYRIGHTS, AND PATENTS.
(a) Retix has provided Internetworking Solutions with a true and
complete list describing all of the trademarks, trade names and service and
other marks which are related to the Transferred Business. Except as
contemplated or described in this Agreement or the Other Agreements, Retix owns
all right, title and interest in and to such marks.
-33-
<PAGE>
(b) Retix has provided Internetworking Solutions with a true and
complete list describing all of the patents, patent rights, patent applications,
copyrights and copyright applications relating to the Products. Retix owns all
right, title and interest to, or has sufficient licenses under, all such
patents, patent rights, patent application, copyrights and copyright
applications.
(c) Upon consummation of the transactions contemplated by this
Agreement, Internetworking Solutions will have all rights, including without
limitation rights under patents, trademarks, trade secrets, trade rights, trade
names, and copyrights, necessary to operate the Transferred Business in the
manner it was operated prior to the Closing Date. To the best of Retix's
knowledge, none of the rights described in the prior sentence conflict with or
infringe on the proprietary rights of others. There are no outstanding rights,
licenses or grants by Retix relating to the use of any of the same, and none of
them is subject to any pending or, to the best of Retix's knowledge, threatened
claim of infringement of the right of others. Retix has not agreed to indemnify
any person for or against any infringement of any patent, patent right,
trademark, trade secret, trade right, trade name, commercial name, computer
software program, or copyright related to the Transferred Business, other than
as part of its license arrangements with its customers.
3.9 AGREEMENTS LIST. Retix has provided Internetworking Solutions
with a list of all contracts, agreements, understandings, licenses, franchises,
leases (written and oral) or other instruments which are both (i) material to
the Transferred Business, and (ii) relate to or affect the Transferred Assets or
under which any portion of the Transferred Assets are used or held or subject,
including without limitation all related supply, in-license, marketing and end-
user agreements, and all related agreements for the testing, modification,
development, trial, license, sale or other use of the Transferred Assets (in
each such case identifying the nature of such agreements).
3.10 NO FINDER'S FEES. Retix is not obligated, either directly or
indirectly, to any person for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement and the Other
Agreements.
3.11 BINDING AGREEMENTS, NO DEFAULT. Each of the Transferred
Contracts is a legal, binding, and enforceable obligation of Retix and, to the
best of Retix's knowledge, the other party(s) thereto, and no party with whom
Retix has an agreement, contract or other instrument relating to or affecting
the Transferred Business is known by Retix to be in default thereunder or to
have breached any material terms or provisions thereof.
3.12 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representatives and warranties of Retix contained herein will be true in all
material respects upon and as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF INTERNETWORKING SOLUTIONS. Except
as set forth in the Internetworking Solutions Disclosure Statement,
Internetworking Solutions represents and warrants that:
34
<PAGE>
4.1 EXISTENCE AND RIGHTS. Internetworking Solutions (a) is a
corporation duly organized, validly existing and in good standing under the laws
of State of California, and (b) has all corporate power and authority to carry
out this Agreement and the Other Agreements to which Internetworking Solutions
is a party and the transactions contemplated herein and therein.
Internetworking Solutions is not qualified or licensed to do business as a
foreign corporation in any state. Internetworking Solutions does not own,
directly or indirectly, any equity or other interest in any other corporation,
association, partnership or other business entity.
4.2 CAPITALIZATION. The authorized capital stock of Internetworking
Solutions consists of 20,000,000 shares of Common Stock, par value $0.01 per
share, none of which were issued and outstanding prior to the Closing, and
16,000,000 shares of Preferred Stock, par value $0.01 per share, none of which
were issued and outstanding prior to the Closing. All shares of Internetworking
Solutions stock to be issued pursuant to this Agreement and the Other Agreements
have been duly authorized and, upon issuance in accordance with the terms hereof
and thereof, will be validly issued, fully paid and nonassessable. All
securities of Internetworking Solutions that will be issued as of the Closing
will be issued in compliance with applicable federal and state securities laws.
Except as provided in the Other Agreements, there are no preemptive rights,
voting agreements, options or warrants or other conversion privileges or rights
presently outstanding to purchase any of the authorized but unissued stock of
Internetworking Solutions.
4.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Internetworking Solutions is a party
by Internetworking Solutions has been duly authorized by all necessary corporate
and other action and do not require notice to, or the consent or approval of,
any governmental body or other regulatory authority. This Agreement and the
Other Agreements to which Internetworking Solutions is a party are, or when
executed and delivered will be, legal, valid and binding obligations of
Internetworking Solutions, enforceable in accordance with their terms.
4.4 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Internetworking
Solutions' knowledge, threatened against or affecting Internetworking Solutions,
which if determined adversely to Internetworking Solutions, would have an
adverse effect on the Transferred Assets or in which it is sought to restrain,
prohibit or otherwise adversely affect the ability of any of Internetworking
Solutions to perform any or all of the obligations required of it under this
Agreement or the Other Agreements or the consummation of the transactions
contemplated herein or therein.
4.5 NO FINDER'S FEES. Internetworking Solutions is not obligated,
either directly or indirectly, to any person for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement and
the Other Agreements.
4.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to the
best of Internetworking Solutions' knowledge against, Internetworking Solutions
for relief under any applicable bankruptcy, insolvency or similar law; no decree
or order for relief has been entered in respect of Internetworking Solutions,
voluntarily or involuntarily, under any such law, and, no receiver, liquidator,
sequestrator, trustee, custodian or other officer has been appointed with
respect to Internetworking Solutions or its assets and liabilities pursuant to
any such law. No warrant of attachment, execution or similar process has been
executed against Internetworking Solutions or any of its assets or properties.
Internetworking Solutions has not made any assignment for the benefit of
creditors.
35
<PAGE>
4.7 NO FINANCIAL STATEMENTS. Internetworking Solutions has not
prepared any balance sheet, income statement, statement of operations, statement
of changes in financial position and shareholders' equity or other financial
statement.
4.8 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representations and warranties of Internetworking Solutions contained herein
will be true in all material respects upon and as of the Closing Date.
5. COVENANTS AND AGREEMENTS OF THE PARTIES.
5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Retix covenants and agrees
with Internetworking Solutions that between the date hereof and the Closing
Date, except as specifically contemplated by this Agreement:
(a) CONDUCT OF BUSINESS. Retix will conduct the Transferred
Business consistent with past practices, including the payment of liabilities.
(b) ACCESS. Retix will permit Internetworking Solutions and its
representatives to have reasonable access during normal business hours to the
personnel and facilities of the Transferred Business and the financial, tax,
contractual and organizational records of the Transferred Business.
Internetworking Solutions shall treat all information received from Retix
pursuant to this Section 5.1(b) as confidential, except to the extent that any
such information is made available to Internetworking Solutions from sources
generally available to the public, and except as required by law. In the event
the Closing shall not occur, Internetworking Solutions will promptly return to
Retix all documents, instruments, work papers and other materials submitted by
Retix to Internetworking Solutions.
5.2 EXECUTION OF DOCUMENTS AT THE CLOSING. Provided that the
conditions to Closing as specified in Section 6 and Section 7 of this Agreement
have been fulfilled, Retix and Internetworking Solutions, respectively, agree to
cause the execution of each of the Other Agreements.
5.3 TRANSFER OF KEY EMPLOYEES. Retix agrees to use its reasonable
efforts to cause all key employees employed in the Transferred Business to
transfer their employment to Internetworking Solutions.
5.4 CONSENTS AND APPROVALS. It is the intent of the parties to
consummate the transactions described in this Agreement and the Other Agreements
at the earliest practicable time and Retix agrees to use its reasonable
reasonable efforts to obtain, and Internetworking Solutions shall cooperate with
and assist Retix in obtaining, all consents, waivers, amendments, modifications,
approvals, authorizations, Permits and licenses which are required to be
obtained by Retix to effectuate this Agreement and the Other Agreements and to
transfer the Transferred Business and the Transferred Assets to Internetworking
Solutions and to permit Internetworking Solutions to operate the Transferred
Business. If any requisite consent or amendment of a contract or other
instrument shall not be obtained, Retix agrees to cooperate with Internetworking
Solutions in any reasonable arrangement designed to provide for Internetworking
Solutions the benefits under such contract or other instrument, including
enforcement of any and all rights of Retix against the other party to such
contract or instrument arising out of the breach or cancellation thereof by such
other party or otherwise. Retix shall use its reasonable efforts to obtain all
other necessary consents and approvals of other persons and Governmental
Entities in connection with the consummation of the transactions contemplated
under this Agreement and the Other Agreements; provided, however, that Retix
36
<PAGE>
shall not be obligated to: (a) undertake any additional material financial
obligation, dispose of any property, or surrender any rights, or (b) otherwise
consent to any arrangement or undertake any obligation that would have a
material adverse effect on Retix.
5.5 VACATION PAY. The cost of vacation pay due (as of the Closing
Date) to any Retix employees who become employees of Internetworking Solutions
as of the Closing shall be shared by Retix and Internetworking Solutions
equally. Retix shall fund its portion of such liability by (i) making quarterly
payments to Internetworking Solutions within 30 days of the close of each such
quarter for such accrued vacation taken during each of Internetworking
Solutions' first six fiscal quarters, and (ii) promptly reimbursing
Internetworking Solutions for one-half of any amounts paid by Internetworking
Solutions to such employees upon termination of their employment with
Internetworking Solutions.
5.6 NO INCONSISTENT ACTS. Internetworking Solutions covenants and
agrees with Retix that between the date hereof and the Closing Date, except as
contemplated by this Agreement, Internetworking Solutions will not perform any
act inconsistent with the representations and warranties of Section 4.
5.7 EMPLOYMENT ELIGIBILITY VERIFICATION. Retix agrees to use its
reasonable efforts to obtain, on behalf of Internetworking Solutions, Employment
Eligibility Verification forms (Form I-9) completed by each employee of Retix
who has agreed to become employed in the Transferred Business and copies of any
documentation obtained by Retix to verify the information therein.
5.8 EMPLOYEES.
(a) Retix and Internetworking Solutions agree to use their
reasonable efforts to employ the current employees of the Transferred Business,
subject to continued acceptable performance by such employees and the general
requirements of the business.
(b) Retix will use its reasonable efforts, consistent with its
established personnel policies, to encourage employees designated to perform
work for the Transferred Business to transfer to Internetworking Solutions.
(c) Internetworking Solutions agrees to provide a package of
compensation and benefits to its employees substantially equivalent to such
compensation and benefits currently being offered to the employees of the
Transferred Business by Retix.
5.9 CONFIDENTIALITY. Neither Retix nor Internetworking Solutions
shall disclose to any third party other than their lenders, accountants,
attorneys or other advisors or in any way make public the proposed transactions
among the parties which are the subject of this Agreement and the Other
Agreements without the prior written consent of Internetworking Solutions or
Retix, respectively.
5.10 ASSIGNMENTS. At the Closing, Retix will use its reasonable
efforts to deliver to Internetworking Solutions, such other instruments of
transfer or assignment as the parties deem reasonably necessary or advisable so
as to vest title in the Transferred Assets more fully in Internetworking
Solutions.
5.11 SUBSEQUENT ACTIONS. At any time, and from time to time, after
the Closing Retix shall, promptly upon request by Internetworking Solutions
execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Internetworking Solutions
may reasonably request in order more effectively to transfer, convey and assign
to Internetworking Solutions,
37
<PAGE>
or to confirm Internetworking Solutions' title to, the Transferred Assets, to
put Internetworking Solutions in possession and control thereof, to assist
Internetworking Solutions in exercising all rights with respect thereto and
otherwise complete the transactions contemplated hereby. The parties agree to
execute documents as necessary to file with the United States Copyright Office,
the United States Patent Office with respect to, or otherwise to confirm
Internetworking Solutions' title in, the Transferred Assets.
5.12 SUBSEQUENT ACCESS. Retix agree to provide access to and copies
of all necessary accounting records, work papers and other documents in
connection with or related to the Transferred Business, as reasonably requested
by Internetworking Solutions or the independent auditors of Internetworking
Solutions. Retix will consider any reasonable requests for customary
representation letters in connection with any audit.
5.13 COVENANTS REGARDING THE MANAGEMENT AND OPERATION OF
INTERNETWORKING SOLUTIONS.
(a) CAPITALIZATION OF INTERNETWORKING SOLUTIONS. As of the
Closing, Retix will own 16,000,000 shares of Internetworking Solutions'
Preferred Stock, representing at least 80% of the outstanding capital stock of
Internetworking Solutions. Retix and Internetworking Solutions agree that there
will be issued or reserved for future issuance to Internetworking Solutions
directors, officers, employees, consultants and other service providers (other
than Retix or its affiliates) an aggregate of twenty percent (20%) of the
aggregate capital stock of Internetworking Solutions on an as-converted basis.
After the Closing, the Board of Directors of Internetworking Solutions shall
determine those persons to whom shares of Internetworking Solutions' Common
Stock (or options to purchase such shares) shall be issued, whether pursuant to
the Key Employee Option Agreements or otherwise, which determination shall be
final and binding.
(b) CORPORATE OBJECTIVES. Retix and Internetworking Solutions
hereby acknowledge and agree that Internetworking Solutions shall be operated as
a for-profit enterprise with the principal strategic objective of obtaining
liquidity for Internetworking Solutions' shareholders through an Initial Public
Offering, sale of Internetworking Solutions or other appropriate transaction.
Internetworking Solutions shall initially operate on a strategic plan and
financial model approved by Retix in its discretion. After the Closing,
Internetworking Solutions shall operate on a strategic plan and financial model
approved by Internetworking Solutions' Board of Directors.
(c) TERMINATION. The provisions of this Section 5.13 shall
terminate and be of no further force or effect upon the earliest to occur of
(i) an Initial Public Offering, (ii) a Change of Control, or (iii) a Sale of
Internetworking Solutions Stock.
5.14 SHARED ADMINISTRATIVE EXPENSES. Retix will provide certain
administrative and support services to Internetworking Solutions for a period to
be mutually agreed upon in good faith. The foregoing services shall be provided
by Retix to Internetworking Solutions in a similar manner as such services were
provided by Retix internally to support the Transferred Business prior to the
Closing Date. The foregoing services shall be provided by Retix to
Internetworking Solutions at Retix's fully-loaded cost, defined as Retix's out-
of-pocket costs of providing such services (including reasonable allocations of
(i) the salaries of Retix personnel providing such services, and (ii) Retix's
overhead costs associated with providing such services). Any costs and expenses
incurred by one party pursuant to this Section 5.14 (including without
limitation taxes, license fees, insurance fees and costs of professional
services), which are payable in
38
<PAGE>
whole or in part by the other party pursuant to this Section 5.14, will be
allocated between the parties as mutually agreed in good faith.
5.15 SUPPORT AND DISCLOSURE. Internetworking Solutions Management
covenants and agrees to fully support Retix in its efforts to divest its equity
holdings in Internetworking Solutions to the public, a third party or to
Internetworking Solutions Management, and to provide full disclosure of all
material information requested by any potential purchasers of such equity
holdings, in each case as reasonably requested by Retix and in compliance with
all applicable securities laws.
6. CONDITIONS OF RETIX'S OBLIGATIONS. The obligation of Retix to
consummate and effect this Agreement and the Other Agreements and the
transactions contemplated hereby and thereby shall be subject to the
satisfaction at the Closing of all of the following conditions, any of which may
be waived, in writing, exclusively by Retix:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Internetworking Solutions contained in this Agreement shall be
true in all material respects at and as of the Closing Date, with the same
effect as though made as of such date.
6.2 COVENANTS. Internetworking Solutions shall have complied with
all agreements and covenants contained herein to be complied with by
Internetworking Solutions prior to or at the Closing Date.
6.3 CLOSING DOCUMENTS. Retix shall have received, in form and
substance satisfactory to Retix and its counsel, each and every closing document
required to be delivered to them by this Agreement and the Other Agreements
including without limitation, a list of Transferred Contracts as determined
by the parties in good faith.
6.4 CONSENTS AND WAIVERS. Retix shall have obtained any and all
consents, permits, approvals and waivers necessary or appropriate for the
consummation of the transactions contemplated by this Agreement and the Other
Agreements.
6.5 OFFICER'S CERTIFICATE. Internetworking Solutions shall have
delivered to Retix a certificate, dated as of the Closing Date and signed by an
authorized officer of Internetworking Solutions, to the effect that the
conditions specified in Section 6.1 and Section 6.2 have been satisfied.
6.6 BOARD OF DIRECTORS. The Board of Directors of Internetworking
Solutions shall consist of Joe Stephan, Jeffrey Drazan, Neil Hynes, Gilbert P.
Williamson and one vacancy.
7. CONDITIONS OF INTERNETWORKING SOLUTIONS OBLIGATIONS. The obligation
of Internetworking Solutions to consummate and effect this Agreement and the
Other Agreements and the transactions contemplated hereby and thereby shall be
subject to the satisfaction at the Closing of all of the following conditions,
any of which may be waived, in writing, exclusively by Internetworking
Solutions:
7.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Retix contained in this Agreement shall be true and correct at and
as of the Closing Date, with the same effect as though made as of such date,
except for changes in the ordinary course of business consistent with past
practices of Retix and other changes consistent with past practices of Retix
which in the aggregate do not have a material adverse effect on the Transferred
Assets, the Transferred Business or Internetworking Solutions.
39
<PAGE>
7.2 COVENANTS. Retix shall have complied with all agreements and
covenants contained herein to be complied with by Retix prior to or at the
Closing Date.
7.3 NO MATERIAL ADVERSE CHANGE. From the date of this Agreement,
there shall not have occurred any material adverse change in the business,
financial condition, operations or value of the Transferred Business or the
value of the Transferred Assets.
7.4 ASSET AND CONTRACT ASSIGNMENTS. Retix shall have taken or agreed
to take any and all steps necessary to effectuate the assignment and transfer to
Internetworking Solutions of all Transferred Assets and Transferred Contracts,
including but not limited to obtaining any and all necessary consents or waivers
with respect thereto.
7.5 CLOSING DOCUMENTS. Internetworking Solutions shall have
received, in form and substance satisfactory to Internetworking Solutions and
its counsel, each and every other closing document required to be delivered to
them by this Agreement and the Other Agreements including without limitation,
a list of Transferred Contracts as determined by the parties in good faith.
7.6 OFFICER'S CERTIFICATE. Retix shall have delivered to
Internetworking Solutions a certificate, dated as of the Closing Date and signed
by an authorized officer of Retix, to the effect that the conditions specified
in Section 7.1 and Section 7.2 have been satisfied.
7.7 CONSENTS AND WAIVERS. Internetworking Solutions shall have
obtained any and all consents, permits, approvals and waivers necessary or
appropriate for the consummation of the transactions contemplated by this
Agreement and the Other Agreements.
8. TERMINATION.
8.1 AGREEMENT TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to or at the
Closing Date upon ten (10) business days prior notice: (a) by Internetworking
Solutions or Retix if there has been a material misrepresentation, breach of
warranty, or breach of covenant by the other in any of their representations,
warranties, or covenants set forth herein which the breaching party or parties
fail to cure within ten (10) business days after receipt of notice thereof;
(b) by Internetworking Solutions if the conditions stated in Section 7 have not
been satisfied by the Closing Date; (c) by Retix if the conditions stated in
Section 6 have not been satisfied by the Closing Date, or (d) by mutual written
agreement of Internetworking Solutions and Retix.
8.2 EFFECT OF TERMINATION. If this Agreement shall be terminated as
provided in Section 8, all obligations of the parties hereunder and under the
Other Agreements shall terminate without liability of any party to any other
party, except that (i) the second and third sentences of Section 5.1(b) of this
Agreement and Section 5.9 of this Agreement shall survive any such termination.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties are material, shall be deemed to have been relied upon
by the parties receiving such representations and warranties and shall survive
the Closing. All such representations and warranties shall expire one year
after the Closing.
40
<PAGE>
10. GENERAL PROVISIONS.
10.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
10.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification of
any provision of this Agreement or any right, power or remedy hereunder, whether
by agreement of the parties or by custom, course of dealing or trade practice,
shall not be effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought. No failure or
delay by either party in exercising any right, power or remedy with respect to
any of the provisions of this Agreement shall operate as a waiver of such
provisions with respect to such occurrences.
10.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
10.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their reasonable efforts to replace
the provision that is contrary to law with a legal one approximating to the
extent possible the original intent of, and the economic benefits accruing to,
the parties.
10.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
10.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10.1,
their respective successors and assigns.
10.7 COMPLETE AGREEMENT. This Agreement and the Other Agreements and
any schedules, exhibits and documents referred to herein or therein or executed
contemporaneously herewith or therewith constitute the entire agreement among
the parties with respect to the subject matter hereof and thereof. This
Agreement and the Other Agreements supersede all prior written, and all prior
and contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof and
thereof.
10.8 NO THIRD-PARTY BENEFICIARIES. Nothing contained in this
Agreement shall be construed to give any person other than Retix and
Internetworking Solutions any legal or equitable right, remedy or claim under or
with respect to this Agreement, the Transferred Assets or the Transferred
Business.
-41-
<PAGE>
10.9 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
10.10 NOTICES. All notices or other communications which shall or
may be given pursuant to this Agreement shall be in writing, shall be effective
upon receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Internetworking Solutions: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
10.11 COUNTERPARTS. This Agreement may be executed in any number
of copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
10.12 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
10.13 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
10.14 TRANSACTION COSTS. Except as otherwise provided herein,
each party shall be responsible for any costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
10.15 ATTORNEYS' FEES AND OTHER COSTS. In the event of any
dispute or controversy arising out of this Agreement, the prevailing party shall
be entitled to reimbursement of its costs, including court and mediation,
dispute resolution and/or arbitration costs and attorneys' and expert witnesses'
fees and costs.
[SIGNATURE PAGE FOLLOWS]
-42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
INTERNETWORKING SOLUTIONS RETIX
By: By:
---------------------- ----------------------
Title: Title:
---------------------- ----------------------
-43-
<PAGE>
MASTER AGREEMENT EXHIBIT LIST
EXHIBIT A Form of Grant Back License Agreement
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Key Employee Option Agreement
EXHIBIT D Internetworking Solutions Disclosure Schedule
EXHIBIT E Form of Preferred Stock Purchase Agreement
EXHIBIT F List of Products
EXHIBIT G Retix Disclosure Schedule
EXHIBIT H Form of Rights Agreement
EXHIBIT I Form of Security Agreement
EXHIBIT J List of Transferred Assets
EXHIBIT K List of Transferred Liabilities
44
<PAGE>
EXHIBIT A
GRANT-BACK LICENSE AGREEMENT
This Grant-Back License Agreement (the "AGREEMENT") is made as of May 31,
1996 (the "EFFECTIVE DATE") by and between Retix, a California corporation with
offices at 2401 Colorado Avenue, Santa Monica, CA 90404 ("RETIX"), and
Internetworking Solutions, a California corporation with offices at 2401
Colorado Avenue, Santa Monica, CA 90404 ("INTERNETWORKING SOLUTIONS").
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, receipt of which is hereby acknowledged,
Internetworking Solutions and Retix hereby agree as follows:
1. DEFINITIONS.
"LICENSED MATERIALS" shall be each computer program whether in
software, firmware, physical or other form, as well as any other technology or
designs (whether hardware, software, firmware or other form thereof) which, as
of the Closing Date, was either owned by Internetworking Solutions or permitted
to be licensed by Internetworking Solutions to Retix on the terms provided for
herein, in each case after giving effect to the transfer of assets and other
matters contemplated in the Master Agreement. Such Licensed Materials shall
include, without limitation, those programs and other items specified in EXHIBIT
A and such other rights as the parties may from time to time agree to
incorporate into such Exhibit. The term "LICENSED MATERIAL" shall specifically
include documentation and related materials pertinent to such program, design or
other material and any updated version or portion thereof furnished to Retix by
Internetworking Solutions for use in connection with or replacement of a
Licensed Material, and shall specifically exclude future additions, improvements
or modifications thereto unless approved in writing by Internetworking Solutions
and Retix.
"MASTER AGREEMENT" shall mean the Master Agreement between
Internetworking Solutions and Retix of even date herewith.
"OBJECT FORM" shall mean any machine translated version of the Source
Form suitable for execution by computer equipment, or any intermediate form
derived from Source Form which can be made executable by computer equipment.
"PRODUCTS" shall mean all hardware, software and other products
developed, marketed or sold by Retix or its subsidiaries or affiliates which
contain Licensed Materials and which also contain material added features or
other material distinguishing characteristics from the Licensed Materials
incorporated therein.
"SOURCE FORM" shall mean the source code form on any media of any
Licensed Material in the language as delivered by Internetworking Solutions to
Retix, or any translation or modification of such Licensed Material which
substantially preserves its original identity.
-45-
<PAGE>
2. LICENSE GRANT.
2.1 TECHNOLOGY LICENSE. Internetworking Solutions hereby grants to
Retix and its authorized contractors a non-exclusive, non-transferable (except
as provided in Section 8.1) worldwide, perpetual, fully-paid license, with the
right to sublicense, to use, copy, have copied and distribute Licensed Materials
in conjunction with the operation, development, design, manufacture, marketing,
sale or other disposition of the Products.
2.2 USE OF SOURCE FORM FOR DEVELOPMENT. Internetworking Solutions
hereby grants to Retix and its authorized contractors a non-exclusive, non-
transferable (except as provided in Section 8.1) worldwide, perpetual,
fully-paid license with the right to sublicense, to use, copy and have copied
the Source Form of Licensed Materials for the purpose of adapting or
incorporating such Licensed Materials for operation in connection with the
Products.
2.3 USE OF OBJECT FORM IN PRODUCTS. Internetworking Solutions hereby
grants to Retix and its authorized contractors a non-exclusive, non-transferable
(except as provided in Section 8.1), worldwide, perpetual, fully-paid license,
with rights to sublicense as described in Section 2.3, to use, copy, have
copied, and distribute the Object Form of Licensed Materials solely on and in
conjunction with the Products.
2.4 RIGHT TO GRANT SUBLICENSES.
(a) RIGHT TO GRANT OBJECT FORM OR SUBLICENSES.
(i) Internetworking Solutions hereby grants Retix a non-
exclusive, non-transferable (except as provided in Section 8.1), worldwide,
perpetual, fully-paid right to grant and to grant to distributors, resellers and
other parties who distribute Products the right to grant sublicenses (not
exceeding the scope of the underlying license) to use, copy and have copied the
Object Form of Licensed Materials solely on and in conjunction with the
Products, provided that (i) such sublicensees agree to be bound by terms and
conditions no less restrictive than those set forth in the End User License
Agreement attached hereto as EXHIBIT B, and (ii) any distributors, resellers and
other parties who distribute Products, to which Retix grants the right to grant
sublicenses as provided above, agree in writing to be bound by all of the
restrictions contained in this Agreement applicable to Retix. Neither Retix nor
its distributors, resellers and other parties who distribute Products shall
distribute the Licensed Materials other than in connection with the marketing
and sale of Products.
(ii) If the Object Form is sublicensed on media or devices
separately from the Products, then Retix shall use appropriate means to provide
for the acceptance of said End User License Agreement by the end user
sublicensee and installation of the Object Form only on Products, which means
may include a customary written shrinkwrap or break-seal document specifying
such provisions.
(iii) If the Object Form is sublicensed in the form of
firmware in Read Only Memory (ROM) attached directly to the Products, then said
End User License Agreement, or provisions containing at a minimum those of said
End User License Agreement, will be made a part of a written agreement between
Retix and any purchaser of Products, or in lieu thereof a customary written
shrink wrap or break-seal document specifying such provisions.
46
<PAGE>
(b) RIGHT TO GRANT SOURCE FORM SUBLICENSES. Internetworking
Solutions hereby grants Retix a non-exclusive, non-transferable (except as
provided in Section 8.1), worldwide, perpetual, fully-paid right to grant
sublicenses (not exceeding the scope of the underlying license) to use, copy and
have copied the Source Form of Licensed Materials solely on specific items of
Products under the conditions specified below, provided that such sublicensees
agree to be bound by a source code license agreement permitting the use of the
Source Form of Licensed Materials solely for the purposes outlined below, and
having terms no less restrictive than those specified in Section 5
(Confidentiality):
(i) Source Form is required to be held in escrow by a
government sublicensee; or
(ii) Source Form for any or all of the Licensed Materials is
required for maintenance by a sublicensee.
In addition to those provisions outlined above, Retix
agrees that its Source Form sublicensees specified in clauses (i) and (ii) above
shall be bound by the following additional provisions:
(A) Such Source Form sublicenses shall be used for
maintenance purposes only with no rights to develop or distribute improvements,
adaptations, new versions or derivative works of the Licensed Materials.
(B) Except as expressly provided or permitted in this
Agreement, such Source Form sublicensees shall have no rights to distribute or
otherwise make available Source Form or Object Form to other legal entities
other than affiliates of such Source Form sublicensees.
(C) Such Source Form sublicensees shall use the Source
Form and any Object Form compiled therefrom solely in accordance with the
restrictions set forth on EXHIBIT B (in addition to the other restrictions set
forth herein).
2.5 SUBLICENSES TO GOVERNMENT AGENCIES. Internetworking Solutions
grants to Retix a non-exclusive, non-assignable, restricted right to sublicense
the Object Form of Licensed Materials to Government units or agencies, with such
Government units or agencies acquiring only the most limited and restricted
rights, permitted under applicable law, in such Licensed Materials and related
proprietary technical information, data, documentation, and any other forms of
recording and communication. Internetworking Solutions grants no subsequent
rights to sublicense such Licensed Materials. If the sublicensee is the United
States Government, the restrictions as set forth in DFARS 227.7202 for military
agencies, and FAR 12.212 for civilian agencies, apply. For purposes of such
regulations, the Contractor/Manufacturer shall be deemed to be Internetworking
Solutions. Retix and Internetworking Solutions expressly agree to follow all
procedures necessary to secure such limited and restricted rights.
2.6 SUBLICENSE ENFORCEMENT. Retix agrees, upon written request or
prior written approval of Internetworking Solutions to perform the duties and
enforce the rights of Internetworking Solutions with respect to any sublicense
granted by Retix under this Agreement, to the extent permitted under the terms
of such sublicense.
47
<PAGE>
2.7 RIGHTS TO IMPROVEMENTS. Internetworking Solutions agrees to
notify Retix promptly in writing of the existence of and the specifications for
any improvements, enhancements, modifications or amendments to the Licensed
Materials (the "IMPROVEMENTS") that Internetworking Solutions does not market as
new products and of any versions to or new versions of the Licensed Materials
that Internetworking Solutions markets or new products which it has developed
and proposes to make available to any third party (the "TECHNOLOGIES," and
collectively with the Improvements, the "NEW TECHNOLOGIES"). Until the
consummation of Internetworking Solutions' Initial Public Offering (as defined
in the Master Agreement), Internetworking Solutions shall make any such New
Technologies available for use by Retix on terms no less favorable than those
provided by Internetworking Solutions to its most favored customer and at a rate
equal to the greater of Internetworking Solutions' most favored customer
discount or a 50% discount off the then-current Internetworking Solutions
suggested end-user price for such New Technology, in each case for
Internetworking Solutions customers contemporaneously purchasing the Licensed
Materials under similar terms. Following the consummation of Internetworking
Solutions' Initial Public Offering, Internetworking Solutions shall make any
such New Technologies available for use by Retix on terms no less favorable than
those provided by Internetworking Solutions to Equivalent Purchasers (as defined
below) of similar Internetworking Solutions products and services. As used in
the foregoing sentence, the term "EQUIVALENT PURCHASERS" shall mean purchasers
of Internetworking Solutions products or services who (i) are not affiliated
with Internetworking Solutions, and (ii) purchase such products or services on
terms that are substantially equivalent to those applicable to Retix.
2.8 THIRD-PARTY ROYALTIES. No royalties or similar payments are
payable by Retix to Internetworking Solutions under this Agreement, except for
payments that may arise under Section 2.7 and except for royalties owed by
Internetworking Solutions to third parties with respect to Retix' or Retix'
sublicensees' use of the Licensed Materials (collectively, "THIRD-PARTY
ROYALTIES"). At the end of each calendar quarter, Internetworking Solutions
shall prepare a quarterly statement showing the Third Party Royalties actually
paid by Internetworking Solutions during such quarter. Within 15 days of its
receipt of such quarterly statement, Retix shall reimburse Internetworking
Solutions for the Third Party Royalty payments actually paid as indicated in
such statement.
2.9 WARRANTY DISCLAIMER. INTERNETWORKING SOLUTIONS MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED MATERIALS OR ANY
OTHER MATERIALS PROVIDED HEREUNDER AND EXPRESSLY DISCLAIMS THE IMPLIED
WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT.
3. DELIVERABLES. At the Closing pursuant to the Master Agreement between
Internetworking Solutions and Retix of even date herewith, Internetworking
Solutions shall provide Retix with a copy of all Licensed Materials, including
copies of all computer programs included in the Licensed Materials in Source
Form and Object Form (and including sufficient documentation for a complete
technical understanding of such programs) for Retix's use in accordance with the
terms of this Agreement. Thereafter, during the term of this Agreement,
Internetworking Solutions shall provide Retix with prompt written notification
of any additions, improvements or modifications to the Licensed Materials,
developed by or for Internetworking Solutions, and shall thereafter promptly
deliver to Retix a copy of any such additions, improvements or modifications
which the parties agree should be included in the Licensed Materials.
48
<PAGE>
4. SUPPORT. Retix shall be solely responsible for supporting and
providing maintenance of all or any part of the Licensed Materials and
documentation as provided to Retix's customers. Internetworking Solutions shall
have no obligation to provide any consultation or maintenance support to Retix's
customers with respect to all or any part of the Licensed Materials or other
subject matter of this Agreement.
5. CONFIDENTIALITY.
5.1 CONFIDENTIAL INFORMATION. As used in this Agreement, the term
"Confidential Information" shall mean any information disclosed by one party to
the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked "Confidential", "Proprietary" or
in some other manner to indicate its confidential nature. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such information is designated
as confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time (not to exceed thirty (30) days) after
its oral disclosure, and such writing is marked in a manner to indicate its
confidential nature and delivered to the receiving party. Notwithstanding any
failure to so identify it, however, all Licensed Materials to be supplied by
Internetworking Solutions hereunder shall constitute Internetworking Solutions'
Confidential Information without need for further marking.
5.2 CONFIDENTIALITY. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except as set forth herein, and shall use reasonable efforts not to
disclose such Confidential Information to any third party. Without limiting
the foregoing, each of the parties shall use at least the same degree of care
which it uses to prevent the disclosure of its own confidential information of
like importance to prevent the disclosure of Confidential Information disclosed
to it by the other party under this Agreement. Each party shall promptly notify
the other party of any actual or suspected misuse or unauthorized disclosure of
the other party's Confidential Information.
5.3 EXCEPTIONS. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which the receiving party can prove:
(i) was in the public domain at the time it was disclosed or has
entered the public domain through no fault of the receiving party;
(ii) was known to the receiving party, without restriction, at
the time of disclosure, as demonstrated by files in existence at the time of
disclosure;
(iii) is disclosed with the prior written approval of the
disclosing party;
(iv) was independently developed by the receiving party without
any use of the Confidential Information, as demonstrated by files created at the
time of such independent development;
(v) becomes known to the receiving party, without restriction,
from a source other than the disclosing party without breach of this Agreement
by the receiving party and otherwise not in violation of the disclosing party's
rights;
(vi) is disclosed generally to third parties by the disclosing
party without restrictions similar to those contained in this Agreement; or
49
<PAGE>
(vii) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, however,
that the receiving party shall provide prompt notice thereof to the disclosing
party to enable the disclosing party to seek a protective order or otherwise
prevent or restrict such disclosure;
provided, that Sections 5.3(ii) and (iv) shall not apply to any Licensed
Materials originally developed by Retix prior to the Effective Date,
subsequently transferred to Internetworking Solutions, and then licensed back to
Retix by Internetworking Solutions pursuant to this Agreement.
5.4 REMEDIES. Any breach of the restrictions contained in this
Section 5 is a breach of this Agreement which may cause irreparable harm to the
nonbreaching party. Any such breach shall entitle the nonbreaching party to
injunctive relief in addition to all legal remedies.
5.5 PRESERVATION OF NOTICES. Internetworking Solutions shall retain
title and copyrights to the Licensed Materials and related materials that are
provided by Internetworking Solutions to Retix. Appropriate copyright notices
shall be placed on the materials supplied by Internetworking Solutions (or as
modified by Internetworking Solutions following the closing contemplated by the
Master Agreement) and shall be embedded in the Source Form and Object Form, of
Licensed Materials, and such notices shall be retained on full or partial copies
made by Retix. Retix agrees to reproduce and include all notices, including but
not limited to, any proprietary notices, copyright notices, and restricted
rights legends, appearing thereon.
6. EXPORT CONTROLS.
6.1 EXPORT CONTROLS IN GENERAL. In exercising its rights under this
Agreement, Retix agrees to comply strictly and fully with all export controls
imposed on the Licensed Materials by any country or organization of nations
within whose jurisdiction Retix operates or does business and with all
applicable international, national regional and local laws including all
relevant commodity control laws and regulations in any transactions involving
Licensed Materials.
6.2 COMPLIANCE WITH EXPORT CONTROLS.
(a) With respect to exportation or re-exportation of any part of
the Licensed Materials, Retix agrees not to export or permit exportation without
first (i) obtaining any required written permission to do so from the United
States Office of Export Administration and any other appropriate governmental
agencies of the United States, or (ii) complying fully and strictly with all
requirements of any general license exempting the exportation from the
requirement for that permission.
(b) Retix agrees to comply with the United States Export
Administration Act of 1979 as amended (the "ACT"), and with the Export
Administration Regulations ("EAR") promulgated from time to time thereunder by
the United States Department of Commerce ("DOC") in connection with the exercise
of its rights hereunder.
(c) Each party agrees to execute any documents reasonably
requested by the other party (including applications for export licenses and
written assurances of non-reexportation) for the purpose of complying with the
Act and EAR. Retix agrees to keep, at a minimum, the following records required
by DOC for all Licensed Materials incorporated within Products shipped under
this Agreement:
50
<PAGE>
(i) Name and complete address of Retix's customer;
(ii) Customer's type of business and industry;
(iii) End use of Product sold; and
(iv) Serial numbers and dates of Product sold.
Retix understands and agrees that Licensed Materials may not be
exported, resold or reexported except in a manner which complies with this
Section and Internetworking Solutions shall not under any circumstances be
liable to Retix for any damages whatsoever in the event such export licenses are
not obtained or if any shipment of the Licensed Materials is delayed because of
delays in obtaining such licenses.
7. INDEMNIFICATION AND LIMITATION OF LIABILITY.
(a) Internetworking Solutions shall indemnify Retix and hold it
harmless from any loss, claim or damage (including attorney's fees) arising out
of Internetworking Solutions' use or possession of the Licensed Materials or
related materials (including, but not limited to, infringement or claims of
infringement of any patents, trademarks, copyrights or other intellectual
property rights).
(b) EXCEPT FOR ACTIONS PURSUANT TO SECTIONS 5.1, 5.2, 5.3 AND/OR 5.4,
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS, LOSS OF USE OR LOST DATA) ARISING FROM OR BASED UPON THIS AGREEMENT OR
ANY BREACH HEREOF, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER OR NOT
SUCH PARTY HAD BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. GENERAL PROVISIONS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
in business or an acquiror of all or substantially all of a party's business or
assets, this Agreement is not transferable or assignable without the consent of
the other party to this Agreement. Any assignment in derogation of the
foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification of
any provision of this Agreement or any right, power or remedy hereunder, whether
by agreement of the parties or by custom, course of dealing or trade practice,
shall not be effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought. No failure or
delay by either party in exercising any right, power or remedy with respect to
any of the provisions of this Agreement shall operate as a waiver of such
provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
51
<PAGE>
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
8.7 COMPLETE AGREEMENT. This Agreement and any schedules, exhibits
and documents referred to herein or executed contemporaneously herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof. This Agreement supersedes all prior written, and all prior and
contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof.
8.8 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.9 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Internetworking Solutions: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.10 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
52
<PAGE>
8.11 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
8.12 DRAFTING. This Agreement shall not be construed against any party
by reason of the drafting or preparation thereof.
8.13 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for any costs, expenses and claims ( including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement.
8.14 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
[SIGNATURE PAGE FOLLOWS]
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
INTERNETWORKING SOLUTIONS RETIX
By: By:
--------------------- ----------------------
Title: Title:
--------------------- ----------------------
54
<PAGE>
EXHIBIT A
LICENSED MATERIALS
EXHIBIT B
FORM OF END USER LICENSE AGREEMENT
55
<PAGE>
EXHIBIT B
LOAN AGREEMENT
This Loan Agreement (the "AGREEMENT") dated as of May 31, 1996, is by and
between Retix, a California corporation (the "LENDER") and Internetworking
Solutions, a California corporation (the "BORROWER").
1. LOAN.
1.1 Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Borrower set forth herein,
Lender agrees to provide Borrower with a credit line of up to $5,000,000 (the
"CREDIT LINE") to be secured by all of Borrower's assets pursuant to the
Security Agreement between Lender and Borrower of even date herewith (the
"SECURITY AGREEMENT").
1.2 Advances under the Credit Line may be advanced to Borrower in a
single funding or in separate fundings (each such event, a "FUNDING EVENT," and
each date thereof, a "FUNDING DATE"). Borrower shall provide Lender at least
ten (10) business days prior notice of each requested Funding Event. Each
Funding Event shall be evidenced by a promissory note of Borrower in favor of
Lender substantially in the form of EXHIBIT A to this Agreement (each a "NOTE"
and together the "NOTES").
1.3 Subject to the terms and conditions of this Agreement, on or
before May 31, 1998, Borrower may re-borrow amounts repaid under the entire
Credit Line. Beginning on June 1, 1998 and until May 31, 1999, Borrower may re-
borrow amounts repaid under the Credit Line up to a maximum of $2,000,000. Any
amounts re-borrowed under the Credit Line shall be evidenced by a Note, and
shall be subject to the terms and conditions of this Agreement, including the
repayment terms set forth in the Note and in Section 3 below. No loans shall be
made to Borrower after May 31, 1999, and any Notes outstanding as of such date
shall be repaid by Borrower in accordance with their respective terms.
1.4 Amounts borrowed or re-borrowed under the Credit Line shall be
used solely and exclusively to fund the Borrower's ongoing operating expenses as
approved by the Borrower's Board of Directors.
2. CONDITIONS PRECEDENT TO FUNDING. The obligation of Lender to make
advances under the Credit Line to Borrower, or any funding thereof, is subject
to the following conditions:
2.1 That Lender shall have received, on or before each Funding Date,
including the first such Funding Date, each of the following, in form and
substance satisfactory to Lender and its counsel, if any: (a) a Note in the
principal amount of the respective funding duly executed by Borrower; and (b) a
certificate of an officer of Borrower that the representations and warranties
contained in this Agreement are true and correct on the Funding Date and that
there is no Event of Default under this Agreement and no event or condition
which, with lapse of time or giving of notice, would become such an Event of
Default;
2.2 That no Event of Default under this Agreement and no event or
condition which would, with the giving of notice or lapse of time or both,
become such an Event of Default under this Agreement shall have occurred and be
continuing on or before each Funding Date; and
56
<PAGE>
2.3 That such Credit Line is, in aggregate amount as well as in the
timing of the respective Funding Event, consistent with Borrower's written
annual operating plan previously approved by its Board of Directors.
3. REPAYMENT OF LOAN.
3.1 REPAYMENT TERMS. Payments of interest must be made in on the
first day of each calendar quarter following the date of each Note. Payments of
principal must also be made on the first day of each calendar quarter following
the date of each Note out of any funds available to Borrower at such time.
Payments of both interest and principal shall also be due immediately upon the
occurrence of certain events as set forth below. Solely for purposes of
illustration, if on the first day of a calendar quarter,
(a) Borrower has (1) an outstanding promissory note in the
principal amount of $1,000,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $15,000, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2 in
the amount of $12,000 and (4) a cash balance in its accounts of $2,500,000, then
on such date Borrower must pay to Lender (1) the entire $27,000 in interest due
on Notes 1 and 2, then (2) the entire $1,000,000 principal balance due on Note
1, then (3) the entire $750,000 principal balance due on Note 2, and
(b) Borrower has (1) an outstanding promissory note in the
principal amount of $1,000,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $15,000, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2 in
the amount of $12,000 and (4) a cash balance in its accounts of $1,500,000, then
on such date Borrower must pay to Lender (1) the entire $27,000 in interest due
on Notes 1 and 2, then (2) the entire $1,000,000 principal balance due on Note
1, then (3) the entire remaining cash balance in Borrower' accounts ($473,000)
towards the reduction of the principal balance due on Note 2.
3.2 PREPAYMENT. Borrower may prepay the Credit Line, or any portion
thereof, at any time, without prepayment penalty.
3.3 LATE PAYMENT CHARGE. Payments of principal (and of interest to
the extent permitted by law) not made on the due date shall bear interest at a
rate per annum equal to the rate specified in each Note plus two percent (2%),
but not in excess of the maximum rate permitted by law until such unpaid amount
has been paid in full (whether before or after judgment). All interest provided
for in this Section 3.3 shall be payable on demand.
3.4 NON-BUSINESS DAYS. Whenever any payment required under this
Agreement falls due on a day that is not a business day, such payment shall be
made on the next succeeding business day.
3.5 ACCELERATION. At Lender's option, the entire principal amount
and interest due under the Notes shall become immediately due and payable, and
no further amounts may be borrowed or re-borrowed under the Credit Line: (i) if
Borrower sells all or substantially all of its assets, (ii) if Borrower
liquidates, dissolves or consummates any consolidation, merger or other
combination (except a merger, consolidation, sale of assets or other combination
in which the shareholders of Borrower immediately prior to the transaction hold
more than fifty percent (50%) of the outstanding voting securities of the
surviving or purchasing entity by virtue of voting equity securities of the
successor entity received in connection with such transaction in exchange for
shares or other securities of Borrower owned immediately prior to the
57
<PAGE>
closing of such transaction), or (iii) upon the occurrence of any Event of
Default (as defined below). In addition, 50% of the entire principal amount and
unpaid accrued interest under the Notes shall become immediately due and
payable, at Lender's option, if the Borrower consummates any transaction as a
result of which Lender ceases to own at least 50% of the then outstanding
capital stock of Borrower on an as converted to Common Stock basis.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower makes the following representations and warranties
which shall survive the execution and delivery of this Agreement and the Notes:
4.1 CORPORATE EXISTENCE AND POWERS. Borrower (a) is a corporation
duly organized, validly existing and in good standing under the laws of State of
California, and (b) has all corporate power and authority to carry out this
Agreement and the transactions contemplated herein. Borrower is not qualified
or licensed to do business as a foreign corporation in any state. Borrower does
not own, directly or indirectly, any equity or other interest in any other
corporation, association, partnership or other business entity.
4.2 CORPORATE AUTHORIZATIONS; BINDING EFFECT. The execution,
delivery and performance by Borrower of this Agreement are within the corporate
authority of Borrower, have been duly authorized by all necessary corporate
proceedings and do not and will not, to the knowledge of Borrower,
(i) contravene, or constitute a default under, any provisions of applicable law
or regulations or of the Articles of Incorporation or Bylaws of Borrower or of
any presently existing material contract, agreement, judgment, order, decree or
other material instrument binding upon Borrower or (ii) result in or require the
creation or imposition of any lien upon or with respect to any material property
now or hereafter owned by Borrower under any presently existing material
contract, agreement or other material instrument binding upon it, other than
that specifically created under this Agreement. To the knowledge of Borrower,
this Agreement constitutes, as of its execution, a legal, valid and binding
agreement enforceable against Borrower in accordance with its terms.
4.3 GOVERNMENTAL AND OTHER CONSENTS NOT REQUIRED. To the knowledge
of Borrower, no license, authorization, consent or approval of any governmental
body, other body or agency is required to be obtained by Borrower in connection
with the execution and delivery of this Agreement, or in connection with the
carrying out by Borrower of its obligations under this Agreement.
4.4 LITIGATION. There is no action, suit or proceeding pending, or
to the knowledge of Borrower, threatened, against or affecting Borrower before
any court or arbitration tribunal or any other governmental department,
administrative agency or instrumentality which, if such action, suit or
proceeding would be determined against Borrower, would affect the ability of
Borrower to perform its obligations under this Agreement. To its knowledge,
Borrower is not in default in any material respect with respect to any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award.
4.5 TITLE TO COLLATERAL. Borrower warrants that Borrower has
acquired good and merchantable title to the Collateral (as defined in the
Security Agreement between Borrower and Lender of even date with this Agreement)
at such time and in such manner as to create a first priority security interest
in the Collateral in favor of Lender (provided and on the condition that Lender
makes timely filings in the proper offices of all UCC-1 financing statements
furnished to it) free and clear of in each instance any other security
interests, liens, claims, encumbrances and rights of others except any lien
created by this Agreement,
58
<PAGE>
liens for taxes not yet due and payable and any security interests which will be
discharged at or before the funding contemplated hereby.
4.6 DISCLOSURE. All information heretofore, herein or hereafter
supplied to Lender by or on behalf of Borrower with respect to the Collateral is
and will be accurate and complete in all material respects.
4.7 RECONFIRMATION OF REPRESENTATIONS AND WARRANTIES. Borrower shall
reconfirm as of each Funding Date that all the aforesaid representations and
warranties remain valid and in full force and effect.
5. COVENANTS OF BORROWER. Borrower covenants that until the payment in
full of the Credit Line and fulfillment of all its obligations under this
Agreement, Borrower shall comply with the following covenants:
5.1 NO SALE. As long as any amount due under this Agreement or under
any Note remains unpaid, Borrower will not sell, assign, transfer, encumber,
lease or otherwise dispose of all, or any part, of its right, title and interest
in any of the Collateral pledged as security for the Credit Line, except for
licenses granted or sales of products by Borrower in the ordinary course of
business, or as set forth in this Agreement.
5.2 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral, or cause the Collateral to be maintained, in good order and
condition, reasonable wear and tear excepted.
5.3 PAYMENT OF TAXES. Borrower will pay when due and before any
interest or penalty is assessed, all taxes, federal, state or local, and all
levies or charges assessed against the Collateral to the appropriate
authorities. Borrower will discharge, or cause to be discharged, all liens,
security interests and encumbrances affecting the Collateral arising therefrom.
5.4 CORPORATE EXISTENCE. Borrower shall preserve and maintain its
existence as a corporation under the laws of the state of its incorporation and
all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.
5.5 FINANCIAL STATEMENTS.
(a) Borrower shall deliver to Lender:
(i) Within 90 days after the end of each fiscal year, an
audited balance sheet as of the end of such fiscal year, and a statement of
income and retained earnings for such fiscal year, and a statement of cash flows
for such fiscal year (each with the accompanying footnotes) all in reasonable
detail;
(ii) Within 45 days after the end of each of the first three
quarters of each fiscal year, Borrower shall provide copies of (A) the unaudited
balance sheet at the end of the interim period ending at the end of such
quarter, and (B) the related consolidated statement of income and changes in
financial position for the portion of the fiscal year ended at the end of such
period; each of the financial statements shall present fairly the consolidated
financial position of Borrower at the end of each such quarter, and the
consolidated results of operations and cash flows for the portion of the fiscal
year ended at the end of such period, all in conformity with generally accepted
accounting principles applied on a basis consistent
59
<PAGE>
with the financial statements referred to in (i) above (except that such
quarterly statements will not contain footnotes);
5.6 NOTICES. Borrower shall give immediate notice to Lender of:
(a) the occurrence of any Event of Default (as defined below)
accompanied by a certificate specifying the nature of such Event of Default, the
circumstances thereof and the action that Borrower has taken or proposes to
take;
(b) any claim, litigation or judicial proceeding which may exist
at any time which, if determined adversely, could have a material adverse effect
on the ability of Borrower to perform its obligations under this Agreement;
(c) any event that materially adversely affects the value of the
Collateral, the ability of Borrower to dispose of any Collateral or the rights
and remedies of Lender in relation thereto, including the levy of any legal
process against any of the Collateral; and
(d) any material adverse change in the composition of the
Collateral.
5.7 NO CONFLICTS. Borrower shall not enter into any agreement that
would materially impair or conflict with Borrower's obligations hereunder
without Lender's prior written consent, which consent shall not be unreasonably
withheld. Borrower shall not permit the inclusion in any material contract to
which its becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Borrower's rights and interest in
any property included within the definition of the Collateral acquired under
such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.
6. EVENTS OF DEFAULT. Any of the following events shall constitute an
"EVENT OF DEFAULT" under this Agreement and under the Notes:
6.1 PAYMENTS. Borrower shall fail to make any payment due under this
Agreement or under any Note after the same shall become due and such failure
shall continue for ten days after Borrower receives notice of non-payment;
6.2 LIENS. Borrower shall suffer the imposition upon the Collateral
or any part thereof of any claim, lien, security interest, encumbrance or charge
which is prior to or on a parity with the security interest granted under this
Agreement, except as contemplated by this Agreement, and such imposition shall
remain undischarged for a period of ten days after Borrower has actual notice or
actual knowledge thereof;
6.3 COVENANTS. Borrower shall fail to perform or observe any
material covenant, condition or agreement to be performed or observed by
Borrower in this Agreement, any Note or in any agreement or certificate of
Borrower furnished to Lender in connection herewith and such failure shall
continue unremedied after occurrence of such failure for a period of ten days
after the earlier of Borrower's actual knowledge of such failure or receipt of
written notice thereof;
60
<PAGE>
6.4 INSOLVENCY. Borrower shall have become insolvent or bankrupt or
admit in writing its inability to pay any of its debts as they mature or make an
assignment for the benefit of creditors, or a receiver or trustee shall have
been appointed with respect to Borrower; PROVIDED, that an Event of Default
shall not have occurred under this Agreement if such action is opposed by
Borrower and is dismissed within sixty days; or
6.5 BANKRUPTCY. Bankruptcy, reorganization arrangement, insolvency
or liquidation proceedings for relief under Title XI of the United States Code
or any bankruptcy law or similar law now or hereafter in force for the relief of
debtors shall be instituted by or against Borrower and, solely with respect to
any proceedings instituted against Borrower by a third party, Borrower shall
fail to dismiss or to stay such proceedings within sixty days of such
institution.
7. SURVIVAL OF REPRESENTATIONS. All representations and warranties made
in this Agreement or in any relevant documents furnished to Lender by Borrower
under this Agreement and executed by its authorized officer or agent shall
survive the execution and delivery of this Agreement and any such relevant
documents furnished to Lender by Borrower and executed by its authorized officer
or agent and shall continue so long as any obligations under this Agreement are
outstanding and unsatisfied.
8. MISCELLANEOUS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification of
any provision of this Agreement or any right, power or remedy hereunder, whether
by agreement of the parties or by custom, course of dealing or trade practice,
shall not be effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought. No failure or
delay by either party in exercising any right, power or remedy with respect to
any of the provisions of this Agreement shall operate as a waiver of such
provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
61
<PAGE>
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
8.7 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.8 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Borrower: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Lender: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.9 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
8.10 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
8.11 DRAFTING. This Agreement shall not be construed against any party
by reason of the drafting or preparation thereof.
8.12 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for its costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
62
<PAGE>
8.13 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
8.14 COMPLETE AGREEMENT. This Agreement, together with the exhibits
or schedules to this Agreement, the Notes, and the Security Agreement of even
date to this Agreement, is intended by the parties as a final expression of
their agreement and is intended as a complete statement of the terms and
conditions of the subject matter hereof and thereof.
[SIGNATURE PAGE FOLLOWS]
63
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and year first above written.
"LENDER"
RETIX
By: _______________________________
Title: ____________________________
"BORROWER"
INTERNETWORKING SOLUTIONS
By: _______________________________
Title: ____________________________
64
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$ ____________ ___________, 199_
FOR VALUE RECEIVED, Internetworking Solutions, a California corporation
(the "BORROWER"), hereby promises to pay to the order of Retix, a California
corporation (the "LENDER") the principal sum of ___________________
($___________), together with interest at the lesser of the prime rate as
announced from time to time by First Interstate Bank or the maximum rate
permitted by law per annum, on the unpaid amount owing under this Note for the
period commencing on the date hereof. Payments of interest shall be made in
immediately available funds on the first day of each calendar quarter following
the date of this Note. Payments of principal shall be made in immediately
available funds on the first day of each calendar quarter following the date of
this Note out of any funds available to Borrower at such time in accordance with
the terms of the Loan Agreement dated _____________, 1996 between Borrower and
Lender (the "LOAN AGREEMENT").
All interest and principal due under this Note shall also be due
immediately upon the occurrence of certain events as set forth in the Loan
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to such terms in the Agreement.
Borrower may prepay amounts due under this Note, or any portion thereof, at
any time, without prepayment penalty.
All payments to be made to the Lender under this Note shall be made to
Lender at its principal offices at 2401 Colorado Avenue, Santa Monica,
California 90404 or such other address as Lender may designate in writing.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CALIFORNIA.
INTERNETWORKING SOLUTIONS
a California corporation
By:
-----------------------------
Title:
--------------------------
65
<PAGE>
EXHIBIT C
INTERNETWORKING SOLUTIONS
STOCK OPTION AGREEMENT
Internetworking Solutions, a California corporation (the "COMPANY"), has
granted to OPTIONEE (the "OPTIONEE"), an option (the "OPTION") to purchase a
total of SHARES shares of Common Stock (the "SHARES"), at the price determined
as provided herein, and in all respects subject to the terms, definitions and
provisions of the 1996 Stock Option Plan (the "PLAN") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION. This Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE PRICE. The exercise price is $0.50 for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) VESTING CALCULATIONS.
(1) Initially, this Option shall not be exercisable.
Subject to the other terms and conditions of this Option, on the date (the
"CLIFF VESTING DATE") that is one year after the Vesting Commencement Date (as
set forth on the signature page of this Agreement) this Option shall become
exercisable for a total of 1/3 of the Shares subject to the Option; thereafter,
this Option shall be exercisable cumulatively, to the extent of 1/36th of the
Shares subject to the Option at the end of each month after the Cliff Vesting
Date.
(2) Notwithstanding the foregoing Section 3(i)(a)(1), the
exercisability of this Option shall be accelerated as follows: Upon
consummation of any sale (a "THIRD PARTY SALE") by Retix, a California
corporation ("RETIX") of all of the Company's securities owned by Retix to any
third party other than (i) Internetworking Solutions Management (as defined in
the Master Agreement between Retix and the Company dated May 31, 1996 (the
"MASTER AGREEMENT") or any Affiliates thereof (as defined below) or (ii) in the
Company's Initial Public Offering (as defined in the Master Agreement) or in
connection with a distribution of any of the Company's securities owned by Retix
to its shareholders, then in addition to any Shares that are already vested
hereunder, this Option shall become immediately exercisable for an additional
number of Shares equal to the total number of Shares which would otherwise have
become vested over a period of 12 months; PROVIDED, HOWEVER, that at least 1/3
of the Shares originally subject to the Option remain unvested as of the date of
closing of the Third Party Sale. In the event that less than 1/3 of the Shares
originally subject to the Option remain unvested as of the date of closing of
the Third Party Sale, then this Option shall continue to vest in accordance with
the terms of Section 3(i)(a)(1) above, and the Option shall not be exercisable
for any additional Shares as of such closing date. As used herein, the term
"AFFILIATE"
66
<PAGE>
shall have the meaning given in the Securities Act of 1933 and Securities
Exchange Act of 1934 and any rules and regulations promulgated thereunder.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8 and 9 below, subject to the limitations contained in
subsections 3(i)(d) and (e).
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.
(e) In the event that this Option becomes exercisable at a time
or times which, when this Option is aggregated with all other incentive stock
options granted to Optionee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the date of grant of the option covering such share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year, the amount in excess of
$100,000 shall be treated as a nonstatutory stock option, pursuant to Section 5
of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his or her Investment Representation Statement in
the form attached as EXHIBIT A.
5. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
67
<PAGE>
(iii) surrender of other shares of Common Stock of the Company which
(A) either have been owned by the Optionee for more than six (6) months on the
date of surrender or were not acquired, directly or indirectly, from the Company
and (B) have a fair market value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of
Optionee's Continuous Status as an Employee, he or she may, but only within
two (2) months after the date of such termination (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), exercise this Option to the extent that he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise this Option at the date of such termination, or if he
or she does not exercise this Option within the time specified herein, the
Option shall terminate.
8. DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section 7 above, in the event
of termination of Optionee's Continuous Status as an Employee as a result of his
or her total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option as set forth in Section 11 below), exercise this Option
to the extent he or she was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(which he or she was entitled to exercise) within the time specified herein, the
Option shall terminate.
68
<PAGE>
(ii) Notwithstanding the provisions of Section 7 above, in the event
of termination of Optionee's Continuous Status as an Employee as a result of any
disability not constituting a total and permanent disability (as defined in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of termination of employment (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent he or she was entitled to exercise it at the
date of such termination; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three
(3) months from the date of termination of employment, this Option will cease to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such exercise in an amount generally measured by
the difference between the exercise price for the Shares and the fair market
value of the Shares on the date of exercise. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within three (3)
months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee twelve (12) months after the date of death, subject to the
limitations contained in Section 3(i)(e) above; or
(ii) within two (2) months after the termination of Optionee's
Continuous Status as an Employee, the Option may be exercised, at any time
within three (3) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), by Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of the Optionee only by the Optionee or a
transferee permitted by this Section. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
11. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
69
<PAGE>
12. EARLY DISPOSITION OF STOCK. Optionee understands that if he or she
disposes of any Shares received under this Option within two (2) years after the
date of this Agreement or within one (1) year after such Shares were transferred
to him or her, he or she will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
generally measured by the difference between the price paid for the Shares and
the lower of the fair market value of the Shares at the date of the exercise or
the fair market value of the Shares at the date of disposition. The amount of
such ordinary income may be measured differently if Optionee is an officer,
director or 10% shareholder of the Company, or if the Shares were subject to a
substantial risk of forfeiture at the time they were transferred to Optionee.
OPTIONEE HEREBY AGREES TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE
DATE OF ANY SUCH DISPOSITION. Optionee understands that if he disposes of such
Shares at any time after the expiration of such two-year and one-year holding
periods, any gain on such sale will be taxed as long-term capital gain.
13. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such offering, Optionee hereby agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Shares or other securities of the Company (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters; PROVIDED, HOWEVER, that the Optionee
need not so agree unless a majority of the Company's officers and directors and
a majority of the holders of at least 5% of the Company's outstanding securities
also agree to be similarly bound.
[SIGNATURE PAGE FOLLOWS]
70
<PAGE>
DATE OF GRANT: , 1996
------------ INTERNETWORKING SOLUTIONS
By:
--------------------
Title:
-----------------
Vesting Commencement Date: VESTINGDATE
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN
ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS OR HER
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE ACKNOWLEDGES THAT THIS OPTION IS THE ONLY OPTION OR OTHER RIGHT TO
BE OFFERED, PROVIDED OR GRANTED TO THE OPTIONEE WITH RESPECT TO THE SECURITIES
OF THE COMPANY OR ANY AFFILIATED ENTITY AND THAT THIS OPTION SUPERSEDES ALL
PRIOR AGREEMENTS, UNDERSTANDINGS OR DISCUSSIONS, WRITTEN OR ORAL, WITH RESPECT
TO THE FOREGOING.
Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Dated: __________________ ______________________________
OPTIONEE, Optionee
71
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: OPTIONEE
COMPANY:
SECURITY:
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "SECURITIES
ACT").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including among other
things: (1) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly
72
<PAGE>
with a market maker (as said term is defined under the Securities Exchange Act
of 1934); and, in the case of an affiliate, (2) the availability of certain
public information about the Company, and the amount of securities being sold
during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of exercise of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (2) the availability of
certain public information about the Company, (3) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(d) MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such offering, Optionee hereby agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any of the Securities or any other securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; PROVIDED, HOWEVER, that
the Optionee need not so agree unless a majority of the Company's officers and
directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
___________________________
OPTIONEE
Date:_______________________
73
<PAGE>
EXHIBIT D
INTERNETWORKING SOLUTIONS DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 4 of the
Master Agreement (the "AGREEMENT") by and between Retix and Internetworking
Solutions. The Section numbers in this Disclosure Statement correspond to the
Section numbers in the Agreement; however, any information disclosed herein
under any Section number shall be deemed to be disclosed and incorporated into
any other Section number under the Agreement where such disclosure would be
appropriate. Any terms used in this Disclosure Statement shall have the
meanings defined for them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Internetworking
Solutions.
74
<PAGE>
EXHIBIT E
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of May 31, 1996 by and between Internetworking
Solutions, a California corporation (the "COMPANY") and Retix, a California
corporation (the "PURCHASER").
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
1.1 AUTHORIZATION. The Company will authorize the sale and issuance
of up to 16,000,000 shares of its Preferred Stock, having the rights, privileges
and preferences as set forth in the Amended and Restated Articles of
Incorporation (the "RESTATED ARTICLES") in the form attached to this Agreement
as EXHIBIT A.
1.2 SALE OF PREFERRED. Subject to the terms and conditions of this
Agreement, in exchange for the transfer of the Transferred Assets (subject to
the Transferred Liabilities and Transferred Contracts) as provided in the Master
Agreement between the parties of even date herewith (the "MASTER AGREEMENT"),
the Purchaser agrees to purchase at the Closing (as defined below), and the
Company agrees to sell and issue to the Purchaser, 16,000,000 shares of the
Company's Preferred Stock (the "SHARES" or "PREFERRED") at a price of $5.00 per
share.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
under this Agreement shall be held at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Master
Agreement (the "CLOSING") or at such other time and place upon which the Company
and the Purchaser shall agree (the date of the Closing is hereinafter referred
to as the "CLOSING DATE").
2.2 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate or certificates representing the number of Shares to be
purchased by the Purchaser at such Closing, against delivery to the Company by
the Purchaser of all necessary and appropriate instruments to effect the
transfer of the Transferred Assets, as provided in the Master Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on
EXHIBIT B attached to this Agreement, the Company hereby represents and warrants
to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
(a) is a corporation duly organized, validly existing and in good standing under
the laws of State of California, and (b) has all corporate power and authority
to carry out this Agreement and the transactions contemplated herein. The
Company is not qualified or licensed to do business as a foreign corporation in
any state. The Company does not own, directly or indirectly, any equity or
other interest in any other corporation, association, partnership or other
business entity. The Company has furnished Purchaser with copies of its
Articles of Incorporation and Bylaws. Said copies are true, correct and
complete and contain all amendments through the Closing Date.
75
<PAGE>
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Shares hereunder, to issue the Common Stock issuable upon
conversion of the Shares and to carry out and perform its obligations under the
terms of this Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Restated Articles, consist of:
20,000,000 shares of Common Stock, none of which are issued and outstanding; and
16,000,000 shares of Preferred Stock, none of which were issued and outstanding
prior to the Closing. All issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved 16,000,000 shares of Preferred Stock for issuance
hereunder, 16,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, 3,800,000 shares for issuance pursuant to the Company's 1996
Stock Option Plan and 200,000 shares for issuance pursuant to the Company's 1996
Directors' Stock Option Plan. The Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Restated Articles.
All securities of the Company to be outstanding immediately following the
Closing will be issued in compliance with applicable federal and state
securities laws. Except as described above, there are no preemptive rights,
options or warrants or other conversion privileges or rights presently
outstanding to purchase any of the authorized but unissued stock of the Company.
The Company is not obligated to repurchase any shares of its capital stock or
any other securities.
3.4 AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders (if any) necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares (and the Common Stock
issuable upon conversion of the Shares) and the performance of all of the
Company's obligations under this Agreement has been taken or will be taken prior
to the Closing. This Agreement, when executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company enforceable in
accordance with its terms. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid and
nonassessable and will have the rights, preferences and privileges described in
the Restated Articles. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and, when issued in compliance
with the provisions of this Agreement and the Restated Articles will be validly
issued, fully paid and nonassessable, and the Shares and such Common Stock will
be free of any liens or encumbrances other than those created by or imposed upon
the holders thereof through no action of the Company; provided, however, that
the Shares (and the Common Stock issuable upon conversion thereof) may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal, except as set forth in the Rights Agreement in the form
attached hereto as EXHIBIT C (the "RIGHTS AGREEMENT").
3.5 NO FINANCIAL STATEMENTS. The Company has not prepared any
balance sheet, income statement, statement of operations, statement of changes
in financial position and shareholders' equity or other financial statement.
3.6 PATENTS AND OTHER INTANGIBLE ASSETS. Without having conducted
any special infringement or patent search, the Company is unaware of any
infringement of or conflict with the rights of others with respect to any
patents, patent applications, inventions, processes, formulae or copyrights
necessary for the operation of the business of the Company as now conducted and
as proposed to be conducted.
76
<PAGE>
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles of Incorporation or
Bylaws, each as amended and in effect on and as of the Closing, or in any
material respect of any material term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement, and the issuance
of the Shares and the Common Stock issuable upon conversion of the Shares, have
not resulted and will not result in any material violation of, or conflict with,
or constitute a material default under, or result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default which
materially and adversely affects the business of the Company as conducted or as
proposed to be conducted, or any of the Company's properties or assets.
3.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties (nor, to the best
of the Company's knowledge, against officers of the Company) before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
threat thereof), which, either in any case or in the aggregate, might result in
any material adverse change in the business or financial condition of the
Company or any of its properties or assets, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement or any action
taken or to be taken in connection herewith.
3.9 EMPLOYEES. To the best of the Company's knowledge, after
reasonable investigation, no employee or consultant of the Company is in
violation of any term of any employment, employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such person with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees. The Company
has no employee benefit plans presently in force with respect to profit-sharing,
pensions, stock options, or other stock benefits. The Company is not aware of
any key employee of the Company who has any plans to terminate his or her
employment with the Company.
3.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Shares (and the Common Stock issuable upon conversion of the Shares), or
the consummation of any other transaction contemplated by this Agreement,
except for filing of the Restated Articles in the office of the Secretary of
State of the State of California and filing of such notice as required by
Section 25102(f) of the California Corporate Securities Law of 1968, and the
compliance with other applicable blue sky laws.
3.11 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 5 of this Agreement and in written responses to the
Company's inquiries, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement and the issuance of the Common Stock
to be issued upon conversion of the Shares, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.12 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
77
<PAGE>
3.13 DISCLOSURE. To the best of the Company's knowledge, after
reasonable investigation, no representation or warranty of the Company contained
in this Agreement and the Exhibits attached hereto, or any certificate furnished
or to be furnished to the Purchaser at the Closing contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
3.14 NO CONFLICT OF INTEREST. The Company is not indebted, directly
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the best of the Company's knowledge, none
of said officers or directors, or any members of their immediate families, are
indebted to the Company (other than in connection with purchases of the
Company's stock) or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship other than the Purchaser, or any firm or corporation
which competes with the Company except that officers, directors and/or
shareholders of the Company may own stock in publicly traded companies which may
compete with the Company. To the best of the Company's knowledge, no officer or
director or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnity of any indebtedness of any other person, firm or
corporation.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company with respect to the purchase of
the Shares as follows:
(a) EXPERIENCE. Purchaser has substantial experience in
evaluating and investing in private placement transactions so that Purchaser is
capable of evaluating the merits and risks of Purchaser's investment in the
Company. Purchaser, by reason of its business or financial experience or the
business or financial experience of its professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, has the capacity to
protect its own interests in connection with the purchase of the Shares under
this Agreement.
(b) INVESTMENT. Purchaser is acquiring the Shares and the
underlying Common Stock for investment for Purchaser's own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. Purchaser understands that the Shares and the
underlying Common Stock have not been, and will not be, registered under the
Securities Act by reason of a specific exemption therefrom, and that any such
exemption would depend, among other things, upon the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement. Purchaser has not been formed for the specific
purpose of acquiring the Shares or the underlying Common Stock.
(c) RULE 144. Purchaser acknowledges that the Shares and the
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through
78
<PAGE>
a "broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any three-
month period not exceeding specified limitations.
(d) NO PUBLIC MARKET. Purchaser understands that no public
market now exists for any of the securities issued by the Company, that the
Company has made no assurances that a public market will ever exist for the
Shares or the underlying Common Stock and that, even if such a public market
exists at some future time, the Company may not then be satisfying the current
public information requirements of Rule 144.
(e) ACCESS TO DATA. Purchaser and its representatives have met
with representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions raised by Purchaser or
its representatives concerning the transaction have been answered to the
satisfaction of Purchaser and its representatives. Purchaser's decision to
purchase the Shares is based in part on the answers to such questions as
Purchaser and its representatives have raised concerning the transaction and on
its own evaluation of the risks and merits of the purchase and the Company's
proposed business activities.
(f) AUTHORIZATION. This Agreement when executed and delivered
by the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
(g) BROKERS OR FINDERS. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Purchaser any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
5. CONDITIONS TO CLOSING OF PURCHASER. The Purchaser's obligation to
purchase the Shares at the Closing is, at the option of the Purchaser, subject
to the fulfillment or waiver as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 of this Agreement shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Shares and the Common Stock issuable upon
conversion of the Shares.
79
<PAGE>
5.5 ARTICLES OF INCORPORATION. The Restated Articles shall have been
filed with the Secretary of State of the State of California.
5.6 RIGHTS AGREEMENT. The Company shall have entered into the Rights
Agreement.
5.7 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
6. CONDITIONS TO CLOSING OF COMPANY. The Company's obligation to sell
and issue the Shares at the Closing is, at the option of the Company, subject to
the fulfillment or waiver of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 of this Agreement shall be true and correct when made, and shall be
true and correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Shares and the Common Stock issuable upon
conversion of the Shares.
6.3 ARTICLES OF INCORPORATION. The Restated Articles shall have been
filed with the Secretary of State of the State of California.
6.4 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.5 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following
reports to the Purchaser for so long as the Purchaser is a holder of any Shares
purchased by such person pursuant to this Agreement (or Common Stock issued upon
conversion of the Shares):
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) Contemporaneously with delivery to holders of Common Stock,
a copy of each report of the Company delivered to holders of the Company's
Common Stock.
80
<PAGE>
(c) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to discuss
the affairs, finances and accounts of the Company with the Company's officers,
all at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated to provide any
information that it reasonably considers to be a trade secret or to contain
confidential information.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser (together with
any affiliate of such Purchaser) holds not less than 500,000 Shares (or an
equivalent number of shares consisting of the Shares or Common Stock issued upon
conversion of the Shares), as adjusted for recapitalizations, stock splits,
stock dividends and the like, the Company will mail the following reports to
such Purchaser:
(a) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and consolidated
statements of cash flow of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail.
(b) As soon as practicable after the end of each fiscal month,
and in any event within thirty (30) days thereafter, an unaudited consolidated
balance sheet of the Company as at the end of such month, and unaudited
consolidated statements of income and unaudited consolidated statements of cash
flow for such month and for the current fiscal year to date. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied (other than accompanying notes), all in
reasonable detail.
(c) Within 30 days at the end of each fiscal year, an annual
budget, operating or similar plan for the upcoming fiscal year (the "PLAN").
(d) Any material amendments or changes to such Plan promptly
following any such amendments or changes, and in any event within 30 days of the
date thereof.
7.3 TRANSFER OF INFORMATION RIGHTS. The information rights set forth
in Sections 7.1 and 7.2 may be transferred in any nonpublic transfer of Shares
(or Shares of Common Stock issued upon conversion of the Shares), provided that
the Company is given written notice of such transfer, and provided further that
the right to receive the information set forth in Section 7.2 may only be
transferred to a holder of, or affiliated holders who in the aggregate hold, at
least 500,000 Shares (or an equivalent number of Shares consisting of the Shares
or Common Stock issued upon conversion of the Shares, as appropriately adjusted
for stock splits and the like). In the event that the Company reasonably
determines that provision of information to a transferee pursuant to this
Section 7.3 would materially adversely impact its proprietary position, such
information may be edited in the manner necessary to avoid such impact.
7.4 TERMINATION OF COVENANTS. The covenants set forth in this
Section 7 shall terminate on and be of no further force or effect upon the
earlier of (i) the consummation of the Company's sale of its Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act, immediately subsequent to which the Company
shall be obligated to file annual and quarterly reports with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
81
<PAGE>
1934 (the "EXCHANGE ACT") or (ii) the registration by the Company of a class of
its equity securities under Section 12(b) or 12(g) of the Exchange Act.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement; provided, however, that the right of the
Purchaser to purchase the Shares shall not be assignable without the prior
written consent of the Company.
8.4 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Master
Agreement and the other documents delivered pursuant to this Agreement at the
Closing constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and supersede all prior
agreements, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least a majority of the Shares (or shares
of Common Stock issued upon conversion of the Shares) may, with the written
consent of the Company, waive, modify or amend on behalf of all holders, any
provisions hereof benefiting such holders, so long as the effect thereof will be
that all such holders will be treated equally.
8.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Company: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Purchaser: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
82
<PAGE>
8.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any holder of any Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 EXPENSES. The Company and the Purchaser shall each bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASER"
INTERNETWORKING SOLUTIONS, RETIX,
a California corporation a California corporation
By: By:
----------------------- ------------------------
Title: Title:
-------------------- ---------------------
83
<PAGE>
EXHIBIT F
LIST OF PRODUCTS
INTERNATIONAL PRODUCT LIST
Effective Date: APRIL 2, 1996
84
<PAGE>
PRODUCT CODES AND PRICING - ROUTERXCHANGE 7000 FAMILY
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
ROUTERXCHANGE 7000 CENTRAL SITE ROUTERS
NOTE: FOR 110VAC MODELS, USE -1 IN THE PRODUCT ID INSTEAD OF -2
RX7500-2 Multiprotocol router chassis with
five module slots. Base unit comprises $2,500 30 days
chassis, enclosure and power supply
(230V) only.
RX7550-2 Multiprotocol router chassis with five $5,000 30 days
module slots and support for redundant
power supply. Base unit comprises
chassis, enclosure and one power supply
(230V) only.
ROUTERXCHANGE 7000 REGIONAL SITE ROUTERS
RX7240-2 Multiprotocol router with 2 I/O card slots.
Single processor system, includes chassis,
enclosure, power supply (230V), processor
board with 4 MB of memory, and software
pre-installed. $1,745 30 days
RX7260-2 Multiprotocol router with 3 I/O card
slots. Single processor system, includes
chassis, enclosure, power supply (230V),
processor board with 8 MB of memory, and
software pre-installed. $4,995 30 days
ROUTERXCHANGE 7000 REMOTE SITE ROUTERS
RX7221 Two port high performance multiprotocol
router. Includes AUI port for connection
to Ethernet LAN, and one WAN interface.
Appropriate 'intelligent' WAN cable must
be specified (see below). $2,375 30 days
RX7222 Three port high performance multiprotocol
router. Includes AUI port for connection
to Ethernet LAN, and two WAN interfaces.
Appropriate 'intelligent' WAN cables must
be specified (see below). $2,675 30 days
RX7102-2 Two port IP/IPX router (230V). Includes
AUI port for connection to Ethernet LAN,
and choice of one WAN interface module. $2,250 30 days
RX7103-2 Three port IP/IPX router (230V). Includes
AUI port for connection to Ethernet LAN,
and choice of two WAN interface modules. $2,875 30 days
-85-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
OPTIONS FOR MODELS 7500, 7550 ONLY
PROC.
MODULES:
RMP7705/2-8 High performance Routing Management
Processor module with i960CF processor,
8 MB of DRAM, and software pre-installed. $5,325 30 days
FP7710/2-8 High performance Forwarding Processor
module with i960CF processor and 8 MB
of DRAM. $4,075 30 days
I/O MODULE:
FDDI7715 FDDI multi-mode DAS and SAS interface
(requires full chassis module slot).
Does not require separate FP module. $12,500 30 days
OPTION FOR MODEL 7550 ONLY
PRX50-2 Redundant load-sharing power supply
(230V). $2,500 30 days
-86-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
OPTIONS FOR MODELS 7500, 7550, 7240, 7260
I/O CARDS:
10B5-1 Ethernet interface with AUI connector
(single slot). $750 30 days
10B2-1 10BASE2 Ethernet interface (single slot). $750 30 days
10BT-1 10BASE-T Ethernet interface (single slot). $750 30 days
10BT-12 10BASE-T 12-port Ethernet hub (single slot). $1,495 30 days
TR-1 Token Ring interface (single slot). $2,500 30 days
V35-1 V.35 WAN interface (single slot). $1,250 30 days
X21-1 X.21 WAN interface (single slot). $1,250 30 days
449-1 RS-449 WAN interface (single slot). $1,250 30 days
RS232-1 RS-232 WAN interface (single slot). $1,250 30 days
G703-1 G.703 WAN interface (single slot). $1,875 30 days
DUWAN-1 Dual Port WAN interface (single slot).
Requires Ver. 3.2 software or later for
7500, 7550; or Ver. 2.3 or later for
7240, 7260. Appropriate Dual Port WAN
cable must be specified (see below). $1,875 30 days
ATM-1 ATM TAXI interface (2 card slots).
Requires Ver. 3.0 software or later for
7500, 7550; or Ver. 2.3 or later for 7260.
(Not supported by 7240) $12,500 30 days
MANUALS:
RX7500M Two volume User Guide, including binders
(covers V2.x and V3.x). $185 30 days
ACCESSORIES:
SBP-1 Blanking plate for empty interface card
slot. $15 30 days
FBP-1 Blanking plate for empty chassis module
slot (7500, 7550). $50 30 days
10BT-12AK Network Adapter kit for 10BT-12 hub. $375 30 days
CA-7001 Cable, RS-232 DTE to DCE, 2 meters $125 30 days
CA-7002 Cable, X.21 DTE to DCE, 2 meters $125 30 days
CA-7003 Cable, V.35 DTE to DCE, 2 meters $250 30 days
CA-7004 Cable, RS-449 DTE to DCE, 2 meters $175 30 days
CA-RS232 Cable, Dual Port WAN to RS-232 male $325 30 days
CA-X21 Cable, Dual Port WAN to X.21 male $325 30 days
CA-V35M Cable, Dual Port WAN to V.35 male $325 30 days
CA-V35F Cable, Dual Port WAN to V.35 female $325 30 days
CA-RS449 Cable, Dual Port WAN to RS-449 male $325 30 days
RM7200 Rackmount kit (RX7240 and RX7260 only). $185 30 days
RM7500 Rackmount kit (RX7500 only). $185 30 days
RM7550 Rackmount kit (RX7550 only). $185 30 days
RX7000-Binder Empty set of binders for User Guide. $60 30 days
-87-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
UPGRADES FOR MODELS 7500, 7550, 7250
NOTE: SEE UPGRADE SECTION UNDER ORDERING INFORMATION FOR DETAILS OF THE VARIOUS
MODULES. PRICING SHOWN IS FOR ADVANCE SHIPMENT OF NEW MODULE IN EXCHANGE FOR
OLD MODULE. IF OLD MODULE IS NOT RETURNED TO RETIX WITHIN 30 DAYS, CUSTOMER
WILL BE BILLED FULL PRICE OF NEW MODULE
RMP7705/2-8UG Upgrade from original RMP or RMP/1-8
(excluding 7250). $3,450 30 days
FP7710/2-8UG Upgrade from original FP or FP/1-8. $2,825 30 days
RX7000 MEM-8UG 8 MB SIMM upgrade kit for RMP/2 or FP/2
modules. RMP/2 memory may be expanded
from 2 MB to 10 MB, or from 8 MB to 16 MB.
FP/2 memory may be expanded from 2 MB
to 8 MB. $1,875 30 days
SOFTWARE:
RX7500V3(01) Version 3.x software upgrade kit with
single unit license. Includes one complete
set of pages of the User Guide (without
binders). $250 30 days
RX7500V3(05) Version 3.x software upgrade kit with
five unit license. Includes one complete
set of pages of the User Guide (without
binders). $1,250 30 days
RX7500V3(10) Version 3.x software upgrade kit with ten
unit license. Includes one complete set
of pages of the User Guide (without
binders). $2,500 30 days
-88-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
UPGRADES FOR MODELS 7240, 7260
SOFTWARE (SPECIFY nn = 40 OR 60):
RX72nnV2(01) Version 2.x software upgrade kit with
single unit license. Includes one
complete set of pages of the User Guide
(without binders). $250 30 days
RX72nnV2(05) Version 2.x software upgrade kit with
five unit license. Includes one complete
set of pages of the User Guide
(without binders). $1,250 30 days
RX72nnV2(10) Version 2.x software upgrade kit with ten
unit license. Includes one complete set
of pages of the User Guide (without
binders). $2,500 30 days
OPTIONS FOR MODELS 7221, 7222
ACCESSORIES:
CA-7220-RS232 Intelligent cable, RS-232 $250 30 days
CA-7220-X21 Intelligent cable, X.21 $250 30 days
CA-7220-V35 Intelligent cable, V.35 $250 30 days
CA-7220-RS449 Intelligent cable, RS-449 $250 30 days
RM7220 Rack mount kit. $112 30 days
UPGRADES FOR MODELS 7221, 7222
RX7220MEM-4UG 4 MB DRAM SIMM Upgrade Kit $1,000 30 days
OPTIONS FOR MODELS 7102, 7103
NOTE: REQUIRED CHOICE OF WAN INTERFACE CARD(S) MUST BE SPECIFIED FROM FOLLOWING
LIST, WHEN ORDERING
NEW MODEL 7102 OR 7103:I/O CARDS:
7101/IN RS-232 WAN interface. N/C 30 days
7102/IN X.21(barriered) WAN interface. $925 30 days
7103/IN V.35 WAN interface. N/C 30 days
7104/IN RS-449 WAN interface. N/C 30 days
7105/IN X.21 (unbarriered) WAN interface. N/C 30 days
7135/IN G.703 WAN interface. $925 30 days
7136/IN T1 (DSU) WAN interface. $925 30 days
ACCESSORIES:
CA-7001 Cable, RS-232 DTE to DCE, 2 meters $125 30 days
CA-7002 Cable, X.21 DTE to DCE, 2 meters $125 30 days
CA-7003 Cable, V.35 DTE to DCE, 2 meters $250 30 days
CA-7004 Cable, RS-449 DTE to DCE, 2 meters $175 30 days
-89-
<PAGE>
RM7100 Rack mount kit. $185 30 days
SPARE PARTS FOR MODELS 7102, 7103
I/O CARDS:
7101 RS-232 WAN interface. $1,575 30 days
7102 X.21(barriered) WAN interface. $2,500 30 days
7103 V.35 WAN interface. $1,575 30 days
7104 RS-449 WAN interface. $1,575 30 days
7105 X.21 (unbarriered) WAN interface. $1,575 30 days
7135 G.703 WAN interface. $2,500 30 days
7136 T1 (DSU) WAN interface. $2,500 30 days
ADDITIONAL MANUALS FOR ROUTERXCHANGE PRODUCTS
RX7500M Two volume ROUTERXCHANGE 7000 User
Guide, including binders, for Models
7500, 7550, 7240 and 7260 routers. $185 30 days
RX7000M ROUTERXCHANGE 7000 Quick Start manual,
for Models 7500, 7550, 7240 and
7260 routers. $40 30 days
RX7220M 7220 Series User Guide $95 30 days
RX7100M 7100 Series User Guide $65 30 days
-90-
<PAGE>
PRODUCT CODES AND PRICING - 4000 FAMILY
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
4900 SERIES REMOTE BRIDGE/ROUTERS
NOTE: FOR 110VAC MODELS, USE -1 IN THE PRODUCT ID INSTEAD OF -2
4941/S-2 Ethernet and single WAN port
multiprotocol router (230V). Includes
AUI and 10BASE2 connectors for LAN port,
and choice of one WAN interface module. $5,450 30 days
4942/S-2 Ethernet and dual WAN port multiprotocol
router (230V). Includes AUI and 10BASE2
connectors for LAN port, and choice of
one WAN interface module. Second WAN port
is priced separately. $6,195 30 days
4982/S-2 Same as 4942/S-2 with enhanced performance. $6,900 30 days
4800 SERIES REMOTE BRIDGES
4810/S-2 Ethernet and single WAN port bridge
(230V). Includes AUI and 10BASE2 connectors
for LAN port, and choice of one WAN
interface module. $2,495 30 days B
4850/S-2 Ethernet and dual WAN port bridge
(230V). Includes AUI and 10BASE2 connectors
for LAN port, and choice of one WAN
interface module. Second WAN port is
priced separately. $3,295 30 days
4880/S-2 Similar to 4850/S-2, but with higher
performance. $6,600 30 days
OPTIONS FOR REMOTE BRIDGES AND BRIDGE/ROUTERS
NOTE: REQUIRED CHOICE OF WAN INTERFACE CARD FOR PORT 1 MUST BE SPECIFIED FROM
FOLLOWING LIST:
I/O CARDS:
4101/IN RS-232 WAN interface. N/C 30 days
4102/IN X.21(barriered) WAN interface. $925 30 days
4103/IN V.35 WAN interface. N/C 30 days
4104/IN RS-449 WAN interface. N/C 30 days
4105/IN X.21 (unbarriered) WAN interface. N/C 30 days
4135/IN G.703 WAN interface. $925 30 days
4136/IN T1 WAN interface (Integral DSU). $925 30 days
NOTE: OPTIONAL CHOICE OF WAN INTERFACE CARD FOR PORT 2 MAY BE SPECIFIED FROM
FOLLOWING LIST (WHERE APPLICABLE):
4101 RS-232 WAN interface. $1,575 30 days
4102 X.21(barriered) WAN interface. $2,500 30 days
4103 V.35 WAN interface. $1,575 30 days
4104 RS-449 WAN interface. $1,575 30 days
4105 X.21 (unbarriered) WAN interface. $1,575 30 days
-91-
<PAGE>
4135 G.703 WAN interface. $2,500 30 days
4136 T1 WAN interface (Integral DSU). $2,500 30 days
ACCESSORIES:
CA-232 RS-232 cable for direct back-to-back
connection between bridges (DTE male to
DTE male, 2 meters [6.5 ft.]) $50 30 days
CA-35 V.35 cable for direct back-to-back
connection between bridges (DTE male to
DTE male, 2 meters [6.5 ft.]) $175 30 days
CA-449 RS-449 cable for direct back-to-back
connection between bridges (DTE male to
DTE male, 2 meters [6.5 ft.]) $90 30 days
4100 19" Rackmount kit for all 4800 and 4900
Series units. $165 30 days
-92-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
LOCAL BRIDGE/ROUTERS
NOTE: FOR 110VAC MODELS (WHERE APPLICABLE), USE -1 IN THE
PRODUCT ID INSTEAD OF -2
4560 Local Ethernet bridge and IP router
(with autoranging powersupply). Includes
two AUI ports. $2,250 30 days
4760/S-2 Similar to 4560, but includes choice of
interfaces for the 2 LAN ports (230V).
HAS NO CE CERTIFICATION. $3,450 30 days
LOCAL BRIDGES
2265M/S-2 Local Ethernet bridge (230V). Includes
AUI and 10BASE2 connectors for both LAN
ports. HAS NO CE CERTIFICATION. $1,000 30 days
4460 Local Ethernet bridge (with autoranging
power supply). Includes two AUI ports. $2,125 30 days
4660/S-2 Similar to 4460, but includes choice of
interfaces for the 2 LAN ports (230V). HAS
NO CE CERTIFICATION. $3,125 30 days
OPTIONS FOR LOCAL BRIDGES AND BRIDGE/ROUTERS
I/O CARDS (4660 AND 4760 ONLY):
4661/IN 10BASE5 Ethernet interface. N/C 30 days
4662/IN 10BASE2 Ethernet interface. N/C 30 days
4663/IN 10BASE-T Ethernet interface. N/C 30 days
4664/IN FOIRL Ethernet interface. $250 30 days
ACCESSORIES:
2201 19" Rackmount kit for 2265M $125 30 days
4100 19" Rackmount kit for 4660 and 4760/S $165 30 days
RM4X60 19" Rackmount kit for 4460 and 4560 $125 30 days
SPARE PARTS FOR LOCAL BRIDGES AND BRIDGE/ROUTERS
I/O CARDS (4660 AND 4760 ONLY):
4661 10BASE5 Ethernet interface. $450 30 days
4662 10BASE2 Ethernet interface. $450 30 days
4663 10BASE-T Ethernet interface. $450 30 days
4664 FOIRL Ethernet interface. $695 30 days
ADDITIONAL MANUALS FOR 4000 FAMILY PRODUCTS
-93-
<PAGE>
R4900M 4900 Series User Guide $65 30 days
R4800M 4800 Series User Guide $65 30 days
R4760M Model 4760 User Guide $65 30 days
R4660M Model 4660 User Guide $65 30 days
R4560M Model 4560 User Guide $65 30 days
R4460M Model 4460 User Guide $65 30 days
R2265M Model 2265 Installation Guide $65 30 days
-94-
<PAGE>
NETWORK MANAGEMENT SOFTWARE - PRODUCT CODES AND PRICING
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
RXV-SUN RETIXVISION for Sun SPARCstation - Provides
a graphical user interface to perform
SNMP-based configuration and management
for many Retix products. The application
runs in a standalone mode under Sun-OS, or
it can be invoked through almost any
third-party SNMP Manager software (e.g.
SunNet Manager or HP OpenView). $2,500 30 days
RXV-HP RETIXVISION for HP workstation - Provides
a graphical user interface to perform
SNMP-based configuration and management
for many Retix products. The application
acts in a standalone mode under HP-UX, or it
can be invoked through almost any third-
party SNMP Manager software (e.g. HP
OpenView). $2,500 30 days
-95-
<PAGE>
PRODUCT CODES AND PRICING - SWITCHSTAK 5000 FAMILY
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
SWITCHSTAK 5000 ETHERNET SWITCHES
5510 SWITCHSTAK high performance, stackable
10-port base unit - 8 ports with
10BASE-T connectors, 2 with both 10BASE-T
and AUI. $3,750 30 days
5512 Same as 5510, but with dual redundant
power supplies.
$4,750 30 days
SWITCHSTAK 5000 OPTIONS
VERSION 2.X SOFTWARE IS PRE-REQUISITE FOR ALL THE FOLLOWING I/O MODULE OPTIONS -
SEE SOFTWARE UPGRADES, BELOW.
100BASE-TX 100Mbps Fast Ethernet expansion module
with RJ-45 connector. $1,250 30 days
100BASE-FX-SC 100Mbps Fast Ethernet expansion module
with a fiber-optic SC duplex-connector. $1,500 30 days
100BASE-FX-ST 100Mbps Fast Ethernet expansion module
with fiber-optic ST connectors. $1,500 30 days
EXP-6 Six-port Ethernet expansion module. $2,500 30 days
STAK-CC Copper STAKBUS module. $1,250 30 days
STAK-FF Multimode fiber STAKBUS module (2Km range). $3,125 30 days
STAK-FC Multimode fiber/Copper STAKBUS module. $2,500 30 days
STAK-CF Copper/Multimode fiber STAKBUS module. $2,500 30 days
STAK-FF-SM Single mode fiber STAKBUS module
(0-19Km range) $8,750 30 days
STAK-FC-SM Single mode fiber/Copper STAKBUS module. $5,625 30 days
STAK-CF-SM Copper/Single mode fiber STAKBUS module. $5,625 30 days
STAK-FF-SMLD Long distance single mode fiber
STAKBUS module (12-30Km range) $10,000 30 days
STAK-FC-SMLD Long distance single mode fiber/Copper
STAKBUS module. $6,250 30 days
STAK-CF-SMLD Copper/ Long distance single mode fiber
STAKBUS module. $6,250 30 days
RM5500 Rack mount kit $60 30 days
SWITCHSTAK 5000 SOFTWARE UPGRADES
5500V2(01) Version 2.x software upgrade kit with
single unit license. Includes one copy of
the User Guide. $125 30 days
5500V2(04) Version 2.x software upgrade kit with
four unit license. Includes one copy
of the User Guide. $500 30 days
ADDITIONAL MANUAL FOR SWITCHSTAK 5000 FAMILY
1080430-01 SWITCHSTAK 5000 User Guide $65 30 days
-96-
<PAGE>
PRODUCT CODES AND PRICING - FIBERRING 100 FAMILY
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
FIBERRING 100 CHASSIS
FR100 FIBERRING 100 Main Chassis with
processor & monitor modules, and
four I/O slots:
-- With 110 or 220VAC power supply. $4,250 QUOTE
-- With -48VDC power supply. $6,250 QUOTE
FR100EXP FIBERRING 100 Expansion Chassis
with twisted pair cable, slave &
monitor modules, and four I/O slots:
-- With 110 or 220VAC power supply. $2,325 QUOTE
-- With -48VDC power supply. $4,350 QUOTE
FRNMS-0000 Network Management pack - REQUIRED.
Includes software disk, and cable
(DB-25 to RJ-11) for connection between
management station and FIBERRING 100 unit. N/C QUOTE
HOT STAGE Factory configuration and test of
complete system before shipment. $450 QUOTE
per
chassis
NETWORK MANAGEMENT ACCESSORIES FOR FIBERRING 100 ONLY
0500-0162 PCNMS Multiport Interface for PC, for 3
to 10 rings. $2,000 QUOTE
0500-0162A PCNMS Multiport Interface for PS/2, for 3
to 10 rings. $2,250 QUOTE
URNMS-00xx Network Management upgrade, including
software disk and EPROMS (xx = number of
FR100 units to be upgraded). $625 QUOTE
EXPANSION INTERFACE FOR FIBERRING 100 ONLY
0500-0152 Expansion Master Module for FR100 Main
Chassis, supports 2 expansion chassis. $375 QUOTE
COMPOSITE MODULES FOR FIBERRING 100 ONLY
0500-0130 CM100 1300nm Multimode RLB 8db ST
Primary Ring. $3,125 QUOTE
0500-0177 CM100 1300nm Multimode RLB 12db
ST Primary Ring. $4,190 QUOTE
0500-0165 CM100 1300nm Singlemode RLB 17db
ST Primary Ring. $3,950 QUOTE
0500-0166 CM100 1300nm Singlemode RLB 20db
ST Primary Ring. $6,050 QUOTE
0500-0130S CM100 1300nm Multimode RLB 8db
ST Secondary Ring. $3,125 QUOTE
0500-0177S CM100 1300nm Multimode RLB 12db
ST Secondary Ring. $4,195 QUOTE
-97-
<PAGE>
Ring.
0500-0165S CM100 1300nm Singlemode RLB 17db
ST Secondary Ring. $3,950 QUOTE
0500-0166S CM100 1300nm Singlemode RLB 20db
ST Secondary Ring. $6,050 QUOTE
0500-0172 CM100 1300nm Singlemode RLB 25db
ST Primary Ring. $7,950 QUOTE
0500-0185 CM100 1550nm Singlemode RLB 16db
ST Primary Ring. QUOTE QUOTE
0500-0172S CM100 1300nm Singlemode RLB 25db
ST Secondary Ring. $7,950 QUOTE
0500-0185S CM100 1550nm Singlemode RLB 16db
ST Secondary Ring. QUOTE QUOTE
5110 CHASSIS
5110 5110 Chassis with monitor module
and four I/O slots:
-- With 110 or 220VAC power supply. $1,950 QUOTE
-- With -48VDC power supply. $2,950 QUOTE
COMPOSITE MODULES (28 MBPS) FOR 5110 ONLY
0500-0072 CM28 850 nm Multimode RLB 12db
ST Primary Ring. $2,250 QUOTE
0500-0087 CM28 1300 nm Multimode RLB 16db ST
Primary Ring. $5,200 QUOTE
0500-0086 CM28 1300 nm Singlemode RLB 17db ST
Primary Ring. $5,500 QUOTE
0500-0072S CM28 850 nm Multimode RLB 12db
ST Secondary Ring. $2,250 QUOTE
0500-0087S CM28 1300 nm Multimode RLB 16db
ST Secondary Ring. $5,200 QUOTE
0500-0086S CM28 1300 nm Singlemode RLB 17db
ST Secondary Ring. $5,500 QUOTE
-98-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
LAN I/O MODULES FOR FR100 MAIN CHASSIS ONLY
0500-0148 TR 4/16 Mbps Repeater. 2 DB-9S connectors. $3,125 QUOTE
0500-0179 SEM 1 10BASE-T Port. 1 RJ45 and 1 AUI
connector and SNMP. $4,495 QUOTE
0500-0180 SEM 4 10BASE-T Ports. 4 RJ45 and 1 AUI
connectors and SNMP. $6,250 QUOTE
0500-0195 SEM 4 10BASE-T Ports. 4 RJ45/4 AUI
connectors and SNMP. $6,250 QUOTE
0500-0196 SEM 4 10BASE-T Ports. 3 RJ45/10BASE-FL
and 1 RJ45/AUI connector combinations
and SNMP. $7,495 QUOTE
0500-0193 SEM 8 10BASE-T Ports. 8 RJ45 and 1
AUI connectors and SNMP $7,850 QUOTE
LAN I/O MODULES FOR FR100, 5110
0500-0125 Ethernet Simple Bridge Module. One
AUI and one BNC connector. $2,500 QUOTE
0500-0052 ARCNET Two Port Repeater. Two BNC
connectors. $2,375 QUOTE
IBM 3270 I/O MODULES FOR FR100, 5110
0500-0139 3270 Controller End 32 BNC connectors. $2,325 QUOTE
0500-0046 3270 Terminal End 32 BNC connectors. $2,325 QUOTE
0500-0050 3270 Terminal End 32 RJ11 connectors. $2,325 QUOTE
0500-0049 3270 Terminal End 2 50-pin Telco
connectors. $2,325 QUOTE
0500-0141 3270/3299 Controller End 4 BNC
connectors. $2,325 QUOTE
0500-0061 3299 Terminal End 4 BNC connectors. $2,325 QUOTE
0500-0183 3170 Controller End 32 BNC connectors. $2,325 QUOTE
0500-0184 3170 Terminal End 32 BNC connectors. $2,325 QUOTE
IBM AS400/SYSTEM 3X I/O MODULES FOR FR100, 5110
0500-0113 AS400 Controller End 8 Twinax connectors. $2,325 QUOTE
0500-0167 AS400 Terminal End 8 Twinax connectors. $2,325 QUOTE
T1/E1 I/O MODULES FOR FR 100, 5110
0500-0135 E1 - 3 Full Duplex Channels at 2.048
Mbps. 6 BNC and 1 DB-15 connectors. $2,450 QUOTE
0500-0145 T1 - 4 Full Duplex Channels at 1.544
Mbps. 5 DB-15 connectors. $2,450 QUOTE
ASYNCHRONOUS I/O MODULES FR 100, 5110
0500-0013 RS-232 16 Channels. 16 DB-25s. Autobaud
to 19.2 Kbps/channel. $1,075 QUOTE
-99-
<PAGE>
0500-0010 RS-232 36 Channels. 36 RJ-11s. Autobaud
to 19.2 Kbps/channel. $1,075 QUOTE
0500-0149 RS-232 72 Channels. 6 50-pin Telcos.
Autobaud to 19.2 Kbps/ch. $1,750 QUOTE
0500-0082 RS-422 16 Channels. 16 DB-25s.
Autobaud to 19.2 Kbps/channel. $2,000 QUOTE
SYNCHRONOUS I/O MODULES FOR FR 100, 5110
0500-0019 V.35 8 Channels up to 64 Kbps. 8
MRAC 34-pin connectors. $2,625 QUOTE
0500-0045 V.35 4 Channels - any mix of
1.544 Mbps and 722 Kbps.
4 MRAC 34-pin connectors. $3,050 QUOTE
0500-0163 RS-232 16 Channels at 19.2 Kbps, or
8 channels at 38.4 Kbps. 16 DB-25
connectors. $2,450 QUOTE
0500-0021 RS-422 8 Channels up to 64 Kbps.
8 DC-37 connectors. $1,875 QUOTE
0500-0164A RS-422 3 Channels at 1.024 or 2.048
Mbps. 3 DC-37 connectors. $4,375 QUOTE
0500-0164E RS-422 4 Channels at 512, 256 or 128
Kbps. 4 DC-37 connectors. $4,375 QUOTE
0500-0094 V.35 4 Channels at 1.344 Mbps,
D4 framing. 4 MRAC 34-pin connectors. $3,350 QUOTE
0500-0164B RS-422 4 Channels - any mix of 1.544
Mbps and 722 Kbps. 4 DC-37 connectors. $4,375 QUOTE
0500-0164C RS-422 4 Channels - any mix of 1.536
Mbps and 768 Kbps. 4 DC-37 connectors. $4,375 QUOTE
0500-0164D RS-422 4 Channels at 768, 384, or 192
Kbps. 4 DC-37 connectors. $4,375 QUOTE
-100-
<PAGE>
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
MISCELLANEOUS PARTS FOR FR100, 5110
0000-2901 I/O blank metal panel for covering
empty I/O slots. $30 QUOTE
0000-2902 CM100 blank metal panel for covering
empty composite slots. $25 QUOTE
0500-0PS00 110VAC power supply. $625 QUOTE
0500-0PS22 220VAC power supply. $625 QUOTE
0500-0PS48 -48VDC power supply. $1,625 QUOTE
1403-0000 19/23" Telco rackmount bracket. $95 QUOTE
1405-0000 19" rackmount bracket for front flush. $95 QUOTE
1411-0000 23" rackmount bracket for front flush. $95 QUOTE
1412-0000 19" rackmount bracket for back flush with
I/Os toward front. $95 QUOTE
8000-6916 Loopback plug, DB25, loops RS-232 Sync
or Async channel. $55 QUOTE
8000-6917 Loopback plug, RJ-11, loops RS-232 Sync
or Async channel. $55 QUOTE
0500-0101 Monitor Module. $450 QUOTE
0500-0131 Processor Module (FR100 Main Chassis only).. $1,195 QUOTE
0500-0153 Expansion Slave (FR100EXP only). $625 QUOTE
Dual PC Two power cord option for redundant
power supplies. $625 QUOTE
UPGRADES FOR 5110 ONLY
FU100-0128 Upgrades a 5110 with a Monitor module to
an FR100 Expansion Chassis; includes
expansion slave module and a twisted
pair cable. $1,000 QUOTE
FU100-0129 Upgrades a 5110 to FR100 Expansion
Chassis; includes expansion slave module,
monitor module and a twisted pair cable. $1,625 QUOTE
ADDITIONAL MANUALS FOR FIBERRING PRODUCTS
1087456-01 FR100 User Guide $65 QUOTE
-101-
<PAGE>
PRODUCT CODES AND PRICING - 3400 FAMILY
PRODUCT ID DESCRIPTION PRICE AVAIL. CAT.
STAND-ALONE MODELS
3410-0048-
ST-1 1300nm Multimode 4 or 16 Mbps
RLB 12db. $3,100 30 days
3410S-0000
- -ST-1 850nm Multimode 4 or 16 Mbps
RLB 15db. $1,550 30 days
RACKMOUNT MODELS
3410-0053-ST 1300nm Multimode 4 or 16 Mbps
RLB 12db. $2,995 30 days
3410S-0040-ST 850nm Multimode 4 or 16 Mbps RLB 15db. $1,450 30 days
ACCESSORIES
2800-0056 19" rackmount chassis with redundant
power supply.
Holds 8 cards. $1,875 QUOTE
2800-0042 19" rackmount chassis with single
power supply. Holds 8 cards. $1,250 QUOTE
2800-0061 19" rackmount chassis with no
power supply. Holds 8 cards. $750 QUOTE
2800-0060 Upgrade Kit from single to redundant
power supply. $750 QUOTE
1308-0000 Replacement power supply for 2800-00XX
Series Token Ring Extender
rackmount chassis $600 QUOTE
1301-0000 Wall-mount power supply for Stand-Alone
models. $75 30 days
-102-
<PAGE>
PRODUCT CODES AND PRICING - BASIC SUPPORT PROGRAMS
PRODUCT ID DESCRIPTION PRICE/YR AVAIL. CAT.
ROUTERXCHANGE 7000 FAMILY
RX71XX RX7102, RX7103 $400 IMMED C
RX722X RX7221, RX7222 $400 IMMED C
RX7240 $400 IMMED C
RX7260 $400 IMMED C
RX7250 $700 IMMED C
RX75XX RX7500, RX7550 $700 IMMED C
4000 FAMILY
2265 Local Bridge $300 IMMED C
3660 Token Ring Bridge $300 IMMED C
3880 Token Ring Bridge $300 IMMED C
4560, 4760 Local Bridge/Routers $300 IMMED C
4460, 4660 Local Bridges $300 IMMED C
48XX 4810, 4820, 4850, 4880 $300 IMMED C
49XX 4941, 4942, 4982 $300 IMMED C
NETWORK MANAGEMENT SOFTWARE
7050 Network Management Pack for SunNet Manager $500 IMMED C
7100 RETIXVision $500 IMMED C
SWITCHSTAK 5000
52XX 5210, 5212 $200 IMMED C
54XX 5410, 5412, 5430 $200 IMMED C
55XX 5510, 5512 $200 IMMED C
FIBERRING FAMILY
FR100 FR100, FR100EXP $300 IMMED C
51XX 5100, 5110 $300 IMMED C
3400 FAMILY
3410 All models $300 IMMED C
-103-
<PAGE>
PRODUCT CODES AND PRICING - COMPREHENSIVE SUPPORT PROGRAMS
PRODUCT ID DESCRIPTION PRICE/YR AVAIL. CAT.
ROUTERXCHANGE 7000 FAMILY
RX7500 Includes Chassis and RMP - FPs and
interfaces priced separately $320 IMMED C
RX7550 Includes Chassis and RMP - FPs and
interfaces priced separately $320 IMMED C
RX7250 Includes Chassis, RMP, FP - interfaces
priced separately $450 IMMED C
RX7260 Includes Chassis and processors -
interfaces priced separately $450 IMMED C
RX7240 Includes Chassis and processors -
interfaces priced separately $450 IMMED C
RX7221 All inclusive $450 IMMED C
RX7222 All inclusive $450 IMMED C
RX7102 All inclusive $450 IMMED C
RX7103 All inclusive $450 IMMED C
INTERFACES FOR MODEL 7500, 7550, 7250, 7260, 7240
FP Fowarding Processor $245 IMMED C
FDDI FDDI multimode $750 IMMED C
10B2 Ethernet $45 IMMED C
10B5 Ethernet $45 IMMED C
10BT-1 Ethernet $45 IMMED C
10BT-12 12 port Ethernet hub $90 IMMED C
TR Token Ring $116 IMMED C
V35 V.35 WAN $75 IMMED C
X21 X.21 WAN $75 IMMED C
449 RS-449 WAN $75 IMMED C
RS232 RS-232 WAN $75 IMMED C
G703 G.703 WAN $113 IMMED C
ATM ATM TAXI $750 IMMED C
PRX50 Power Supply $150 IMMED C
DUWAN Dual-port WAN $113 IMMED C
4000 FAMILY
49XX All inclusive $450 IMMED C
48XX All inclusive $375 IMMED C
4560, 4760 All inclusive $375 IMMED C
2265, 4460,
4660 All inclusive $375 IMMED C
3660, 3880 All inclusive $450 IMMED C
-104-
<PAGE>
PRODUCT ID DESCRIPTION PRICE/YR AVAIL. CAT.
SWITCHSTAK 5000 (5200, 5400)
5210 Standalone $400 IMMED C
5212 Standalone - Redundant $400 IMMED C
5410 Stackable - Stakbus priced separately $400 IMMED C
5412 Stackable - Redundant - Stakbus
priced separately $400 IMMED C
SB-CC Stakbus - Copper to Copper $112 IMMED C
SB-FF Stakbus - Fiber to Fiber $217 IMMED C
SB-FC Stakbus - Fiber to Copper $172 IMMED C
SB-CF Stakbus - Copper to Fiber $172 IMMED C
SWITCHSTAK 5000 (5500)
5510 Stackable - Stakbus and other modules
priced separately $400 IMMED C
5512 Stackable - Redundant - Stakbus and
other modules priced separately $400 IMMED C
100BASE-TX 100 Mbps Fast Ethernet module (RJ-45) $100 IMMED C
100BASE-FX-SC 100 Mbps Fast Ethernet module
(fiber-optic SC) $100 IMMED C
100BASE-FX-ST 100 Mbps Fast Ethernet module
(fiber-optic ST) $100 IMMED C
EXP-6 Six-port Ethernet expansion module $200 IMMED C
STAK-CC Stakbus - Copper $100 IMMED C
STAK-FF Stakbus - Multimode fiber $200 IMMED C
STAK-FC Stakbus - Multimode fiber/Copper $150 IMMED C
STAK-CF Stakbus - Copper/Multimode fiber $150 IMMED C
STAK-FF-SM Stakbus - Single mode fiber $525 IMMED C
STAK-FC-SM Stakbus - Single mode fiber/Copper $350 IMMED C
STAK-CF-SM Stakbus - Copper/Single mode fiber $350 IMMED C
STAK-FF-SMLD Stakbus - Long distance single mode fiber $600 IMMED C
STAK-FC-SMLD Stakbus - Long distance single mode
fiber/Copper $400 IMMED C
STAK-CF-SMLD Stakbus - Copper/ Long distance single
mode fiber $400 IMMED C
FIBERRING 100, 5100, 5110, 3410 PRODUCTS
All products QUOTE QUOTE C
-105-
<PAGE>
COURSES AND PRICING
All training courses are in reseller discount category C.
COURSE DESCRIPTION PRICE DURATION
100 LEVEL COURSES - TECHNOLOGY
101 Introduction to Internetworking with
the Retix ROUTERXCHANGE 7000:
Basics of Routing Technology $2,250.00 5 days
102 Internetworking with the Retix
ROUTERXCHANGE 7000 for Resellers $1,350.00 3 days
103 Installation, Configuration and
Operation of Retix 4000 Series Bridge
/Routers $900.00 2 days
104 Installation, Configuation and Operation
of the Network Management System with
RETIXVISION $525.00 1 day
105 QuickStart for the Retix ROUTERXCHANGE
7000 $525.00 1 day
106 QuickStart for the Retix SWITCHHSTAK
5000 $900.00 2 days
107 Introduction to the Retix FIBERRING $900.00 2 days
200 LEVEL COURSES - TECHNOLOGY
200 Introduction to Ethernet and Token
Ring with the Retix ROUTERXCHANGE 7000 $525.00 1/2 day each
201 Local Area Network protocols with
Retix ROUTERXCHANGE 7000 (TCP/IP,
IPX, and DECnet) $900.00 2 days
202 Wide Area Network protocols with Retix
ROUTERXCHANGE 7000 (LAPB, X.25, RFC877,
PPP, Frame Relay, ISDN) $900.00 2 days
203 Fiber Distributed Data Interface (FDDI)
with Retix ROUTERXCHANGE 7000 $900.00 2 days
204 Open Shortest Path First (OSPF) with
Retix ROUTERXCHANGE 7000 $900.00 2 days
300 LEVEL COURSES - ADVANCED
300 Network Troubleshooting with the Retix
ROUTERXCHANGE 7000 (and RCNE exam on a
third full day) $900.00 2 days
301 Troubleshooting the Retix ROUTERXCHANGE
7000 for Resellers $525.00 1 day
308 Network Design using the Retix
ROUTERXCHANGE 7000 $525.00 1 day
-106-
<PAGE>
EXHIBIT G
RETIX DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 3 of the
Master Agreement (the "AGREEMENT") by and between Retix and Internetworking
Solutions. The Section numbers in this Disclosure Statement correspond to the
Section numbers in the Agreement; however, any information disclosed herein
under any Section number shall be deemed to be disclosed and incorporated into
any other Section number under the Agreement where such disclosure would be
appropriate. Any terms used in this Disclosure Statement shall have the
meanings defined for them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Internetworking
Solutions.
-107-
<PAGE>
EXHIBIT H
RIGHTS AGREEMENT
This Rights Agreement (the "AGREEMENT") is entered into as of May 31, 1996,
by and among Internetworking Solutions, a California corporation (the "COMPANY")
and Retix, a California corporation, which is purchasing shares of Preferred
Stock of the Company pursuant to the Preferred Stock Purchase Agreement of even
date herewith (the "PURCHASE AGREEMENT").
In consideration of the mutual promises and covenants hereinafter set
forth, the parties agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable upon
conversion of the Preferred Shares (the "CONVERSION SHARES") and (ii) any Common
Stock issued or issuable in respect of the Preferred Shares or Conversion Shares
or other securities issued or issuable with respect to the Preferred Shares or
Conversion Shares upon any stock split, stock dividend, recapitalization or
similar event or any Common Stock otherwise issued or issuable with respect to
the Preferred Shares or Conversion Shares; PROVIDED, HOWEVER, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
(1) if and so long as they have not been (A) sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto are removed upon the consummation of such sale, or (2) if with respect
to any Holder all shares of the Company's capital stock then held by Holder may
not be sold in any single three month period without registration pursuant to
Rule 144 promulgated under the Securities Act.
"HOLDER" shall mean any person holding Registrable Securities and
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"PREFERRED SHARES" shall mean an aggregate of 16,000,000 shares
of Preferred Stock issued pursuant to a Preferred Stock Purchase Agreement dated
of even date herewith between the Company and Retix.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
-108-
<PAGE>
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"RETIX" shall mean Retix, a California corporation, and any of
its successors, transferees or assigns.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
"INITIATING HOLDERS" shall mean Retix or any transferees of Retix
under Section 1.14 hereof who in the aggregate are Holders of not less than
fifty percent (50%) of the Registrable Securities.
1.2 RESTRICTIONS. The Preferred Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Holders will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares and the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with legends in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
-109-
<PAGE>
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SAID ACT."
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities in
order to implement the restrictions on transfer established in this Section 1.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "no action"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which a Holder which is a corporation distributes Restricted
Securities after six (6) months after the purchase thereof solely to its
majority-owned subsidiaries or affiliates for no consideration, or (c) in any
transaction in which a Holder which is a partnership distributes Restricted
Securities after six (6) months after the purchase thereof solely to partners
thereof for no consideration, provided that each transferee agrees in writing to
be subject to the terms of this Section 1.4. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act.
1.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive
from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the anticipated aggregate offering price, net of underwriting
discounts and commissions, of which would exceed $10,000,000 and the offering
price to the public of which would be at least $7.50 per share, the Company
will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
-110-
<PAGE>
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice from
the Company; PROVIDED, HOWEVER, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance pursuant
to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(3) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a) in any 12 month period, such
registration has been declared or ordered effective and the securities offered
pursuant to such registration have been sold; or
(4) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5) and this paragraph, the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders. In the event that Holders of
Registrable Securities wish to join in the request of the Initiating Holders
made pursuant to this Section 1.5(a), the provisions of Section 1.6 of this
Agreement shall govern the ability of such Holders to join in such request.
-111-
<PAGE>
(b) UNDERWRITING. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to
Section 1.5 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 1.5 and the inclusion of such
Holder's Registrable Securities in the underwriting, to the extent requested, to
the extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders (which managing underwriter shall
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 1.5, if the managing underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Initiating Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Initiating Holders at the time of
filing the registration statement; the provisions of Section 1.6 shall govern
the ability of the Holders of Registrable Securities not held by the Initiating
Holders to participate. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within thirty (30) days after receipt of such
written notice from the Company by any Holder, but only to the extent
-112-
<PAGE>
that such inclusion will not diminish the number of securities included by the
Company or by holders of the Company's securities who have demanded such
registration.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration or exclude them entirely. The Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting pursuant to piggyback registration rights similar to this
Section 1.6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities held by other holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 REGISTRATION ON FORM S-3.
(a) If any Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered for
the offering on such form; PROVIDED, HOWEVER, that the Company shall not be
required to effect more than two registrations pursuant to this Section 1.7 in
any twelve (12) month period. The Com-
-113-
<PAGE>
pany will (i) promptly give written notice of the proposed registration to all
other Holders, and (ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within thirty (30) days after receipt of such written notice from the Company.
The provisions of Section 1.5(b) shall be applicable to each registration
initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act,
(ii) during the period starting with the date sixty (60) days prior to the
filing of, and ending on a date six (6) months following the effective date of,
a registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective, or
(iii) if the Company shall furnish to such Holder a certificate signed by the
president of the Company stating that, in the good faith judgment of the Board
of Directors, it would be seriously detrimental to the Company or its
shareholders for registration statements to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a single period not to exceed one hundred twenty
(120) days from the receipt of the request to file such registration by such
Holder or Holders.
1.8 SHELF REGISTRATION.
(a) Retix shall be entitled to demand, at any time, that the
Company secure the effectiveness of a "shelf" registration statement under
Rule 415 under the Securities Act with the SEC, for the sale by Retix of all of
the Registrable Securities held thereby. Prior to demanding any such
registration, Retix shall first consult with the Company for a period of at
least 30 days otherwise, concerning the need for such registration in light of
Retix's ability to sell freely all of the shares of Common Stock issuable upon
conversion of the Securities in the United States public markets under Rule 144
or otherwise.
(b) Following such consultation, whether to demand such
Registration Statement shall be at the sole discretion of Retix, and the Company
shall take all action necessary to comply with such demand. The Company
represents and warrants that on the date the Registration Statement becomes
effective, the Registration Statement will comply in all material respects with
the applicable requirements of the Securities Act and the rules thereunder; on
the date of its effectiveness the Registration Statement (including any
documents incorporated by
-114-
<PAGE>
reference therein) will 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 made therein not misleading, provided, however, that no
representation is made by the Company with respect to written information
furnished to the Company by or on behalf of the Retix specifically for inclusion
in the Registration Statement; and the final prospectus contained in the
Registration Statement, if not filed pursuant to Rule 424(b), will not, and on
the date of any filing pursuant to Rule 424(b), such final prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, provided, however, that no representation is made by the Company
with respect to written information furnished to the Company by or on behalf of
Retix specifically for inclusion in such prospectus. The Company will promptly:
(A) notify Retix when the Registration Statement is declared effective; and
(B) notify Retix of any stop-order or similar proceeding by the SEC or any state
securities authority.
(c) The Company hereby covenants and agrees that (A) no other
holder of the Company's securities (including convertible securities) other than
transferees of Retix is entitled to or shall be hereafter given the right to
participate in any registration under this Section 1.8 whether by the exercise
of a demand or "piggyback" registration right and (B) no other registration
statement covering any other holder's securities shall be declared effective or
maintained in effect during such time as the Registration Statement shall be
effective.
(d) The Company shall promptly prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement and keep the Registration Statement effective
until all the Registrable Securities have been sold pursuant thereto or until
Retix is able to dispose of its entire remaining ownership interest in the
Registrable Securities in the United States public markets in a single
transaction under Rule 144 without invoking clause (e)(1)(ii) of Rule 144. The
Company shall provide a transfer agent, registrar and CUSIP number with respect
to all securities registered by such Registration Statement.
(e) The Company shall furnish to Retix with respect to the
Registrable Securities registered under the Registration Statement such number
of copies of prospectuses and preliminary prospectuses and supplements in
conformity with the requirements of the Securities Act and such other documents
as Retix may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares by Retix.
(f) The Company shall use its best efforts to register or
qualify the Registrable Securities covered by such Registration Statements under
such other securities or blue sky laws of such jurisdictions as Retix shall
reasonably request and do any and all other acts or things which may be
necessary or desirable to enable Retix to consummate the public sale or other
disposition in such jurisdictions, provided that the Company shall not be
required in
-115-
<PAGE>
connection therewith or as a condition thereto to qualify to do business or file
a general consent to service of process in any such jurisdictions.
(g) In accordance with Section 1.10 below, the Company shall
bear all expenses in connection with the procedures set forth in this Section
1.8 and the registration of the Registrable Securities pursuant to the
Registration Statement, other than broker's commissions or discounts, transfer
taxes, and fees and expenses, if any, of counsel or other advisors to Retix.
1.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless (i) such new
registration rights, including standoff obligations, are on a pari passu basis
with those rights of the Holders under this Agreement, or (ii) such new
registration rights, including standoff obligations, are subordinate to the
registration rights granted Holders under this Agreement.
1.10 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5, 1.6 and 1.8 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the
Holders of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses. Unless otherwise stated, all other Selling Expenses
relating to securities registered on behalf of the Holders and all Registration
Expenses incurred in connection with any registration pursuant to Section 1.7
shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
1.11 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days or until the distribution described in the registration
statement has been completed; and
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registra-
-116-
<PAGE>
tion statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to facilitate the
public offering of such securities.
1.12 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein 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, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder, controlling person or underwriter and
stated to be specifically for use therein. The indemnity provided under this
Section 1.12(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if the Company has defended such matter and
if such settlement is effected without the Company's consent, which consent
shall not be unreasonably withheld.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons,
-117-
<PAGE>
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein.
(c) Each party entitled to indemnification under this
Section 1.12 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.13 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.14 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with
-118-
<PAGE>
the reporting requirements of said Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company and
other information in the possession of or reasonably obtainable by the Company
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
1.15 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted Holders under Sections 1.5, 1.6, 1.7 and 1.8 may
be assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a Holder
(together with any affiliate); PROVIDED, that (a) such transfer may otherwise be
effected in accordance with applicable securities laws, (b) notice of such
assignment is given to the Company, and (c) such transferee or assignee (i) is a
wholly-owned subsidiary, constituent partner (including limited partners),
shareholder, parent, child or spouse of such Holder or is Holder's estate, or
(ii) acquires from such Holder the lesser of (a) 50,000 or more shares of
Restricted Securities (as appropriately adjusted for stock splits and the like)
or (b) all of the Restricted Securities then owned by such Holder.
1.16 STANDOFF AGREEMENT. Each Holder agrees in connection with any
registration of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; PROVIDED, that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.
1.17 TERMINATION OF RIGHTS. The rights of any particular Holder to
cause the Company to register securities under Sections 1.5, 1.6, 1.7 and 1.8
shall terminate with respect to such Holder following a bona fide firm
underwritten public offering of shares of the Company's Common Stock registered
under the Securities Act (provided the aggregate offering price, net of
underwriting discounts and commissions, exceeds ten million dollars
($10,000,000)) at such time as such Holder is able to dispose of all its
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants in one three-month
period pursuant to the provisions of Rule 144; PROVIDED, that such Holder holds
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants constituting less
than 1% of the outstanding voting stock of the Company. The rights to cause the
Company to register securities under Section 1.5, 1.6, 1.7 and 1.8 shall
terminate in any event five (5) years after the closing of the foregoing public
offering.
-119-
<PAGE>
2. MISCELLANEOUS.
2.1 ASSIGNMENT. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
2.2 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California in the United States of America.
2.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
2.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to the Company: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
2.6 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
2.7 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived with the written consent of the Company and the Holders of at
least a majority of the outstanding Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event
-120-
<PAGE>
that an underwriting agreement is entered into between the Company and any
Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
2.8 EFFECT OF AMENDMENT OR WAIVER. The Holders and their successors
and assigns acknowledge that by the operation of Section 2.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
2.9 RIGHTS OF HOLDERS. Each Holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
2.10 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
[SIGNATURE PAGE FOLLOWS]
-121-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
INTERNETWORKING SOLUTIONS
By:
---------------------------
Title:
------------------------
HOLDERS:
RETIX
By:
---------------------------
Title:
------------------------
-122-
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is made as May 31, 1996 by and
between Internetworking Solutions, a California corporation (the "DEBTOR") in
favor of Retix, a California corporation (the "SECURED PARTY").
RECITALS
The Debtor and the Secured Party are parties to a Loan Agreement of even
date with this Agreement (the "LOAN AGREEMENT") pursuant to which the Secured
Party shall be making a Loan (as defined therein) to the Debtor. The parties
intend that the Debtor's obligations to repay the Loan to the Secured Party be
secured by all of the assets of the Debtor.
NOW, THEREFORE, in consideration of the Loan to be made by the Secured
Party to the Debtor and for other good and valuable consideration, the Debtor
hereby agrees with the Secured Party as follows:
1. DEFINED TERMS. The following terms shall have the following meanings:
"CODE" means the Uniform Commercial Code as from time to time in
effect in the State of California.
"COLLATERAL" means the property described on EXHIBIT A to this
Agreement.
"EVENT OF DEFAULT" means Debtor's failure to pay or discharge the
Obligations in full in accordance with the terms of the Notes.
"OBLIGATIONS" means the unpaid principal amount of, and interest on,
the Notes and all other obligations and liabilities of the Debtor to the Secured
Party which may arise under the Notes.
"NOTES" means the Debtor's promissory notes issued pursuant to the
Loan Agreement.
2. GRANT OF SECURITY INTEREST. To secure the Debtor's prompt, punctual,
and faithful performance of all and each of the Debtor's Obligations to the
Secured Party, the Debtor hereby grants to the Secured Party a continuing
security interest in-and to the Collateral.
3. COVENANTS. The Debtor covenants and agrees with the Secured Party
that, from and after the date of this Agreement until the Obligations are paid
in full:
(a) OTHER LIENS. Except for the security interest granted hereby,
the Debtor is the owner of the Collateral and will be the owner of the
Collateral hereafter acquired free from any adverse lien, security interest or
encumbrance (other than purchase money security interests that will be
discharged upon Debtor's payment of the purchase price for the applicable
property),
-123-
<PAGE>
and the Debtor will defend the Collateral against the claims and demands of all
persons at any time claiming the same or any interest therein. No financing
statements covering any Collateral or any proceeds thereof are on file in any
public office.
(b) FURTHER DOCUMENTATION. At any time and from time to time, upon
the written request of the Secured Party, and at the sole expense of the Debtor,
the Debtor will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens
created hereby. The Debtor also hereby authorizes the Secured Party to file any
such financing or continuation statement without the signature of the Debtor to
the extent permitted by applicable law. A reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
(c) INDEMNIFICATION. The Debtor agrees to pay, and to save the
Secured Party harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any governmental authority applicable to
any of the Collateral or (iii) in connection with any of the transactions
contemplated by this Agreement.
(d) MAINTENANCE OF RECORDS. The Debtor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral.
(e) RIGHT OF INSPECTION. The Secured Party shall at all times have
full and free access during normal business hours, and upon reasonable prior
notice, to all the books, correspondence and records of the Debtor relating to
the Collateral, and the Secured Party or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and the Debtor
agrees to render to the Secured Party, at the Debtor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
(f) COMPLIANCE WITH LAWS, ETC. The Debtor will comply in all
material respects with all laws, rules, regulations and orders of any
governmental authority applicable to the Collateral or any part thereof or to
the operation of the Debtor's business; provided, however, that the Debtor may
contest any such law, rule, regulation or order in any reasonable manner which
shall not, in the reasonable opinion of the Secured Party, adversely affect the
Secured Party's rights or the priority of its liens on the Collateral.
(g) PAYMENT OF OBLIGATIONS. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being contested in good faith
by appropriate
-124-
<PAGE>
proceedings, (ii) such proceedings do not involve any material danger of the
sale, forfeiture or loss of any of the Collateral or any interest therein and
(iii) such charge is adequately reserved against on the Debtor's books in
accordance with generally accepted accounting principles.
(h) LIMITATION ON LIENS ON COLLATERAL. The Debtor will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien or claim on or to the
Collateral, other than the security interest granted hereunder and the security
interests described in Section 3(a) above, and will defend the right, title and
interest of the Secured Party in and to any of the Collateral against the claims
and demands of all other persons.
(i) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, provided however that Debtor will be allowed to
grant licenses to its software products and related documentation in the
ordinary course of business and to establish or provide for source code escrows
in connection therewith, and to dispose of any tangible fixed assets of
individual net book value of less than $5,000.
(j) FURTHER IDENTIFICATION OF COLLATERAL. The Debtor will furnish to
the Secured Party from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Secured Party may reasonably request, all in reasonable
detail.
4. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Debtor hereby appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Debtor and in the name of the Debtor or in its own name, from
time to time in the Secured Party's discretion so long as an Event of Default
has occurred and is continuing, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all instruments which may be necessary or desirable to accomplish the purposes
of this Agreement, and, without limiting the generality of the foregoing, the
Debtor shall grant the Secured Party the power and right, on behalf of the
Debtor, without notice to or assent by the Debtor, to do the following, so long
as an Event of Default has occurred and is continuing:
(i) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral;
(ii) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party or as the Secured Party shall
direct;
(iii) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
-125-
<PAGE>
(iv) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to enforce any right
in respect of any Collateral;
(v) to defend any suit, action or proceeding brought against the
Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action or
proceeding described in subsection (v) above and, in connection therewith, to
give such discharges or releases as the Secured Party may deem appropriate;
(vii) to assign any patent right included in the Collateral
of Debtor (along with the goodwill of the business to which any such patent
right pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Secured Party shall in its sole
discretion determine; and
(viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and the Debtor's expense,
at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve or realize upon the Collateral and the
Secured Party's liens thereon and to effect the intent of this Agreement, all as
fully and effectively as the Debtor might do.
The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney shall be a power coupled with
an interest and shall be irrevocable.
(b) NO DUTY ON SECURED PARTY'S PART. The powers conferred on the
Secured Party hereunder are solely to protect the Secured Party's interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be responsible to the
Debtor for any act or failure to act hereunder, except for its own willful
misconduct or gross negligence.
5. PERFORMANCE BY SECURED PARTY OF DEBTOR'S OBLIGATIONS. If the Debtor
fails to perform or comply with any of its agreements contained herein and the
Secured Party, as provided for by the terms of this Agreement shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Secured Party incurred in connection
with such performance or compliance shall be payable by the Debtor to the
Secured Party on demand and shall constitute Obligations secured hereby.
6. REMEDIES. If an Event of Default has occurred and is continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
-126-
<PAGE>
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Debtor or any other person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Secured Party shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Debtor, which right or equity is hereby waived or released.
The Secured Party shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Secured Party hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Secured Party may elect, and only after
such application and after the payment by the Secured Party of any other amount
required by any provision of law, need the Secured Party account for the
surplus, if any, to the Debtor. To the extent permitted by applicable law, the
Debtor waives all claims, damages and demands it may acquire against the Secured
Party arising out of the exercise by the Secured Party of any of its rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 5 days before such sale or other disposition. The Debtor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Party to collect
such deficiency.
7. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL. The
Secured Party's sole duty with respect to the custody, safekeeping and
preservation of the Collateral, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Secured Party deals with
similar property for its own account. Neither the Secured Party nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Debtor or otherwise.
8. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect the Collateral are irrevocable and powers coupled
with an interest.
9. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 10(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default under the Notes or in any breach
of any of the terms and conditions hereof. No failure to
-127-
<PAGE>
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Party would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
10. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Debtor and the
Secured Party, provided that any provision of this Agreement may be waived by
the Secured Party in a written letter or agreement executed by the Secured Party
or by telex or facsimile transmission from the Secured Party. This Agreement
shall be binding upon the successors and assigns of the Debtor and shall inure
to the benefit of the Secured Party and its successors and assigns.
(b) GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
(c) SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
(d) KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
(e) BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10(a),
their respective successors and assigns.
(f) HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
-128-
<PAGE>
(g) NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Debtor: Internetworking Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Secured Party: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
(h) COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
(i) LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
(j) DRAFTING. This Agreement shall not be construed against any party
by reason of the drafting or preparation thereof.
[SIGNATURE PAGE FOLLOWS]
-129-
<PAGE>
IN WITNESS WHEREOF, the Debtor and Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
---------------------------------
"DEBTOR"
-------------------------
---------------------------------
INTERNETWORKING SOLUTIONS,
---------------------------------
a California corporation
---------------------------------
By: ____________________________
---------------------------------
Title: _________________________
---------------------------------
"SECURED PARTY"
---------------
---------------------------------
RETIX, a California corporation
---------------------------------
By: ____________________________
---------------------------------
Title: _________________________
-130-
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Debtor in
and to the following:
(a) All goods and equipment now owned or hereafter acquired, including
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Debtor's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Debtor and Debtor's Books relating
to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Debtor's books relating to the foregoing;
(f) All copyrights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor devices, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
-131-
<PAGE>
EXHIBITS J AND K - TRANSFERRED ASSETS & LIABILITIES
INTERNETWORKING SOLUTIONS, INC.
STATEMENT OF TRANSFERRED ASSETS AND LIABILITIES
AS OF 5/31/96
5/31/96
----------------
CASH $ --
ACCOUNTS RECEIVABLE, NET OF RESERVES 2,035,542.76
OTHER RECEIVABLES (57,700.20)
INVENTORIES 2,902,169.54
PREPAID EXPENSES AND OTHER CURRENT ASSETS 562,325.77
INTERCOMPANY RECEIVABLES 3,363,554.98
TOTAL CURRENT ASSETS 8,805,892.84
MACHINERY AND EQUIPMENT 2,094,585.57
FURNITURE AND FIXTURES 126,989.50
BUILDINGS 2,166,181.00
LEASEHOLD IMPROVEMENTS 271,390.90
TOTAL PROPERTY AND EQUIPMENT 4,659,146.97
ACCUMULATED DEPRECIATION (2,717,319.41)
NET PROPERTY AND EQUIPMENT 1,941,827.56
OTHER ASSETS 73,374.54
TOTAL ASSETS $ 10,821,094.94
ACCOUNTS PAYABLE $ 457,004.23
ACCRUED WAGES 195,357.25
DEFERRED REVENUE 489,531.80
OTHER ACCRUED LIABILITIES 1,194,691.90
ACCRUED RESTRUCTURING 3,156,126.05
INCOME TAXES PAYABLE (105,798.71)
CURRENT PORTION-LTD 27,511.06
TOTAL CURRENT LIABILITIES 5,414,423.57
LONG TERM DEBT 2,518,806.00
DEFERRED RENT 90,364.00
TOTAL LIABILITIES $ 8,023,593.57
<PAGE>
The enclosed unaudited Statements of Transferred Assets and Liabilities of
Retix's internetworking division's U.S. and U.K. (including Retix Europe and
Retix U.K.) operations include all of the tangible and recorded intangible
assets as well as known liabilities recorded as of May 31, 1996, in all material
respects, except as noted below. The enclosed Statements of Transferred Assets
and Liabilities have been prepared in accordance with past accounting policies
and practices of Retix consistently applied, however, such statement does not
contain any footnotes which may be required to be in conformity with generally
accepted accounting principles ("GAAP"). Subsidiary financial records and
corresponding detail schedules are on file at Retix's principal corporate
offices and are available via written communication with the chief accounting
officer of Retix. Except as disclosed below, the enclosed Statements of
Transferred Assets and Liabilities reflect the assets and liabilities
transferred from Retix's internetworking division to Internetworking Solutions,
Inc., as of May 31, 1996 as contemplated by the Master Agreement:
ACCRUED VACATION - The enclosed Statements of Transferred Assets and
Liabilities excludes liabilities associated with vacation accruals of
internetworking division employees as of May 31, 1996 as contemplated by the
Master Agreement.
BONUSES/COMMISSIONS - Bonuses/commissions potentially due under certain
employment contracts and commission plans have been excluded from the enclosed
Statements of Transferred Assets and Liabilities as final determination of
eligibility by such internetworking division employees has not occurred as of
May 31, 1996. Any such amounts, if earned, are not expected to be significant.
UNDISCLOSED LIABILITIES - The enclosed Statements of Transferred Assets and
Liabilities reflect accrued and absolute liabilities of Retix's internetworking
division as of May 31, 1996. In addition, commitments and other potentially
contingent liabilities which relate to Retix's internetworking division are
contemplated to be transferred to Internetworking Solutions, Inc., in accordance
with the Master Agreement, and may not be disclosed on the enclosed Statements
of Transferred Assets and Liabilities. Such undisclosed liabilities include
among other items:
(continued)
132
<PAGE>
OPERATING LEASE commitments for office facilities and equipment used in the
execution of Retix's internetworking division business. Such facilities
include: approximately 15,000 square feet of the facility at 4640
Admiralty Way, Marina del Rey, California; 60 Priestly Road, The Surrey
Research Park, Guildford, England (and its corresponding sublease agreement
with Reliance Silicon, Ltd.); Alan Turing Road, The Surrey Research Park,
Guildford, England (and its corresponding sublease agreement with Canon,
Inc.); 5155 Goldman Avenue, Moorpark, California (and its corresponding
sublease agreement with Altatron, Inc.); 5701 Lindero Canyon Road #1-204,
Westlake Village, California; 1950 Stemmons Freeway #5001 (E-6), Dallas,
Texas; 900 Wheeler Road, Hauppauge, New York; 120 Broadway, 9th floor,
New York, New York (and its corresponding sublease agreement with VDG,
Inc.); One Tiffany Pointe #112-20, Bloomingdale, Illinois. Operating
leases commitments in connection with equipment includes photocopiers,
postage machines, test equipment and certain computer equipment.
INTERCOMPANY ACCOUTS - Certain intercompany note and other interco operating
accounts require final reconciliation upon completion of the carve-out of
Retix's internetworking division from Retix's consolidated financial statements
and may require adjustments to the enclosed Statements of Transferred Assets and
Liabilities of Internetworking Solutions, Inc., as of May 31, 1996.
INTELLECTUAL PROPERTY, CONTRACTS AND OTHER INTANGIBLES - As contemplated by the
Master Agreement, all trademarks, trade names, copyrights, technology and other
intangible property as well as contracts (customer and vendor) that are used in
the business of Retix's internetworking division are to be transferred to
Internetworking Solutions, Inc., subject to a Grant-Back License Agreement.
Such items are not reflected on the enclosed Statements of Transferred Assets
and Liabilities of Retix's internetworking division as of May 31, 1996 and the
rights and obligations related to such transfer to Internetworking Solutions,
Inc., is addressed elsewhere within the Master Agreement.
CAPITALIZATION - Internetworking Solutions, Inc., is capitalized through the
issuance of 16,000,000 shares of the Company's Preferred Stock at $5.00 per
share to Retix as contemplated by the Master Agreement.
STOCKHOLDER'S NET INVESTMENT - Certain cash and investment accounts require
final reconciliation upon completion of the carve-out of Retix's
internetworking solutions business unit from Retix's consolidated financial
statements. Such final reconciliations may require adjustments to record
Retix's investment in the internetworking division to reflect the historical
operating results of the business unit.
133
<PAGE>
Exhibit 10.47
MASTER AGREEMENT
This Master Agreement (the "AGREEMENT") is made and entered into as of
May 31, 1996 by and among Retix, a California corporation ("RETIX") and
Wireless Solutions, a California corporation ("WIRELESS SOLUTIONS").
RECITALS
A. The parties desire to cause Wireless Solutions to be formed to operate
as a separate entity the wireless communications business presently conducted by
Retix.
B. The parties further wish to set forth the terms and conditions
governing the relationships among them.
NOW, THEREFORE, in consideration of the covenants and agreements contained
in this Agreement and the Other Agreements (as defined below), and other good
and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS. The following terms, whenever used in this Agreement,
shall have the following meanings:
1.1 "AFFILIATE" shall mean, with respect to any person, any other
person which, directly or indirectly, controls, is controlled by or is under
common control with, such person. For purposes of this definition, (i)
"CONTROL" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person through
the ownership of voting securities or by contract or otherwise, and (ii)
Wireless Solutions and any corporation which joins with Wireless Solutions in
the filing of a consolidated federal income tax return shall not be deemed to be
Affiliates of Retix or any corporation which joins with Retix in the filing of
a consolidated federal income tax return, and vice versa.
1.2 "CHANGE OF CONTROL" shall mean any consolidation, merger, sale
of assets or combination of Wireless Solutions, whether or not Wireless
Solutions is the surviving entity, other than where shareholders of Wireless
Solutions immediately prior to the closing of such consolidation, merger, sale
of assets or combination own at least a majority of the voting equity securities
of the successor entity immediately following such closing by virtue of voting
equity securities of the successor entity received in connection with such
transaction in exchange for shares or other securities of Wireless Solutions
owned immediately prior to the closing of such transaction.
1.3 "BUSINESS OF WIRELESS SOLUTIONS" shall mean (i) operation of the
worldwide wireless communications business presently conducted within Retix
being transferred to Wireless Solutions and consisting of the development,
manufacture, sale, licensing, maintenance and service of CDPD MD-IS and related
wireless or cellular infrastructure products; (ii) engaging in such other
activities as may be approved by the Board of Directors of Wireless Solutions ;
and (iii) performing all things necessary or incidental to or connected with or
growing
-134-
<PAGE>
out of the foregoing activities in accordance with the terms and provisions of
this Agreement and the Other Agreements.
1.4 "CLOSING" shall have the meaning set forth in Section 2.3 of
this Agreement.
1.5 "CLOSING DATE" shall mean the date first set forth above, or
such other date as the parties shall mutually agree upon which the Closing shall
occur.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.7 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.8 "FACILITY" shall mean any property owned, leased, operated or
occupied by the Retix related to or affecting the Transferred Business.
1.9 "GRANT-BACK LICENSE AGREEMENT" shall mean the Grant-Back License
Agreement between Wireless Solutions and Retix dated as of the date of this
Agreement and attached to this Agreement as EXHIBIT A.
1.10 "GOVERNMENTAL ENTITY" shall mean any court, tribunal,
administrative agency, commission, or other governmental authority or
instrumentality.
1.11 "INITIAL PUBLIC OFFERING" shall mean the initial sale of
Wireless Solutions' Common Stock to the public pursuant to an effective
registration statement under the Securities Act of 1933, as amended, with an
aggregate offering price, net of underwriting discounts and commissions, in
excess of $10,000,000, and with an offering price to the public of at least
$5.00 per share.
1.12 "LAWS" shall mean all applicable international, federal, state
and local statutes, ordinances, rules and regulations.
1.13 "LIENS" shall mean mortgages, deeds of trust, pledges, security
interests, charges, liens, leases, licenses, liabilities, assessments,
encumbrances, costs, claims, conditions or restrictions of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise (including, without limitation any conditional sale or other title
retention agreement and any agreement to give any security interest).
1.14 "LOAN AGREEMENT" shall mean the Loan Agreement between Wireless
Solutions and Retix dated as of the date of this Agreement and attached to this
Agreement as EXHIBIT B.
1.15 KEY EMPLOYEE OPTION AGREEMENT(S)" shall mean any of the Key
Employee Stock Option Agreements between Wireless Solutions and Wireless
Solutions Management in the form attached to this Agreement as EXHIBIT C.
-135-
<PAGE>
1.16 "WIRELESS SOLUTIONS DISCLOSURE STATEMENT" shall mean the
Disclosure Statement of Wireless Solutions attached to this Agreement as EXHIBIT
D.
1.17 "WIRELESS SOLUTIONS MANAGEMENT" shall mean the principal
executive officers of Wireless Solutions, as determined by the Board of
Directors of Wireless Solutions.
1.18 "OTHER AGREEMENTS" shall mean the Preferred Stock Purchase
Agreement, the Rights Agreement, the Loan Agreement, the Grant-Back License
Agreement, and the Security Agreement.
1.19 "PERMITS" shall mean all applicable licenses, permits,
authorizations, approvals, clearances and consents.
1.20 "PERSON" shall mean any individual, firm, trust, partnership,
joint venture, association, corporation, unincorporated organization, or a
government or any department or agency thereof.
1.21 "PREFERRED STOCK PURCHASE AGREEMENT" shall mean the Preferred
Stock Purchase Agreement between Wireless Solutions and Retix dated as of the
date of this Agreement and attached to this Agreement as EXHIBIT E.
1.22 "PRODUCTS" shall mean the products described on EXHIBIT F to
this Agreement.
1.23 "RETIX DISCLOSURE STATEMENT" shall mean the Disclosure Statement
of Retix attached to this Agreement as EXHIBIT G.
1.24 "RIGHTS AGREEMENT" shall mean the Rights Agreement between
Wireless Solutions and Retix dated as of the date of this Agreement and attached
to this Agreement as EXHIBIT H.
1.25 "SALE OF WIRELESS SOLUTIONS STOCK" shall mean any sale by Retix
of all of the Wireless Solutions securities owned by Retix to any third party,
including Wireless Solutions Management.
1.26 "SECURITY AGREEMENT" shall mean the Security Agreement between
Wireless Solutions and Retix dated as of the date of this Agreement and attached
to this Agreement as EXHIBIT I.
1.27 "TAX" or "TAXES" shall mean any and all taxes or other
liability imposed by any governmental entity or similarly empowered entity,
including without limitation any charge, obligation, assessment or fee for
federal, state, county, city and foreign income, profits, gross receipts,
withholding, payroll, stamp, sales, use, employment, environmental, occupation,
net worth, property, excise, estimated, recapture, ad valorem, custom, duty,
unitary and any other taxes, obligations and assessments of any kind whatsoever
and any withholding obligation for FICA, FUTA, SSI or analogous or similar
state, local and foreign withholding obligation or
-136-
<PAGE>
employer contribution, together with all interest, penalties and additions to
tax or other assessment imposed with regard thereto; the foregoing shall include
any transferee or secondary liability for any tax and any liability arising as a
result of being a member of any affiliated, consolidated, combined or unitary
group which is required to be included in any Tax return or report as well as
any Tax arising out of a tax sharing agreement, indemnity agreement or any
similar agreement to which one or more of Retix is a party. "TAX" or "TAXES"
shall, however, not include any Taxes arising from operation of Wireless
Solutions or Retix on or after the Closing Date.
1.28 "TRANSFERRED ASSETS" shall mean the assets to be transferred by
Retix to Wireless Solutions as described in EXHIBIT J to this Agreement, which
assets shall specifically exclude any accounts receivable accrued by Retix prior
to the Closing Date in accordance with its historical practices for revenue
recognition but which shall include any maintenance revenue received by Retix
prior to the Closing Date which remains unearned as of the Closing Date.
1.29 "TRANSFERRED BUSINESS" shall mean the worldwide wireless
communications business presently conducted within Retix to be transferred to
Wireless Solutions pursuant to the provisions of this Agreement and consisting
of the development, manufacture, sale, licensing, maintenance and service of
wireless communications products.
1.30 "TRANSFERRED CONTRACTS" shall mean the contracts to be
transferred by Retix to Wireless Solutions as determined by Retix and
Wireless Solutions in good faith.
1.31 "TRANSFERRED LIABILITIES" shall mean the liabilities to be
transferred by Retix to Wireless Solutions as described on EXHIBIT K to this
Agreement.
2. FORMATION OF WIRELESS SOLUTIONS; CLOSING.
2.1 FORMATION OF WIRELESS SOLUTIONS. Upon and subject to the terms
and conditions of this Agreement and in reliance upon the representations,
warranties and agreements contained in this Agreement, Wireless Solutions and
Retix shall at the Closing execute and deliver (or cause to be executed and
delivered) the Other Agreements, all substantially in the respective forms
attached to this Agreement, together with such other documents and funds as may
be necessary or advisable to form Wireless Solutions and effect the transactions
described in this Agreement and the Other Agreements.
2.2 TRANSFER OF ASSETS. Subject to the terms and conditions of this
Agreement and the Other Agreements, at the Closing Retix shall transfer to
Wireless Solutions, and Wireless Solutions shall receive from Retix, all of
Retix's right, title and interest in and to the Transferred Business, including
without limitation the Transferred Assets, the Transferred Contracts, the
Transferred Liabilities and inventory of the Transferred Business (collectively,
the "TRANSFERRED ITEMS"). Retix will deliver to Wireless Solutions possession
of the Transferred Items, and will further deliver to Wireless Solutions proper
instruments sufficient to transfer to Wireless Solutions the rights to the
Transferred Items specified in this Agreement and such other instruments of
transfer as counsel for Wireless Solutions may reasonable deem necessary or
desirable to effect or evidence the transfers contemplated hereby, free and
clear of all mortgages,
-137-
<PAGE>
pledges, liens, licenses, rights of possession, security interests,
restrictions, encumbrances, charges, title retention, conditional sale or other
security arrangement except for the Transferred Liabilities or as may be
contained in the Transferred Contracts or as provided in this Agreement or in
the Other Agreements. Except for the Transferred Liabilities, Wireless
Solutions is not assuming, and Retix shall remain responsible for and pay on a
timely basis, any liabilities of Retix, whether or not arising from or
associated with the Transferred Business and whether accrued or unaccrued,
contingent or actual, or asserted or unasserted. Retix will promptly pay over
to Wireless Solutions any amounts received in respect of the Transferred
Business following the Closing Date, except for amounts which Retix is expressly
authorized by this Agreement to retain.
2.3 CLOSING. The transactions contemplated by Section 2.1
(the "CLOSING") shall be consummated at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Other
Agreements, or at such other place and time as the parties may agree, on the
Closing Date.
2.4 TAX TREATMENT. The parties intend that the transactions
contemplated by this Agreement will constitute a tax-free exchange as described
in Section 351 of the Code.
2.5 SALES AND OTHER TAXES. Wireless Solutions shall pay all sales,
use, transfer, excise or other similar taxes, if any, arising out of the
transfer of the Transferred Assets or Transferred Business, or otherwise as a
consequence of the transactions contemplated by this Agreement or the Other
Agreements. The parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize the above-described
taxes.
3. REPRESENTATIONS AND WARRANTIES OF RETIX. Except as set forth in the
Retix Disclosure Statement, Retix represents and warrants that:
3.1 EXISTENCE AND RIGHTS. Retix (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, (b) has all corporate power and authority to own or lease its
properties and to carry on the Transferred Business as now being conducted, (c)
possesses all licenses, franchises, rights and privileges necessary to the
conduct of the Transferred Business as now being conducted, and (d) has all
corporate power and authority to carry out this Agreement and the Other
Agreements to which Retix is a party and the transactions contemplated herein
and therein.
3.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Retix is a party has been, or will
be prior to the Closing, duly authorized by all necessary corporate and other
action and does not require notice to, or the consent or approval of, any
governmental body or other regulatory authority. This Agreement and the Other
Agreements to which Retix is a party have been duly executed or will be at the
Closing, as the case may be, and delivered to Wireless Solutions by Retix. This
Agreement and the Other Agreements to which Retix is a party constitute, or when
executed and delivered will constitute, legal, valid and binding obligations of
Retix, enforceable in accordance with their terms.
-138-
<PAGE>
3.3 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Retix's knowledge,
threatened against or affecting Retix or the Transferred Assets, which if
determined adversely to Retix, would have an adverse effect on the conduct of
the Transferred Business, Wireless Solutions or the Transferred Assets or in
which it is sought to restrain, prohibit or otherwise adversely affect the
ability of Retix to perform any or all of the obligations required of it under
this Agreement or the Other Agreements or the consummation of the transactions
contemplated herein or therein.
3.4 FIXED ASSETS. The fixed assets used in the ordinary course of
the operations of the Transferred Business are in satisfactory operating
condition, reasonable wear and tear excepted and except for such minor defects
as do not substantially interfere with the continued use thereof in the conduct
of normal operations.
3.5 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION OF PROPERTY.
(a) Retix has valid and marketable title to the Transferred
Assets and to all personal property and other assets, tangible or intangible,
required to be used in the conduct of the Transferred Business as it is
currently conducted.
(b) The Transferred Assets are free and clear of all title
defects and Liens, except the following: (i) unperfected mechanics', carriers',
workers' and other similar liens arising after the date of this Agreement in the
ordinary course of business consistent with past practice which are or will be
reflected in the balance sheet as of the Closing Date to be delivered pursuant
to this Agreement; (ii) imperfections of title which do not materially or
unreasonably detract from the value, marketability, financial ability or use of
such items; and (iii) property taxes which are a lien not yet due and payable.
(c) The Transferred Assets are in a condition suitable and
adequate for the conduct of the Transferred Business as such business is
presently being conducted. Retix is not aware of any facts which would prevent
Wireless Solutions from using such assets after the Closing generally in the
manner in which such assets have been used and operated prior to the date of
this Agreement.
3.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to
the best of Retix's knowledge against, Retix for relief under any applicable
bankruptcy, insolvency or similar law; no decree or order for relief has been
entered in respect of Retix, voluntarily or involuntarily, under any such law;
and, no receiver, liquidator, sequestrator, trustee, custodian or other officer
has been appointed with respect to Retix or its assets and liabilities pursuant
to any such law. No warrant of attachment, execution or similar process has
been executed against Retix or any of its assets or properties. Retix has not
made any assignment for the benefit of creditors. The consummation of the
transactions contemplated hereby will not render Retix insolvent or unable to
pay its liabilities as they come due.
-139-
<PAGE>
3.7 PRODUCTS.
(a) Retix owns, or will own by the Closing Date, or has
sufficient rights to, all rights to make, use and sell the Products. No Product
is subject to any pending or, to the best of Retix's knowledge, any threatened
challenge of infringement of the rights of others, nor to the best of Retix's
knowledge is there any basis for a challenge of infringement of any such rights
of others.
(b) To the best of Retix's knowledge, no party other than Retix
(prior to the Closing) and Wireless Solutions and their respective agents and
representatives (following the Closing) and their permitted licensees possesses
any copy of all or any part of the designs, flow charts, algorithms, schematics
of the Products or source code contained in the Products (except to the extent
it has been licensed from other persons (including other subsidiaries of
Retix)). No person other than Retix owns any right, title or interest in or to
any such Product, except as set forth in the Retix Disclosure Statement.
(c) Wireless Solutions shall not by virtue of any contractual
arrangement between Retix and any third party be obligated to provide to any
such third party any modifications, enhancements or upgrades to the Products or
derivative works thereof, other than pursuant to a Transferred Contract.
3.8 TRADEMARKS, COPYRIGHTS, AND PATENTS.
(a) Retix has provided Wireless Solutions with a true and
complete list describing all of the trademarks, trade names and service and
other marks which are related to the Transferred Business. Except as
contemplated or described in this Agreement or the Other Agreements, Retix owns
all right, title and interest in and to such marks.
(b) Retix has provided Wireless Solutions with a true and
complete list describing all of the patents, patent rights, patent applications,
copyrights and copyright applications relating to the Products. Retix owns all
right, title and interest to, or has sufficient licenses under, all such
patents, patent rights, patent application, copyrights and copyright
applications.
(c) Upon consummation of the transactions contemplated by this
Agreement, Wireless Solutions will have all rights, including without limitation
rights under patents, trademarks, trade secrets, trade rights, trade names, and
copyrights, necessary to operate the Transferred Business in the manner it was
operated prior to the Closing Date. To the best of Retix's knowledge, none of
the rights described in the prior sentence conflict with or infringe on the
proprietary rights of others. There are no outstanding rights, licenses or
grants by Retix relating to the use of any of the same, and none of them is
subject to any pending or, to the best of Retix's knowledge, threatened claim of
infringement of the right of others. Retix has not agreed to indemnify any
person for or against any infringement of any patent, patent right, trademark,
trade secret, trade right, trade name, commercial name, computer software
program, or copyright related to the Transferred Business, other than as part of
its license arrangements with its customers.
-140-
<PAGE>
3.9 AGREEMENTS LIST. Retix has provided Wireless Solutions with a
list of all contracts, agreements, understandings, licenses, franchises, leases
(written and oral) or other instruments which are both (i) material to the
Transferred Business, and (ii) relate to or affect the Transferred Assets or
under which any portion of the Transferred Assets are used or held or subject,
including without limitation all related supply, in-license, marketing and end-
user agreements, and all related agreements for the testing, modification,
development, trial, license, sale or other use of the Transferred Assets (in
each such case identifying the nature of such agreements).
3.10 NO FINDER'S FEES. Retix is not obligated, either directly or
indirectly, to any person for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement and the Other
Agreements.
3.11 BINDING AGREEMENTS, NO DEFAULT. Each of the Transferred
Contracts is a legal, binding, and enforceable obligation of Retix and, to the
best of Retix's knowledge, the other party(s) thereto, and no party with whom
Retix has an agreement, contract or other instrument relating to or affecting
the Transferred Business is known by Retix to be in default thereunder or to
have breached any material terms or provisions thereof.
3.12 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representatives and warranties of Retix contained herein will be true in all
material respects upon and as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF WIRELESS SOLUTIONS. Except as set
forth in the Wireless Solutions Disclosure Statement, Wireless Solutions
represents and warrants that:
4.1 EXISTENCE AND RIGHTS. Wireless Solutions (a) is a corporation
duly organized, validly existing and in good standing under the laws of State of
California, and (b) has all corporate power and authority to carry out this
Agreement and the Other Agreements to which Wireless Solutions is a party and
the transactions contemplated herein and therein. Wireless Solutions is not
qualified or licensed to do business as a foreign corporation in any state.
Wireless Solutions does not own, directly or indirectly, any equity or other
interest in any other corporation, association, partnership or other business
entity.
4.2 CAPITALIZATION. The authorized capital stock of Wireless
Solutions consists of 20,000,000 shares of Common Stock, par value $0.01 per
share, none of which were issued and outstanding prior to the Closing, and
17,000,000 shares of Preferred Stock, par value $0.01 per share, none of which
were issued and outstanding prior to the Closing. All shares of Wireless
Solutions stock to be issued pursuant to this Agreement and the Other Agreements
have been duly authorized and, upon issuance in accordance with the terms hereof
and thereof, will be validly issued, fully paid and nonassessable. All
securities of Wireless Solutions that will be issued as of the Closing will be
issued in compliance with applicable federal and state securities laws. Except
as provided in the Other Agreements, there are no preemptive rights, voting
agreements, options or warrants or other conversion privileges or rights
presently outstanding to purchase any of the authorized but unissued stock of
Wireless Solutions.
-141-
<PAGE>
4.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Wireless Solutions is a party by
Wireless Solutions has been duly authorized by all necessary corporate and other
action and do not require notice to, or the consent or approval of, any
governmental body or other regulatory authority. This Agreement and the Other
Agreements to which Wireless Solutions is a party are, or when executed and
delivered will be, legal, valid and binding obligations of Wireless Solutions,
enforceable in accordance with their terms.
4.4 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Wireless Solutions'
knowledge, threatened against or affecting Wireless Solutions, which if
determined adversely to Wireless Solutions, would have an adverse effect on the
Transferred Assets or in which it is sought to restrain, prohibit or otherwise
adversely affect the ability of any of Wireless Solutions to perform any or all
of the obligations required of it under this Agreement or the Other Agreements
or the consummation of the transactions contemplated herein or therein.
4.5 NO FINDER'S FEES. Wireless Solutions is not obligated, either
directly or indirectly, to any person for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement and the
Other Agreements.
4.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to
the best of Wireless Solutions' knowledge against, Wireless Solutions for relief
under any applicable bankruptcy, insolvency or similar law; no decree or order
for relief has been entered in respect of Wireless Solutions, voluntarily or
involuntarily, under any such law, and, no receiver, liquidator, sequestrator,
trustee, custodian or other officer has been appointed with respect to Wireless
Solutions or its assets and liabilities pursuant to any such law. No warrant of
attachment, execution or similar process has been executed against Wireless
Solutions or any of its assets or properties. Wireless Solutions has not made
any assignment for the benefit of creditors.
4.7 NO FINANCIAL STATEMENTS. Wireless Solutions has not prepared
any balance sheet, income statement, statement of operations, statement of
changes in financial position and shareholders' equity or other financial
statement.
4.8 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representations and warranties of Wireless Solutions contained herein will
be true in all material respects upon and as of the Closing Date.
5. COVENANTS AND AGREEMENTS OF THE PARTIES.
5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Retix covenants and
agrees with Wireless Solutions that between the date hereof and the Closing
Date, except as specifically contemplated by this Agreement:
(a) CONDUCT OF BUSINESS. Retix will conduct the Transferred
Business consistent with past practices, including the payment of liabilities.
-142-
<PAGE>
(b) ACCESS. Retix will permit Wireless Solutions and its
representatives to have reasonable access during normal business hours to the
personnel and facilities of the Transferred Business and the financial, tax,
contractual and organizational records of the Transferred Business. Wireless
Solutions shall treat all information received from Retix pursuant to this
Section 5.1(b) as confidential, except to the extent that any such information
is made available to Wireless Solutions from sources generally available to the
public, and except as required by law. In the event the Closing shall not
occur, Wireless Solutions will promptly return to Retix all documents,
instruments, work papers and other materials submitted by Retix to Wireless
Solutions.
5.2 EXECUTION OF DOCUMENTS AT THE CLOSING. Provided that the
conditions to Closing as specified in Section 6 and Section 7 of this Agreement
have been fulfilled, Retix and Wireless Solutions, respectively, agree to cause
the execution of each of the Other Agreements.
5.3 TRANSFER OF KEY EMPLOYEES. Retix agrees to use its reasonable
efforts to cause all key employees employed in the Transferred Business to
transfer their employment to Wireless Solutions.
5.4 CONSENTS AND APPROVALS. It is the intent of the parties to
consummate the transactions described in this Agreement and the Other Agreements
at the earliest practicable time and Retix agrees to use its reasonable efforts
to obtain, and Wireless Solutions shall cooperate with and assist Retix in
obtaining, all consents, waivers, amendments, modifications, approvals,
authorizations, Permits and licenses which are required to be obtained by Retix
to effectuate this Agreement and the Other Agreements and to transfer the
Transferred Business and the Transferred Assets to Wireless Solutions and to
permit Wireless Solutions to operate the Transferred Business. If any requisite
consent or amendment of a contract or other instrument shall not be obtained,
Retix agrees to cooperate with Wireless Solutions in any reasonable arrangement
designed to provide for Wireless Solutions the benefits under such contract or
other instrument, including enforcement of any and all rights of Retix against
the other party to such contract or instrument arising out of the breach or
cancellation thereof by such other party or otherwise. Retix shall use its
reasonable efforts to obtain all other necessary consents and approvals of other
persons and Governmental Entities in connection with the consummation of the
transactions contemplated under this Agreement and the Other Agreements;
provided, however, that Retix shall not be obligated to: (a) undertake any
additional material financial obligation, dispose of any property, or surrender
any rights, or (b) otherwise consent to any arrangement or undertake any
obligation that would have a material adverse effect on Retix.
5.5 VACATION PAY. The cost of vacation pay due (as of the Closing
Date) to any Retix employees who become employees of Wireless Solutions as of
the Closing shall be shared by Retix and Wireless Solutions equally. Retix
shall fund its portion of such liability by (i) making quarterly payments to
Wireless Solutions within 30 days of the close of each such quarter for such
accrued vacation taken during each of Wireless Solutions' first six fiscal
quarters, and (ii) promptly reimbursing Wireless Solutions for one-half of any
amounts paid by Wireless Solutions to such employees upon termination of their
employment with Wireless Solutions.
-143-
<PAGE>
5.6 NO INCONSISTENT ACTS. Wireless Solutions covenants and agrees
with Retix that between the date hereof and the Closing Date, except as
contemplated by this Agreement, Wireless Solutions will not perform any act
inconsistent with the representations and warranties of Section 4.
5.7 EMPLOYMENT ELIGIBILITY VERIFICATION. Retix agrees to use its
reasonable efforts to obtain, on behalf of Wireless Solutions, Employment
Eligibility Verification forms (Form I-9) completed by each employee of Retix
who has agreed to become employed in the Transferred Business and copies of any
documentation obtained by Retix to verify the information therein.
5.8 EMPLOYEES.
(a) Retix and Wireless Solutions agree to use their reasonable
efforts to employ the current employees of the Transferred Business, subject to
continued acceptable performance by such employees and the general requirements
of the business.
(b) Retix will use its reasonable efforts, consistent with its
established personnel policies, to encourage employees designated to perform
work for the Transferred Business to transfer to Wireless Solutions.
(c) Wireless Solutions agrees to provide a package of
compensation and benefits to its employees substantially equivalent to such
compensation and benefits currently being offered to the employees of the
Transferred Business by Retix.
5.9 CONFIDENTIALITY. Neither Retix nor Wireless Solutions shall
disclose to any third party other than their lenders, accountants, attorneys or
other advisors or in any way make public the proposed transactions among the
parties which are the subject of this Agreement and the Other Agreements without
the prior written consent of Wireless Solutions or Retix, respectively.
5.10 ASSIGNMENTS. At the Closing, Retix will use its reasonable
efforts to deliver to Wireless Solutions, such other instruments of transfer or
assignment as the parties deem reasonably necessary or advisable so as to vest
title in the Transferred Assets more fully in Wireless Solutions.
5.11 SUBSEQUENT ACTIONS. At any time, and from time to time, after
the Closing Retix shall, promptly upon request by Wireless Solutions execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Wireless Solutions may reasonably request
in order more effectively to transfer, convey and assign to Wireless Solutions,
or to confirm Wireless Solutions' title to, the Transferred Assets, to put
Wireless Solutions in possession and control thereof, to assist Wireless
Solutions in exercising all rights with respect thereto and otherwise complete
the transactions contemplated hereby. The parties agree to execute documents as
necessary to file with the United States Copyright Office, the United States
Patent Office with respect to, or otherwise to confirm Wireless Solutions' title
in, the Transferred Assets.
-144-
<PAGE>
5.12 SUBSEQUENT ACCESS. Retix agree to provide access to and copies
of all necessary accounting records, work papers and other documents in
connection with or related to the Transferred Business, as reasonably requested
by Wireless Solutions or the independent auditors of Wireless Solutions. Retix
will consider any reasonable requests for customary representation letters in
connection with any audit.
5.13 COVENANTS REGARDING THE MANAGEMENT AND OPERATION OF WIRELESS
SOLUTIONS.
(a) CAPITALIZATION OF WIRELESS SOLUTIONS. As of the Closing,
Retix will own 17,000,000 shares of Wireless Solutions' Preferred Stock,
representing at least 80% of the outstanding capital stock of Wireless
Solutions. Retix and Wireless Solutions agree that there will be issued or
reserved for future issuance to Wireless Solutions directors, officers,
employees, consultants and other service providers (other than Retix or its
affiliates) an aggregate of fifteen percent (15%) of the aggregate capital stock
of Wireless Solutions on an as-converted basis. After the Closing, the Board of
Directors of Wireless Solutions shall determine those persons to whom shares of
Wireless Solutions' Common Stock (or options to purchase such shares) shall be
issued, whether pursuant to the Key Employee Option Agreements or otherwise,
which determination shall be final and binding.
(b) CORPORATE OBJECTIVES. Retix and Wireless Solutions hereby
acknowledge and agree that Wireless Solutions shall be operated as a for-profit
enterprise with the principal strategic objective of obtaining liquidity for
Wireless Solutions' shareholders through an Initial Public Offering, sale of
Wireless Solutions or other appropriate transaction. Wireless Solutions shall
initially operate on a strategic plan and financial model approved by Retix in
its discretion. After the Closing, Wireless Solutions shall operate on a
strategic plan and financial model approved by Wireless Solutions' Board of
Directors.
(c) TERMINATION. The provisions of this Section 5.13 shall
terminate and be of no further force or effect upon the earliest to occur of (i)
an Initial Public Offering, (ii) a Change of Control, or (iii) a Sale of
Wireless Solutions Stock.
5.14 SHARED ADMINISTRATIVE EXPENSES. Retix will provide certain
administrative and support services to Wireless Solutions for a period to be
mutually agreed upon in good faith. The foregoing services shall be provided by
Retix to Wireless Solutions in a similar manner as such services were provided
by Retix internally to support the Transferred Business prior to the Closing
Date. The foregoing services shall be provided by Retix to Wireless Solutions
at Retix's fully-loaded cost, defined as Retix's out-of-pocket costs of
providing such services (including reasonable allocations of (i) the salaries of
Retix personnel providing such services, and (ii) Retix's overhead costs
associated with providing such services). Any costs and expenses incurred by
one party pursuant to this Section 5.14 (including without limitation taxes,
license fees, insurance fees and costs of professional services), which are
payable in whole or in part by the other party pursuant to this Section 5.14,
will be allocated between the parties as mutually agreed in good faith.
-145-
<PAGE>
5.15 SUPPORT AND DISCLOSURE. Wireless Solutions Management covenants
and agrees to fully support Retix in its efforts to divest its equity holdings
in Wireless Solutions to the public, a third party or to Wireless Solutions
Management, and to provide full disclosure of all material information requested
by any potential purchasers of such equity holdings, in each case as reasonably
requested by Retix and in compliance with all applicable securities laws.
6. CONDITIONS OF RETIX'S OBLIGATIONS. The obligation of Retix to
consummate and effect this Agreement and the Other Agreements and the
transactions contemplated hereby and thereby shall be subject to the
satisfaction at the Closing of all of the following conditions, any of which may
be waived, in writing, exclusively by Retix:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Wireless Solutions contained in this Agreement shall be true in
all material respects at and as of the Closing Date, with the same effect as
though made as of such date.
6.2 COVENANTS. Wireless Solutions shall have complied with all
agreements and covenants contained herein to be complied with by Wireless
Solutions prior to or at the Closing Date.
6.3 CLOSING DOCUMENTS. Retix shall have received, in form and
substance satisfactory to Retix and its counsel, each and every closing
document required to be delivered to them by this Agreement and the Other
Agreements, including without limitation, a list of Transferred Contracts as
determined by the parties in good faith.
6.4 CONSENTS AND WAIVERS. Retix shall have obtained any and all
consents, permits, approvals and waivers necessary or appropriate for the
consummation of the transactions contemplated by this Agreement and the Other
Agreements.
6.5 OFFICER'S CERTIFICATE. Wireless Solutions shall have delivered
to Retix a certificate, dated as of the Closing Date and signed by an authorized
officer of Wireless Solutions, to the effect that the conditions specified in
Section 6.1 and Section 6.2 have been satisfied.
6.6 BOARD OF DIRECTORS. The Board of Directors of Wireless
Solutions shall consist of Joe Stephan, Jeffrey Drazan, Neil Hynes, Gilbert P.
Williamson and one vacancy.
7. CONDITIONS OF WIRELESS SOLUTIONS OBLIGATIONS. The obligation of
Wireless Solutions to consummate and effect this Agreement and the Other
Agreements and the transactions contemplated hereby and thereby shall be subject
to the satisfaction at the Closing of all of the following conditions, any of
which may be waived, in writing, exclusively by Wireless Solutions :
-146-
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Retix contained in this Agreement shall be true and correct at and
as of the Closing Date, with the same effect as though made as of such date,
except for changes in the ordinary course of business consistent with past
practices of Retix and other changes consistent with past practices of Retix
which in the aggregate do not have a material adverse effect on the Transferred
Assets, the Transferred Business or Wireless Solutions.
7.2 COVENANTS. Retix shall have complied with all agreements and
covenants contained herein to be complied with by Retix prior to or at the
Closing Date.
7.3 NO MATERIAL ADVERSE CHANGE. From the date of this Agreement,
there shall not have occurred any material adverse change in the business,
financial condition, operations or value of the Transferred Business or the
value of the Transferred Assets.
7.4 ASSET AND CONTRACT ASSIGNMENTS. Retix shall have taken or
agreed to take any and all steps necessary to effectuate the assignment and
transfer to Wireless Solutions of all Transferred Assets and Transferred
Contracts, including but not limited to obtaining any and all necessary consents
or waivers with respect thereto.
7.5 CLOSING DOCUMENTS. Wireless Solutions shall have received, in
form and substance satisfactory to Wireless Solutions and its counsel, each and
every other closing document required to be delivered to them by this Agreement
and the Other Agreements, including without limitation, a list of Transferred
Contracts as determined by the parties in good faith.
7.6 OFFICER'S CERTIFICATE. Retix shall have delivered to Wireless
Solutions a certificate, dated as of the Closing Date and signed by an
authorized officer of Retix, to the effect that the conditions specified in
Section 7.1 and Section 7.2 have been satisfied.
7.7 CONSENTS AND WAIVERS. Wireless Solutions shall have obtained
any and all consents, permits, approvals and waivers necessary or appropriate
for the consummation of the transactions contemplated by this Agreement and the
Other Agreements.
8. TERMINATION.
8.1 AGREEMENT TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to or at the
Closing Date upon ten (10) business days prior notice: (a) by Wireless
Solutions or Retix if there has been a material misrepresentation, breach of
warranty, or breach of covenant by the other in any of their representations,
warranties, or covenants set forth herein which the breaching party or parties
fail to cure within ten (10) business days after receipt of notice thereof; (b)
by Wireless Solutions if the conditions stated in Section 7 have not been
satisfied by the Closing Date; (c) by Retix if the conditions stated in Section
6 have not been satisfied by the Closing Date, or (d) by mutual written
agreement of Wireless Solutions and Retix.
-147-
<PAGE>
8.2 EFFECT OF TERMINATION. If this Agreement shall be terminated as
provided in Section 8, all obligations of the parties hereunder and under the
Other Agreements shall terminate without liability of any party to any other
party, except that (i) the second and third sentences of Section 5.1(b) of this
Agreement and Section 5.9 of this Agreement shall survive any such termination.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties are material, shall be deemed to have been relied upon
by the parties receiving such representations and warranties and shall survive
the Closing. All such representations and warranties shall expire one year
after the Closing.
10. GENERAL PROVISIONS.
10.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
10.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
10.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
10.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their reasonable efforts to replace
the provision that is contrary to law with a legal one approximating to the
extent possible the original intent of, and the economic benefits accruing to,
the parties.
10.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
-148-
<PAGE>
10.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10.1,
their respective successors and assigns.
10.7 COMPLETE AGREEMENT. This Agreement and the Other Agreements and
any schedules, exhibits and documents referred to herein or therein or executed
contemporaneously herewith or therewith constitute the entire agreement among
the parties with respect to the subject matter hereof and thereof. This
Agreement and the Other Agreements supersede all prior written, and all prior
and contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof and
thereof.
10.8 NO THIRD-PARTY BENEFICIARIES. Nothing contained in this
Agreement shall be construed to give any person other than Retix and Wireless
Solutions any legal or equitable right, remedy or claim under or with respect to
this Agreement, the Transferred Assets or the Transferred Business.
10.9 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
10.10 NOTICES. All notices or other communications which shall
or may be given pursuant to this Agreement shall be in writing, shall be
effective upon receipt, and shall be delivered by Federal Express or a similar
courier, personal delivery, certified or registered mail, or by facsimile
transmission (with confirmation of transmission receipt), addressed as follows
(or as is provided in the future by written notice as provided herein):
If to Wireless Solutions : Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
10.11 COUNTERPARTS. This Agreement may be executed in any number
of copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
-149-
<PAGE>
10.12 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
10.13 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
10.14 TRANSACTION COSTS. Except as otherwise provided herein,
each party shall be responsible for any costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
10.15 ATTORNEYS' FEES AND OTHER COSTS. In the event of any
dispute or controversy arising out of this Agreement, the prevailing party shall
be entitled to reimbursement of its costs, including court and mediation,
dispute resolution and/or arbitration costs and attorneys' and expert witnesses'
fees and costs.
[SIGNATURE PAGE FOLLOWS]
-150-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
WIRELESS SOLUTIONS RETIX
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
-151-
<PAGE>
MASTER AGREEMENT EXHIBIT LIST
EXHIBIT A Form of Grant Back License Agreement
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Key Employee Option Agreement
EXHIBIT D Wireless Solutions Disclosure Schedule
EXHIBIT E Form of Preferred Stock Purchase Agreement
EXHIBIT F List of Products
EXHIBIT G Retix Disclosure Schedule
EXHIBIT H Form of Rights Agreement
EXHIBIT I Form of Security Agreement
EXHIBIT J List of Transferred Assets
EXHIBIT K List of Transferred Liabilities
-152-
<PAGE>
EXHIBIT A
GRANT-BACK LICENSE AGREEMENT
This Grant-Back License Agreement (the "AGREEMENT") is made as of May 31,
1996 (the "EFFECTIVE DATE") by and between Retix, a California corporation with
offices at 2401 Colorado Avenue, Santa Monica, CA 90404 ("RETIX"), and Wireless
Solutions, a California corporation with offices at 2401 Colorado Avenue, Santa
Monica, CA 90404 ("WIRELESS SOLUTIONS").
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, receipt of which is hereby acknowledged,
Wireless Solutions and Retix hereby agree as follows:
1. DEFINITIONS.
"LICENSED MATERIALS" shall be each computer program whether in
software, firmware, physical or other form, as well as any other technology or
designs (whether hardware, software, firmware or other form thereof) which, as
of the Closing Date, was either owned by Wireless Solutions or permitted to be
licensed by Wireless Solutions to Retix on the terms provided for herein, in
each case after giving effect to the transfer of assets and other matters
contemplated in the Master Agreement. Such Licensed Materials shall include,
without limitation, those programs and other items specified in EXHIBIT A and
such other rights as the parties may from time to time agree to incorporate into
such Exhibit. The term "LICENSED MATERIAL" shall specifically include
documentation and related materials pertinent to such program, design or other
material and any updated version or portion thereof furnished to Retix by
Wireless Solutions for use in connection with or replacement of a Licensed
Material, and shall specifically exclude future additions, improvements or
modifications thereto unless approved in writing by Wireless Solutions and
Retix.
"MASTER AGREEMENT" shall mean the Master Agreement between Wireless
Solutions and Retix of even date herewith.
"OBJECT FORM" shall mean any machine translated version of the Source
Form suitable for execution by computer equipment, or any intermediate form
derived from Source Form which can be made executable by computer equipment.
"PRODUCTS" shall mean all hardware, software and other products
developed, marketed or sold by Retix or its subsidiaries or affiliates which
contain Licensed Materials and which also contain material added features or
other material distinguishing characteristics from the Licensed Materials
incorporated therein.
"SOURCE FORM" shall mean the source code form on any media of any
Licensed Material in the language as delivered by Wireless Solutions to Retix,
or any translation or modification of such Licensed Material which substantially
preserves its original identity.
-153-
<PAGE>
2. LICENSE GRANT.
2.1 TECHNOLOGY LICENSE. Wireless Solutions hereby grants to Retix
and its authorized contractors a non-exclusive, non-transferable (except as
provided in Section 8.1) worldwide, perpetual, fully-paid license, with the
right to sublicense, to use, copy, have copied and distribute Licensed Materials
in conjunction with the operation, development, design, manufacture, marketing,
sale or other disposition of the Products.
2.2 USE OF SOURCE FORM FOR DEVELOPMENT. Wireless Solutions hereby
grants to Retix and its authorized contractors a non-exclusive, non-transferable
(except as provided in Section 8.1) worldwide, perpetual, fully-paid license
with the right to sublicense, to use, copy and have copied the Source Form of
Licensed Materials for the purpose of adapting or incorporating such Licensed
Materials for operation in connection with the Products.
2.3 USE OF OBJECT FORM IN PRODUCTS. Wireless Solutions hereby
grants to Retix and its authorized contractors a non-exclusive, non-transferable
(except as provided in Section 8.1), worldwide, perpetual, fully-paid license,
with rights to sublicense as described in Section 2.3, to use, copy, have
copied, and distribute the Object Form of Licensed Materials solely on and in
conjunction with the Products.
2.4 RIGHT TO GRANT SUBLICENSES.
(a) RIGHT TO GRANT OBJECT FORM OR SUBLICENSES.
(i) Wireless Solutions hereby grants Retix a non-exclusive,
non-transferable (except as provided in Section 8.1), worldwide, perpetual,
fully-paid right to grant and to grant to distributors, resellers and other
parties who distribute Products the right to grant sublicenses (not exceeding
the scope of the underlying license) to use, copy and have copied the Object
Form of Licensed Materials solely on and in conjunction with the Products,
provided that (i) such sublicensees agree to be bound by terms and conditions no
less restrictive than those set forth in the End User License Agreement attached
hereto as EXHIBIT B , and (ii) any distributors, resellers and other parties who
distribute Products, to which Retix grants the right to grant sublicenses as
provided above, agree in writing to be bound by all of the restrictions
contained in this Agreement applicable to Retix. Neither Retix nor its
distributors, resellers and other parties who distribute Products shall
distribute the Licensed Materials other than in connection with the marketing
and sale of Products.
(ii) If the Object Form is sublicensed on media or devices separately from
the Products, then Retix shall use appropriate means to provide for the
acceptance of said End User License Agreement by the end user sublicensee and
installation of the Object Form only on Products, which means may include a
customary written shrinkwrap or break-seal document specifying such provisions.
(iii) If the Object Form is sublicensed in the form of firmware in Read
Only Memory (ROM) attached directly to the Products, then said End User License
Agreement, or provisions containing at a minimum those of said End User License
Agreement,
-154-
<PAGE>
will be made a part of a written agreement between Retix and any purchaser of
Products, or in lieu thereof a customary written shrink wrap or break-seal
document specifying such provisions.
(b) RIGHT TO GRANT SOURCE FORM SUBLICENSES. Wireless Solutions
hereby grants Retix a non-exclusive, non-transferable (except as provided in
Section 8.1), worldwide, perpetual, fully-paid right to grant sublicenses (not
exceeding the scope of the underlying license) to use, copy and have copied the
Source Form of Licensed Materials solely on specific items of Products under the
conditions specified below, provided that such sublicensees agree to be bound by
a source code license agreement permitting the use of the Source Form of
Licensed Materials solely for the purposes outlined below, and having terms no
less restrictive than those specified in Section 5 (Confidentiality):
(i) Source Form is required to be held in escrow by a government
sublicensee; or
(ii) Source Form for any or all of the Licensed Materials is required for
maintenance by a sublicensee.
In addition to those provisions outlined above, Retix agrees that its
Source Form sublicensees specified in clauses (i) and (ii) above shall be bound
by the following additional provisions:
(A) Such Source Form sublicenses shall be used for
maintenance purposes only with no rights to develop or distribute improvements,
adaptations, new versions or derivative works of the Licensed Materials.
(B) Except as expressly provided or permitted in this
Agreement, such Source Form sublicensees shall have no rights to distribute or
otherwise make available Source Form or Object Form to other legal entities
other than affiliates of such Source Form sublicensees.
(C) Such Source Form sublicensees shall use the Source
Form and any Object Form compiled therefrom solely in accordance with the
restrictions set forth on EXHIBIT B (in addition to the other restrictions set
forth herein).
2.5 SUBLICENSES TO GOVERNMENT AGENCIES. Wireless Solutions grants
to Retix a non-exclusive, non-assignable, restricted right to sublicense the
Object Form of Licensed Materials to Government units or agencies, with such
Government units or agencies acquiring only the most limited and restricted
rights, permitted under applicable law, in such Licensed Materials and related
proprietary technical information, data, documentation, and any other forms of
recording and communication. Wireless Solutions grants no subsequent rights to
sublicense such Licensed Materials. If the sublicensee is the United States
Government, the restrictions as set forth in DFARS 227.7202 for military
agencies, and FAR 12.212 for civilian agencies, apply. For purposes of such
regulations, the Contractor/Manufacturer shall be deemed to be Wireless
Solutions. Retix and Wireless Solutions expressly agree to follow all
procedures necessary to secure such limited and restricted rights.
-155-
<PAGE>
2.6 SUBLICENSE ENFORCEMENT. Retix agrees, upon written request or
prior written approval of Wireless Solutions to perform the duties and enforce
the rights of Wireless Solutions with respect to any sublicense granted by Retix
under this Agreement, to the extent permitted under the terms of such
sublicense.
2.7 RIGHTS TO IMPROVEMENTS. Wireless Solutions agrees to notify
Retix promptly in writing of the existence of and the specifications for any
improvements, enhancements, modifications or amendments to the Licensed
Materials (the "IMPROVEMENTS") that Wireless Solutions does not market as new
products and of any versions to or new versions of the Licensed Materials that
Wireless Solutions markets or new products which it has developed and proposes
to make available to any third party (the "TECHNOLOGIES," and collectively with
the Improvements, the "NEW TECHNOLOGIES"). Until the consummation of Wireless
Solutions' Initial Public Offering (as defined in the Master Agreement),
Wireless Solutions shall make any such New Technologies available for use by
Retix on terms no less favorable than those provided by Wireless Solutions to
its most favored customer and at a rate equal to the greater of Wireless
Solutions' most favored customer discount or a 50% discount off the then-current
Wireless Solutions suggested end-user price for such New Technology, in each
case for Wireless Solutions customers contemporaneously purchasing the Licensed
Materials under similar terms. Following the consummation of Wireless
Solutions' Initial Public Offering, Wireless Solutions shall make any such New
Technologies available for use by Retix on terms no less favorable than those
provided by Wireless Solutions to Equivalent Purchasers (as defined below) of
similar Wireless Solutions products and services. As used in the foregoing
sentence, the term "EQUIVALENT PURCHASERS" shall mean purchasers of Wireless
Solutions products or services who (i) are not affiliated with Wireless
Solutions, and (ii) purchase such products or services on terms that are
substantially equivalent to those applicable to Retix.
2.8 THIRD-PARTY ROYALTIES. No royalties or similar payments are
payable by Retix to Wireless Solutions under this Agreement, except for payments
that may arise under Section 2.7 and except for royalties owed by Wireless
Solutions to third parties with respect to Retix' or Retix' sublicensees' use of
the Licensed Materials (collectively, "THIRD-PARTY ROYALTIES"). At the end of
each calendar quarter, Wireless Solutions shall prepare a quarterly statement
showing the Third Party Royalties actually paid by Wireless Solutions during
such quarter. Within 15 days of its receipt of such quarterly statement, Retix
shall reimburse Wireless Solutions for the Third Party Royalty payments actually
paid as indicated in such statement.
2.9 WARRANTY DISCLAIMER. WIRELESS SOLUTIONS MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED MATERIALS OR ANY OTHER
MATERIALS PROVIDED HEREUNDER AND EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OR
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
-156-
<PAGE>
3. DELIVERABLES. At the Closing pursuant to the Master Agreement
between Wireless Solutions and Retix of even date herewith, Wireless Solutions
shall provide Retix with a copy of all Licensed Materials, including copies of
all computer programs included in the Licensed Materials in Source Form and
Object Form (and including sufficient documentation for a complete technical
understanding of such programs) for Retix's use in accordance with the terms of
this Agreement. Thereafter, during the term of this Agreement, Wireless
Solutions shall provide Retix with prompt written notification of any additions,
improvements or modifications to the Licensed Materials, developed by or for
Wireless Solutions, and shall thereafter promptly deliver to Retix a copy of any
such additions, improvements or modifications which the parties agree should be
included in the Licensed Materials.
4. SUPPORT. Retix shall be solely responsible for supporting and
providing maintenance of all or any part of the Licensed Materials and
documentation as provided to Retix's customers. Wireless Solutions shall have
no obligation to provide any consultation or maintenance support to Retix's
customers with respect to all or any part of the Licensed Materials or other
subject matter of this Agreement.
5. CONFIDENTIALITY.
5.1 CONFIDENTIAL INFORMATION. As used in this Agreement, the term
"Confidential Information" shall mean any information disclosed by one party to
the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked "Confidential", "Proprietary" or
in some other manner to indicate its confidential nature. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such information is designated
as confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time (not to exceed thirty (30) days) after
its oral disclosure, and such writing is marked in a manner to indicate its
confidential nature and delivered to the receiving party. Notwithstanding any
failure to so identify it, however, all Licensed Materials to be supplied by
Wireless Solutions hereunder shall constitute Wireless Solutions' Confidential
Information without need for further marking.
5.2 CONFIDENTIALITY. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except as set forth herein, and shall use reasonable efforts not to
disclose such Confidential Information to any third party. Without limiting
the foregoing, each of the parties shall use at least the same degree of care
which it uses to prevent the disclosure of its own confidential information of
like importance to prevent the disclosure of Confidential Information disclosed
to it by the other party under this Agreement. Each party shall promptly notify
the other party of any actual or suspected misuse or unauthorized disclosure of
the other party's Confidential Information.
-157-
<PAGE>
5.3 EXCEPTIONS. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which the receiving party can prove:
(i) was in the public domain at the time it was disclosed or has entered
the public domain through no fault of the receiving party;
(ii) was known to the receiving party, without restriction, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the disclosing party;
(iv) was independently developed by the receiving party without any use of
the Confidential Information, as demonstrated by files created at the time of
such independent development;
(v) becomes known to the receiving party, without restriction, from a
source other than the disclosing party without breach of this Agreement by the
receiving party and otherwise not in violation of the disclosing party's rights;
(vi) is disclosed generally to third parties by the disclosing party
without restrictions similar to those contained in this Agreement; or
(vii) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body; provided, however, that the
receiving party shall provide prompt notice thereof to the disclosing party to
enable the disclosing party to seek a protective order or otherwise prevent or
restrict such disclosure;
provided, that Sections 5.3(ii) and (iv) shall not apply to any Licensed
Materials originally developed by Retix prior to the Effective Date,
subsequently transferred to Wireless Solutions, and then licensed back to Retix
by Wireless Solutions pursuant to this Agreement.
5.4 REMEDIES. Any breach of the restrictions contained in this
Section 5 is a breach of this Agreement which may cause irreparable harm to the
nonbreaching party. Any such breach shall entitle the nonbreaching party to
injunctive relief in addition to all legal remedies.
5.5 PRESERVATION OF NOTICES. Wireless Solutions shall retain title
and copyrights to the Licensed Materials and related materials that are provided
by Wireless Solutions to Retix. Appropriate copyright notices shall be placed
on the materials supplied by Wireless Solutions (or as modified by Wireless
Solutions following the closing contemplated by the Master Agreement) and shall
be embedded in the Source Form and Object Form, of Licensed Materials, and such
notices shall be retained on full or partial copies made by Retix. Retix agrees
to reproduce and include all notices, including but not limited to, any
proprietary notices, copyright notices, and restricted rights legends, appearing
thereon.
-158-
<PAGE>
6. EXPORT CONTROLS.
6.1 EXPORT CONTROLS IN GENERAL. In exercising its rights under this
Agreement, Retix agrees to comply strictly and fully with all export controls
imposed on the Licensed Materials by any country or organization of nations
within whose jurisdiction Retix operates or does business and with all
applicable international, national regional and local laws including all
relevant commodity control laws and regulations in any transactions involving
Licensed Materials.
6.2 COMPLIANCE WITH EXPORT CONTROLS.
(a) With respect to exportation or re-exportation of any part of
the Licensed Materials, Retix agrees not to export or permit exportation without
first (i) obtaining any required written permission to do so from the United
States Office of Export Administration and any other appropriate governmental
agencies of the United States, or (ii) complying fully and strictly with all
requirements of any general license exempting the exportation from the
requirement for that permission.
(b) Retix agrees to comply with the United States Export
Administration Act of 1979 as amended (the "ACT"), and with the Export
Administration Regulations ("EAR") promulgated from time to time thereunder by
the United States Department of Commerce ("DOC") in connection with the
exercise of its rights hereunder.
(c) Each party agrees to execute any documents reasonably
requested by the other party (including applications for export licenses and
written assurances of non-reexportation) for the purpose of complying with the
Act and EAR. Retix agrees to keep, at a minimum, the following records required
by DOC for all Licensed Materials incorporated within Products shipped under
this Agreement:
(i) Name and complete address of Retix's customer;
(ii) Customer's type of business and industry;
(iii) End use of Product sold; and
(iv) Serial numbers and dates of Product sold.
Retix understands and agrees that Licensed Materials may not be
exported, resold or reexported except in a manner which complies with this
Section and Wireless Solutions shall not under any circumstances be liable to
Retix for any damages whatsoever in the event such export licenses are not
obtained or if any shipment of the Licensed Materials is delayed because of
delays in obtaining such licenses.
-159-
<PAGE>
7. INDEMNIFICATION AND LIMITATION OF LIABILITY.
(a) Wireless Solutions shall indemnify Retix and hold it harmless
from any loss, claim or damage (including attorney's fees) arising out of
Wireless Solutions' use or possession of the Licensed Materials or related
materials (including, but not limited to, infringement or claims of infringement
of any patents, trademarks, copyrights or other intellectual property rights).
(b) EXCEPT FOR ACTIONS PURSUANT TO SECTIONS 5.1, 5.2, 5.3 AND/OR 5.4,
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS, LOSS OF USE OR LOST DATA) ARISING FROM OR BASED UPON THIS AGREEMENT OR
ANY BREACH HEREOF, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER OR NOT
SUCH PARTY HAD BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. GENERAL PROVISIONS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
in business or an acquiror of all or substantially all of a party's business or
assets, this Agreement is not transferable or assignable without the consent of
the other party to this Agreement. Any assignment in derogation of the
foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
-160-
<PAGE>
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
8.7 COMPLETE AGREEMENT. This Agreement and any schedules, exhibits
and documents referred to herein or executed contemporaneously herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof. This Agreement supersedes all prior written, and all prior and
contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof.
8.8 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.9 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Wireless Solutions: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.10 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
8.11 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
-161-
<PAGE>
8.12 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
8.13 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for any costs, expenses and claims ( including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement.
8.14 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
[SIGNATURE PAGE FOLLOWS]
-162-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
WIRELESS SOLUTIONS RETIX
By: By:
------------------------------ -------------------------
Title: Title:
--------------------------- -----------------------
-163-
<PAGE>
EXHIBIT A
LICENSED MATERIALS
EXHIBIT B
FORM OF END USER LICENSE AGREEMENT
-164-
<PAGE>
EXHIBIT B
LOAN AGREEMENT
This Loan Agreement (the "AGREEMENT") dated as of May 31, 1996, is by and
between Retix, a California corporation (the "LENDER") and Wireless Solutions,
a California corporation (the "BORROWER").
1. LOAN.
1.1 Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Borrower set forth herein,
Lender agrees to provide Borrower with a credit line of up to $1,000,000 (the
"CREDIT LINE") to be secured by all of Borrower's assets pursuant to the
Security Agreement between Lender and Borrower of even date herewith (the
"SECURITY AGREEMENT").
1.2 Advances under the Credit Line may be advanced to Borrower in a
single funding or in separate fundings (each such event, a "FUNDING EVENT," and
each date thereof, a "FUNDING DATE"). Borrower shall provide Lender at least
ten (10) business days prior notice of each requested Funding Event. Each
Funding Event shall be evidenced by a promissory note of Borrower in favor of
Lender substantially in the form of EXHIBIT A to this Agreement (each a "NOTE"
and together the "NOTES").
1.3 Subject to the terms and conditions of this Agreement, on or
before May 31, 1999, Borrower may re-borrow amounts repaid under the Credit
Line. Any amounts re-borrowed under the Credit Line shall be evidenced by a
Note, and shall be subject to the terms and conditions of this Agreement,
including the repayment terms set forth in the Note and in Section 3 below. No
loans shall be made to Borrower after May 31, 1999, and any notes outstanding as
of such date shall be repaid by Borrower in accordance with their respective
terms.
1.4 Amounts borrowed or re-borrowed under the Credit Line shall be
used solely and exclusively to fund the Borrower's ongoing operating expenses as
approved by the Borrower's Board of Directors.
2. CONDITIONS PRECEDENT TO FUNDING. The obligation of Lender to make
advances under the Credit Line to Borrower, or any funding thereof, is subject
to the following conditions:
2.1 That Lender shall have received, on or before each Funding Date,
including the first such Funding Date, each of the following, in form and
substance satisfactory to Lender and its counsel, if any: (a) a Note in the
principal amount of the respective funding duly executed by Borrower; and (b) a
certificate of an officer of Borrower that the representations and warranties
contained in this Agreement are true and correct on the Funding
-165-
<PAGE>
Date and that there is no Event of Default under this Agreement and no event or
condition which, with lapse of time or giving of notice, would become such an
Event of Default;
2.2 That no Event of Default under this Agreement and no event or
condition which would, with the giving of notice or lapse of time or both,
become such an Event of Default under this Agreement shall have occurred and be
continuing on or before each Funding Date; and
2.3 That such Credit Line is, in aggregate amount as well as in the
timing of the respective Funding Event, consistent with Borrower's written
annual operating plan previously approved by its Board of Directors.
3. REPAYMENT OF LOAN.
3.1 REPAYMENT TERMS. Payments of interest must be made in on the
first day of each calendar quarter following the date of each Note. Payments of
principal must also be made on the first day of each calendar quarter following
the date of each Note out of any funds available to Borrower at such time.
Payments of both interest and principal shall also be due immediately upon the
occurrence of certain events as set forth below. Solely for purposes of
illustration, if on the first day of a calendar quarter,
(a) Borrower has (1) an outstanding promissory note in the
principal amount of $250,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $3,750, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2
in the amount of $12,000 and (4) a cash balance in its accounts of $2,500,000,
then on such date Borrower must pay to Lender (1) the entire $15,750 in interest
due on Notes 1 and 2, then (2) the entire $250,000 principal balance due on Note
1, then (3) the entire $750,000 principal balance due on Note 2, and
(b) Borrower has (1) an outstanding promissory note in the
principal amount of $250,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $3,750, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2
in the amount of $12,000 and (4) a cash balance in its accounts of $500,000,
then on such date Borrower must pay to Lender (1) the entire $15,750 in interest
due on Notes 1 and 2, then (2) the entire $250,000 principal balance due on Note
1, then (3) the entire remaining cash balance in Borrower' accounts ($234,250)
towards the reduction of the principal balance due on Note 2.
3.2 PREPAYMENT. Borrower may prepay the Credit Line, or any portion
thereof, at any time, without prepayment penalty.
3.3 LATE PAYMENT CHARGE. Payments of principal (and of interest to
the extent permitted by law) not made on the due date shall bear interest at a
rate per annum equal to the rate specified in each Note plus two percent (2%),
but not in excess of the maximum rate permitted by law until such unpaid amount
has been paid in full (whether before or after judgment). All interest provided
for in this Section 3.3 shall be payable on demand.
-166-
<PAGE>
3.4 NON-BUSINESS DAYS. Whenever any payment required under this
Agreement falls due on a day that is not a business day, such payment shall be
made on the next succeeding business day.
3.5 ACCELERATION. At Lender's option, the entire principal amount
and interest due under the Notes shall become immediately due and payable, and
no further amounts may be borrowed or re-borrowed under the Credit Line: (i) if
Borrower sells all or substantially all of its assets, (ii) if Borrower
liquidates, dissolves or consummates any consolidation, merger or other
combination (except a merger, consolidation, sale of assets or other combination
in which the shareholders of Borrower immediately prior to the transaction hold
more than fifty percent (50%) of the outstanding voting securities of the
surviving or purchasing entity by virtue of voting equity securities of the
successor entity received in connection with such transaction in exchange for
shares or other securities of Borrower owned immediately prior to the closing of
such transaction), or (iii) upon the occurrence of any Event of Default (as
defined below). In addition, 50% of the entire principal amount and unpaid
accrued interest under the Notes shall become immediately due and payable, at
Lender's option, if the Borrower consummates any transaction as a result of
which Lender ceases to own at least 50% of the then outstanding capital stock of
Borrower on an as converted to Common Stock basis.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower makes the following representations and warranties
which shall survive the execution and delivery of this Agreement and the Notes:
4.1 CORPORATE EXISTENCE AND POWERS. Borrower (a) is a corporation
duly organized, validly existing and in good standing under the laws of State of
California, and (b) has all corporate power and authority to carry out this
Agreement and the transactions contemplated herein. Borrower is not qualified
or licensed to do business as a foreign corporation in any state. Borrower does
not own, directly or indirectly, any equity or other interest in any other
corporation, association, partnership or other business entity.
4.2 CORPORATE AUTHORIZATIONS; BINDING EFFECT. The execution,
delivery and performance by Borrower of this Agreement are within the corporate
authority of Borrower, have been duly authorized by all necessary corporate
proceedings and do not and will not, to the knowledge of Borrower, (i)
contravene, or constitute a default under, any provisions of applicable law or
regulations or of the Articles of Incorporation or Bylaws of Borrower or of any
presently existing material contract, agreement, judgment, order, decree or
other material instrument binding upon Borrower or (ii) result in or require the
creation or imposition of any lien upon or with respect to any material property
now or hereafter owned by Borrower under any presently existing material
contract, agreement or other material instrument binding upon it, other than
that specifically created under this Agreement. To the knowledge of Borrower,
this Agreement constitutes, as of its execution, a legal, valid and binding
agreement enforceable against Borrower in accordance with its terms.
-167-
<PAGE>
4.3 GOVERNMENTAL AND OTHER CONSENTS NOT REQUIRED. To the knowledge
of Borrower, no license, authorization, consent or approval of any governmental
body, other body or agency is required to be obtained by Borrower in connection
with the execution and delivery of this Agreement, or in connection with the
carrying out by Borrower of its obligations under this Agreement.
4.4 LITIGATION. There is no action, suit or proceeding pending, or
to the knowledge of Borrower, threatened, against or affecting Borrower before
any court or arbitration tribunal or any other governmental department,
administrative agency or instrumentality which, if such action, suit or
proceeding would be determined against Borrower, would affect the ability of
Borrower to perform its obligations under this Agreement. To its knowledge,
Borrower is not in default in any material respect with respect to any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award.
4.5 TITLE TO COLLATERAL. Borrower warrants that Borrower has
acquired good and merchantable title to the Collateral (as defined in the
Security Agreement between Borrower and Lender of even date with this Agreement)
at such time and in such manner as to create a first priority security interest
in the Collateral in favor of Lender (provided and on the condition that Lender
makes timely filings in the proper offices of all UCC-1 financing statements
furnished to it) free and clear of in each instance any other security
interests, liens, claims, encumbrances and rights of others except any lien
created by this Agreement, liens for taxes not yet due and payable and any
security interests which will be discharged at or before the funding
contemplated hereby.
4.6 DISCLOSURE. All information heretofore, herein or hereafter
supplied to Lender by or on behalf of Borrower with respect to the Collateral is
and will be accurate and complete in all material respects.
4.7 RECONFIRMATION OF REPRESENTATIONS AND WARRANTIES. Borrower
shall reconfirm as of each Funding Date that all the aforesaid representations
and warranties remain valid and in full force and effect.
5. COVENANTS OF BORROWER. Borrower covenants that until the payment in
full of the Credit Line and fulfillment of all its obligations under this
Agreement, Borrower shall comply with the following covenants:
5.1 NO SALE. As long as any amount due under this Agreement or
under any Note remains unpaid, Borrower will not sell, assign, transfer,
encumber, lease or otherwise dispose of all, or any part, of its right, title
and interest in any of the Collateral pledged as security for the Credit Line,
except for licenses granted or sales of products by Borrower in the ordinary
course of business, or as set forth in this Agreement.
5.2 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral, or cause the Collateral to be maintained, in good order and
condition, reasonable wear and tear excepted.
-168-
<PAGE>
5.3 PAYMENT OF TAXES. Borrower will pay when due and before any
interest or penalty is assessed, all taxes, federal, state or local, and all
levies or charges assessed against the Collateral to the appropriate
authorities. Borrower will discharge, or cause to be discharged, all liens,
security interests and encumbrances affecting the Collateral arising therefrom.
5.4 CORPORATE EXISTENCE. Borrower shall preserve and maintain its
existence as a corporation under the laws of the state of its incorporation and
all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.
5.5 FINANCIAL STATEMENTS.
(a) Borrower shall deliver to Lender:
(i) Within 90 days after the end of each fiscal year, an
audited balance sheet as of the end of such fiscal year, and a statement of
income and retained earnings for such fiscal year, and a statement of cash flows
for such fiscal year (each with the accompanying footnotes) all in reasonable
detail;
(ii) Within 45 days after the end of each of the first three
quarters of each fiscal year, Borrower shall provide copies of (A) the unaudited
balance sheet at the end of the interim period ending at the end of such
quarter, and (B) the related consolidated statement of income and changes in
financial position for the portion of the fiscal year ended at the end of such
period; each of the financial statements shall present fairly the consolidated
financial position of Borrower at the end of each such quarter, and the
consolidated results of operations and cash flows for the portion of the fiscal
year ended at the end of such period, all in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in (i) above (except that such quarterly statements will
not contain footnotes);
5.6 NOTICES. Borrower shall give immediate notice to Lender of:
(a) the occurrence of any Event of Default (as defined below)
accompanied by a certificate specifying the nature of such Event of Default, the
circumstances thereof and the action that Borrower has taken or proposes to
take;
(b) any claim, litigation or judicial proceeding which may exist
at any time which, if determined adversely, could have a material adverse effect
on the ability of Borrower to perform its obligations under this Agreement;
(c) any event that materially adversely affects the value of the
Collateral, the ability of Borrower to dispose of any Collateral or the rights
and remedies of Lender in relation thereto, including the levy of any legal
process against any of the Collateral; and
(d) any material adverse change in the composition of the
Collateral.
-169-
<PAGE>
5.7 NO CONFLICTS. Borrower shall not enter into any agreement that
would materially impair or conflict with Borrower's obligations hereunder
without Lender's prior written consent, which consent shall not be unreasonably
withheld. Borrower shall not permit the inclusion in any material contract to
which its becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Borrower's rights and interest in
any property included within the definition of the Collateral acquired under
such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.
6. EVENTS OF DEFAULT. Any of the following events shall constitute an
"EVENT OF DEFAULT" under this Agreement and under the Notes:
6.1 PAYMENTS. Borrower shall fail to make any payment due under
this Agreement or under any Note after the same shall become due and such
failure shall continue for ten days after Borrower receives notice of
non-payment;
6.2 LIENS. Borrower shall suffer the imposition upon the
Collateral or any part thereof of any claim, lien, security interest,
encumbrance or charge which is prior to or on a parity with the security
interest granted under this Agreement, except as contemplated by this
Agreement, and such imposition shall remain undischarged for a period of ten
days after Borrower has actual notice or actual knowledge thereof;
6.3 COVENANTS. Borrower shall fail to perform or observe any
material covenant, condition or agreement to be performed or observed by
Borrower in this Agreement, any Note or in any agreement or certificate of
Borrower furnished to Lender in connection herewith and such failure shall
continue unremedied after occurrence of such failure for a period of ten days
after the earlier of Borrower's actual knowledge of such failure or receipt
of written notice thereof;
6.4 INSOLVENCY. Borrower shall have become insolvent or bankrupt
or admit in writing its inability to pay any of its debts as they mature or
make an assignment for the benefit of creditors, or a receiver or trustee
shall have been appointed with respect to Borrower; PROVIDED , that an Event
of Default shall not have occurred under this Agreement if such action is
opposed by Borrower and is dismissed within sixty days; or
6.5 BANKRUPTCY. Bankruptcy, reorganization arrangement,
insolvency or liquidation proceedings for relief under Title XI of the United
States Code or any bankruptcy law or similar law now or hereafter in force
for the relief of debtors shall be instituted by or against Borrower and,
solely with respect to any proceedings instituted against Borrower by a third
party, Borrower shall fail to dismiss or to stay such proceedings within
sixty (60)days of such institution.
-170-
<PAGE>
7. SURVIVAL OF REPRESENTATIONS. All representations and warranties made
in this Agreement or in any relevant documents furnished to Lender by Borrower
under this Agreement and executed by its authorized officer or agent shall
survive the execution and delivery of this Agreement and any such relevant
documents furnished to Lender by Borrower and executed by its authorized officer
or agent and shall continue so long as any obligations under this Agreement are
outstanding and unsatisfied.
8. MISCELLANEOUS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
-171-
<PAGE>
8.7 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.8 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Borrower: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Lender: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.9 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
8.10 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
8.11 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
8.12 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for its costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
8.13 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
-172-
<PAGE>
8.14 COMPLETE AGREEMENT. This Agreement, together with the exhibits
or schedules to this Agreement, the Notes, and the Security Agreement of even
date to this Agreement, is intended by the parties as a final expression of
their agreement and is intended as a complete statement of the terms and
conditions of the subject matter hereof and thereof.
[SIGNATURE PAGE FOLLOWS]
-173-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and year first above written.
"LENDER"
RETIX
By:
----------------------------
Title:
-------------------------
"BORROWER"
WIRELESS SOLUTIONS
By:
----------------------------
Title: -------------------------
-174-
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$ ____________ ___________, 199_
FOR VALUE RECEIVED, Wireless Solutions, a California corporation (the
"BORROWER"), hereby promises to pay to the order of Retix, a California
corporation (the "LENDER") the principal sum of ___________________
($___________), together with interest at the lesser of the prime rate as
announced from time to time by First Interstate Bank or the maximum rate
permitted by law per annum, on the unpaid amount owing under this Note for the
period commencing on the date hereof. Payments of interest shall be made in
immediately available funds on the first day of each calendar quarter following
the date of this Note. Payments of principal shall be made in immediately
available funds on the first day of each calendar quarter following the date of
this Note out of any funds available to Borrower at such time in accordance with
the terms of the Loan Agreement dated _____________, 1996 between Borrower and
Lender (the "LOAN AGREEMENT").
All interest and principal due under this Note shall also be due
immediately upon the occurrence of certain events as set forth in the Loan
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to such terms in the Agreement.
Borrower may prepay amounts due under this Note, or any portion thereof, at
any time, without prepayment penalty.
All payments to be made to the Lender under this Note shall be made to
Lender at its principal offices at 2401 Colorado Avenue, Santa Monica,
California 90404 or such other address as Lender may designate in writing.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CALIFORNIA.
WIRELESS SOLUTIONS
a California corporation
By:
----------------------------------
Title:
-------------------------------
-175-
<PAGE>
EXHIBIT C
WIRELESS SOLUTIONS
STOCK OPTION AGREEMENT
Wireless Solutions, a California corporation (the "COMPANY"), has granted
to OPTIONEE (the "OPTIONEE"), an option (the "OPTION") to purchase a total of
SHARES shares of Common Stock (the "SHARES"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the 1996 Stock Option Plan (the "PLAN") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION. This Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE PRICE. The exercise price is $0.25 for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) VESTING CALCULATIONS.
(1) Initially, this Option shall not be exercisable.
Subject to the other terms and conditions of this Option, on the date (the
"CLIFF VESTING DATE") that is one year after the Vesting Commencement Date (as
set forth on the signature page of this Agreement) this Option shall become
exercisable for a total of 1/3 of the Shares subject to the Option; thereafter,
this Option shall be exercisable cumulatively, to the extent of 1/36th of the
Shares subject to the Option at the end of each month after the Cliff Vesting
Date.
(2) Notwithstanding the foregoing Section 3(i)(a)(1), the
exercisability of this Option shall be accelerated as follows: Upon
consummation of any sale (a "THIRD PARTY SALE") by Retix, a California
corporation ("RETIX") of all of the Company's securities owned by Retix to any
third party other than (i) Wireless Solutions Management (as defined in the
Master Agreement between Retix and the Company dated May ____, 1996 (the "MASTER
AGREEMENT") or any Affiliates thereof (as defined below) or (ii) in the
Company's Initial Public Offering (as defined in the Master Agreement) or in
connection with a distribution of any of the Company's securities owned by Retix
to its shareholders, then in addition to any Shares that are already vested
hereunder, this Option shall become immediately exercisable for an additional
number of Shares equal to the total number of Shares which would otherwise have
become vested over a period of 12 months; PROVIDED, HOWEVER, that at least 1/3
of the Shares originally subject to the Option remain unvested as of the date of
closing of the Third Party Sale. In the
-176-
<PAGE>
event that less than 1/3 of the Shares originally subject to the Option remain
unvested as of the date of closing of the Third Party Sale, then this Option
shall continue to vest in accordance with the terms of Section 3(i)(a)(1) above,
and the Option shall not be exercisable for any additional Shares as of such
closing date. As used herein, the term "AFFILIATE" shall have the meaning
given in the Securities Act of 1933 and Securities Exchange Act of 1934 and any
rules and regulations promulgated thereunder.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8 and 9 below, subject to the limitations contained in subsections
3(i)(d) and (e).
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.
(e) In the event that this Option becomes exercisable at a time
or times which, when this Option is aggregated with all other incentive stock
options granted to Optionee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the date of grant of the option covering such share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year, the amount in excess of
$100,000 shall be treated as a nonstatutory stock option, pursuant to Section 5
of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his or her Investment Representation Statement in
the form attached as EXHIBIT A.
-177-
<PAGE>
5. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) surrender of other shares of Common Stock of the Company
which (A) either have been owned by the Optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company and (B) have a fair market value on the date of surrender equal to the
Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of
Optionee's Continuous Status as an Employee, he or she may, but only within two
(2) months after the date of such termination (but in no event later than the
date of expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent that he or she was entitled to exercise it at
the date of such termination. To the extent that he or she was not entitled to
exercise this Option at the date of such termination, or if he or she does not
exercise this Option within the time specified herein, the Option shall
terminate.
-178-
<PAGE>
8. DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section 7 above, in the
event of termination of Optionee's Continuous Status as an Employee as a result
of his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option as set forth in Section 11 below), exercise this Option
to the extent he or she was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(which he or she was entitled to exercise) within the time specified herein, the
Option shall terminate.
(ii) Notwithstanding the provisions of Section 7 above, in the
event of termination of Optionee's Continuous Status as an Employee as a result
of any disability not constituting a total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent he or she was entitled to exercise it at the
date of such termination; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three
(3) months from the date of termination of employment, this Option will cease to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such exercise in an amount generally measured by
the difference between the exercise price for the Shares and the fair market
value of the Shares on the date of exercise. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within three (3)
months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee twelve (12) months after the date of death, subject to the
limitations contained in Section 3(i)(e) above; or
(ii) within two (2) months after the termination of Optionee's
Continuous Status as an Employee, the Option may be exercised, at any time
within three (3) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), by Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
-179-
<PAGE>
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of the Optionee only by the Optionee or a
transferee permitted by this Section. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
11. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
12. EARLY DISPOSITION OF STOCK. Optionee understands that if he or she
disposes of any Shares received under this Option within two (2) years after the
date of this Agreement or within one (1) year after such Shares were transferred
to him or her, he or she will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
generally measured by the difference between the price paid for the Shares and
the lower of the fair market value of the Shares at the date of the exercise or
the fair market value of the Shares at the date of disposition. The amount of
such ordinary income may be measured differently if Optionee is an officer,
director or 10% shareholder of the Company, or if the Shares were subject to a
substantial risk of forfeiture at the time they were transferred to Optionee.
OPTIONEE HEREBY AGREES TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE
DATE OF ANY SUCH DISPOSITION. Optionee understands that if he disposes of such
Shares at any time after the expiration of such two-year and one-year holding
periods, any gain on such sale will be taxed as long-term capital gain.
13. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such offering, Optionee hereby agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Shares or other securities of the Company (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters; PROVIDED, HOWEVER, that the
Optionee need not so agree unless a majority of the Company's officers and
directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
[SIGNATURE PAGE FOLLOWS]
-180-
<PAGE>
DATE OF GRANT: , 1996
-------------
WIRELESS SOLUTIONS
By:
----------------------------------
Title:
-------------------------------
Vesting Commencement Date: VESTINGDATE
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN
ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS OR HER
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE ACKNOWLEDGES THAT THIS OPTION IS THE ONLY OPTION OR OTHER RIGHT TO
BE OFFERED, PROVIDED OR GRANTED TO THE OPTIONEE WITH RESPECT TO THE SECURITIES
OF THE COMPANY OR ANY AFFILIATED ENTITY AND THAT THIS OPTION SUPERSEDES ALL
PRIOR AGREEMENTS, UNDERSTANDINGS OR DISCUSSIONS, WRITTEN OR ORAL, WITH RESPECT
TO THE FOREGOING.
Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Dated:
------------------------- -------------------------------------
OPTIONEE, Optionee
-181-
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: OPTIONEE
COMPANY:
SECURITY:
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act of 1933, as amended (the
"SECURITIES ACT").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to
-182-
<PAGE>
the satisfaction of certain of the conditions specified by Rule 144, including
among other things: (1) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of exercise of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (2) the availability of
certain public information about the Company, (3) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(d) MARKET STANDOFF AGREEMENT. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing such offering, Optionee hereby agrees not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any of the Securities or any other securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; PROVIDED, HOWEVER,
that the Optionee need not so agree unless a majority of the Company's officers
and directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities & Exchange
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
Signature of Optionee:
--------------------------------------
OPTIONEE
Date:
---------------------------------
-183-
<PAGE>
EXHIBIT D
WIRELESS SOLUTIONS DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 4 of the
Master Agreement (the "AGREEMENT") by and between Retix and Wireless Solutions.
The Section numbers in this Disclosure Statement correspond to the Section
numbers in the Agreement; however, any information disclosed herein under any
Section number shall be deemed to be disclosed and incorporated into any other
Section number under the Agreement where such disclosure would be appropriate.
Any terms used in this Disclosure Statement shall have the meanings defined for
them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Wireless
Solutions.
-184-
<PAGE>
EXHIBIT E
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of May 31, 1996 by and between Wireless
Solutions, a California corporation (the "COMPANY") and Retix, a California
corporation (the "PURCHASER").
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
1.1 AUTHORIZATION. The Company will authorize the sale and issuance
of up to 17,000,000 shares of its Preferred Stock, having the rights, privileges
and preferences as set forth in the Amended and Restated Articles of
Incorporation (the "RESTATED ARTICLES") in the form attached to this Agreement
as EXHIBIT A.
1.2 SALE OF PREFERRED. Subject to the terms and conditions of this
Agreement, in exchange for the transfer of the Transferred Assets (subject to
the Transferred Liabilities and Transferred Contracts) as provided in the Master
Agreement between the parties of even date herewith (the "MASTER AGREEMENT"),
the Purchaser agrees to purchase at the Closing (as defined below), and the
Company agrees to sell and issue to the Purchaser, 17,000,000 shares of the
Company's Preferred Stock (the "SHARES" or "PREFERRED") at a price of $1.75
per share.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the
Shares under this Agreement shall be held at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Master
Agreement (the "CLOSING") or at such other time and place upon which the
Company and the Purchaser shall agree (the date of the Closing is hereinafter
referred to as the "CLOSING DATE").
2.2 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate or certificates representing the number of Shares to be
purchased by the Purchaser at such Closing, against delivery to the Company by
the Purchaser of all necessary and appropriate instruments to effect the
transfer of the Transferred Assets, as provided in the Master Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
on EXHIBIT B attached to this Agreement, the Company hereby represents and
warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
(a) is a corporation duly organized, validly existing and in good standing under
the laws of State of California, and (b) has all corporate power and authority
to carry out this Agreement and the transactions contemplated herein. The
Company is not qualified or licensed to do business as a foreign corporation in
any state. The Company does not own, directly or indirectly, any equity or
other interest in any other corporation, association, partnership or other
business entity. The
-185-
<PAGE>
Company has furnished Purchaser with copies of its Articles of Incorporation and
Bylaws. Said copies are true, correct and complete and contain all amendments
through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Shares hereunder, to issue the Common Stock issuable upon
conversion of the Shares and to carry out and perform its obligations under the
terms of this Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Restated Articles, consist of:
20,000,000 shares of Common Stock, none of which are issued and outstanding; and
17,000,000 shares of Preferred Stock, none of which were issued and outstanding
prior to the Closing. All issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved 17,000,000 shares of Preferred Stock for issuance
hereunder, 17,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, 2,800,000 shares for issuance pursuant to the Company's 1996
Stock Option Plan and 200,000 shares for issuance pursuant to the Company's 1996
Directors' Stock Option Plan. The Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Restated Articles.
All securities of the Company to be outstanding immediately following the
Closing will be issued in compliance with applicable federal and state
securities laws. Except as described above, there are no preemptive rights,
options or warrants or other conversion privileges or rights presently
outstanding to purchase any of the authorized but unissued stock of the Company.
The Company is not obligated to repurchase any shares of its capital stock or
any other securities.
3.4 AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders (if any) necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares (and the Common Stock
issuable upon conversion of the Shares) and the performance of all of the
Company's obligations under this Agreement has been taken or will be taken prior
to the Closing. This Agreement, when executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company enforceable in
accordance with its terms. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid and
nonassessable and will have the rights, preferences and privileges described in
the Restated Articles. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and, when issued in compliance
with the provisions of this Agreement and the Restated Articles will be validly
issued, fully paid and nonassessable, and the Shares and such Common Stock will
be free of any liens or encumbrances other than those created by or imposed upon
the holders thereof through no action of the Company; provided, however, that
the Shares (and the Common Stock issuable upon conversion thereof) may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal, except as set forth in the Rights Agreement in the form
attached hereto as EXHIBIT C (the "RIGHTS AGREEMENT").
-186-
<PAGE>
3.5 NO FINANCIAL STATEMENTS. The Company has not prepared any
balance sheet, income statement, statement of operations, statement of changes
in financial position and shareholders' equity or other financial statement.
3.6 PATENTS AND OTHER INTANGIBLE ASSETS. Without having conducted
any special infringement or patent search, the Company is unaware of any
infringement of or conflict with the rights of others with respect to any
patents, patent applications, inventions, processes, formulae or copyrights
necessary for the operation of the business of the Company as now conducted and
as proposed to be conducted.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles of Incorporation or
Bylaws, each as amended and in effect on and as of the Closing, or in any
material respect of any material term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement, and the issuance
of the Shares and the Common Stock issuable upon conversion of the Shares, have
not resulted and will not result in any material violation of, or conflict with,
or constitute a material default under, or result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default which
materially and adversely affects the business of the Company as conducted or as
proposed to be conducted, or any of the Company's properties or assets.
3.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties (nor, to the best
of the Company's knowledge, against officers of the Company) before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
threat thereof), which, either in any case or in the aggregate, might result in
any material adverse change in the business or financial condition of the
Company or any of its properties or assets, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement or any action
taken or to be taken in connection herewith.
3.9 EMPLOYEES. To the best of the Company's knowledge, after
reasonable investigation, no employee or consultant of the Company is in
violation of any term of any employment, employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such person with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees. The Company
has no employee benefit plans presently in force with respect to profit-sharing,
pensions, stock options, or other stock benefits. The Company is not aware of
any key employee of the Company who has any plans to terminate his or her
employment with the Company.
-187-
<PAGE>
3.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the Shares), or the
consummation of any other transaction contemplated by this Agreement, except for
filing of the Restated Articles in the office of the Secretary of State of the
State of California and filing of such notice as required by Section 25102(f) of
the California Corporate Securities Law of 1968, and the compliance with other
applicable blue sky laws.
3.11 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 5 of this Agreement and in written responses to the
Company's inquiries, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement and the issuance of the Common Stock
to be issued upon conversion of the Shares, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.12 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
3.13 DISCLOSURE. To the best of the Company's knowledge, after
reasonable investigation, no representation or warranty of the Company contained
in this Agreement and the Exhibits attached hereto, or any certificate furnished
or to be furnished to the Purchaser at the Closing contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
3.14 NO CONFLICT OF INTEREST. The Company is not indebted, directly
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the best of the Company's knowledge, none
of said officers or directors, or any members of their immediate families, are
indebted to the Company (other than in connection with purchases of the
Company's stock) or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship other than the Purchaser, or any firm or corporation
which competes with the Company except that officers, directors and/or
shareholders of the Company may own stock in publicly traded companies which may
compete with the Company. To the best of the Company's knowledge, no officer or
director or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnity of any indebtedness of any other person, firm or
corporation.
-188-
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company with respect to the purchase of
the Shares as follows:
(a) EXPERIENCE. Purchaser has substantial experience in
evaluating and investing in private placement transactions so that Purchaser is
capable of evaluating the merits and risks of Purchaser's investment in the
Company. Purchaser, by reason of its business or financial experience or the
business or financial experience of its professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, has the capacity to
protect its own interests in connection with the purchase of the Shares under
this Agreement.
(b) INVESTMENT. Purchaser is acquiring the Shares and the
underlying Common Stock for investment for Purchaser's own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. Purchaser understands that the Shares and the
underlying Common Stock have not been, and will not be, registered under the
Securities Act by reason of a specific exemption therefrom, and that any such
exemption would depend, among other things, upon the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement. Purchaser has not been formed for the specific
purpose of acquiring the Shares or the underlying Common Stock.
(c) RULE 144. Purchaser acknowledges that the Shares and the
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "BROKER'S TRANSACTION" or in
transactions directly with a "MARKET MAKER" (as provided by Rule 144(f)) and
the number of shares being sold during any three-month period not exceeding
specified limitations.
(d) NO PUBLIC MARKET. Purchaser understands that no public
market now exists for any of the securities issued by the Company, that the
Company has made no assurances that a public market will ever exist for the
Shares or the underlying Common Stock and that, even if such a public market
exists at some future time, the Company may not then be satisfying the current
public information requirements of Rule 144.
(e) ACCESS TO DATA. Purchaser and its representatives have met
with representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions
-189-
<PAGE>
raised by Purchaser or its representatives concerning the transaction have been
answered to the satisfaction of Purchaser and its representatives. Purchaser's
decision to purchase the Shares is based in part on the answers to such
questions as Purchaser and its representatives have raised concerning the
transaction and on its own evaluation of the risks and merits of the purchase
and the Company's proposed business activities.
(f) AUTHORIZATION. This Agreement when executed and delivered
by the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
(g) BROKERS OR FINDERS. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Purchaser any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
5. CONDITIONS TO CLOSING OF PURCHASER. The Purchaser's obligation to
purchase the Shares at the Closing is, at the option of the Purchaser, subject
to the fulfillment or waiver as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 of this Agreement shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
5.5 ARTICLES OF INCORPORATION. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
5.6 RIGHTS AGREEMENT. The Company shall have entered into the
Rights Agreement.
-190-
<PAGE>
5.7 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
6. CONDITIONS TO CLOSING OF COMPANY. The Company's obligation to sell
and issue the Shares at the Closing is, at the option of the Company, subject to
the fulfillment or waiver of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 of this Agreement shall be true and correct when made, and shall be
true and correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
6.3 ARTICLES OF INCORPORATION. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
6.4 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchaser on or prior to the Closing
Date shall have been performed or complied with in all material respects.
6.5 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following
reports to the Purchaser for so long as the Purchaser is a holder of any Shares
purchased by such person pursuant to this Agreement (or Common Stock issued upon
conversion of the Shares):
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) Contemporaneously with delivery to holders of Common Stock,
a copy of each report of the Company delivered to holders of the Company's
Common Stock.
-191-
<PAGE>
(c) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to discuss
the affairs, finances and accounts of the Company with the Company's officers,
all at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated to provide any
information that it reasonably considers to be a trade secret or to contain
confidential information.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser (together with
any affiliate of such Purchaser) holds not less than 500,000 Shares (or an
equivalent number of shares consisting of the Shares or Common Stock issued upon
conversion of the Shares), as adjusted for recapitalizations, stock splits,
stock dividends and the like, the Company will mail the following reports to
such Purchaser:
(a) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and consolidated
statements of cash flow of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail.
(b) As soon as practicable after the end of each fiscal month,
and in any event within thirty (30) days thereafter, an unaudited consolidated
balance sheet of the Company as at the end of such month, and unaudited
consolidated statements of income and unaudited consolidated statements of cash
flow for such month and for the current fiscal year to date. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied (other than accompanying notes), all in
reasonable detail.
(c) Within 30 days at the end of each fiscal year, an annual
budget, operating or similar plan for the upcoming fiscal year (the "PLAN").
(d) Any material amendments or changes to such Plan promptly
following any such amendments or changes, and in any event within 30 days of the
date thereof.
7.3 TRANSFER OF INFORMATION RIGHTS. The information rights set
forth in Sections 7.1 and 7.2 may be transferred in any nonpublic transfer of
Shares (or Shares of Common Stock issued upon conversion of the Shares),
provided that the Company is given written notice of such transfer, and provided
further that the right to receive the information set forth in Section 7.2 may
only be transferred to a holder of, or affiliated holders who in the aggregate
hold, at least 500,000 Shares (or an equivalent number of Shares consisting of
the Shares or Common Stock issued upon conversion of the Shares, as
appropriately adjusted for stock splits and the like). In the event that the
Company reasonably determines that provision of information to a transferee
pursuant to this Section 7.3 would materially adversely impact its proprietary
position, such information may be edited in the manner necessary to avoid such
impact.
-192-
<PAGE>
7.4 TERMINATION OF COVENANTS. The covenants set forth in this
Section 7 shall terminate on and be of no further force or effect upon the
earlier of (i) the consummation of the Company's sale of its Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act, immediately subsequent to which the Company
shall be obligated to file annual and quarterly reports with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT") or (ii) the registration by the Company of a class of its
equity securities under Section 12(b) or 12(g) of the Exchange Act.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement; provided, however, that the right of the
Purchaser to purchase the Shares shall not be assignable without the prior
written consent of the Company.
8.4 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Master
Agreement and the other documents delivered pursuant to this Agreement at the
Closing constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and supersede all prior
agreements, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least a majority of the Shares (or shares
of Common Stock issued upon conversion of the Shares) may, with the written
consent of the Company, waive, modify or amend on behalf of all holders, any
provisions hereof benefiting such holders, so long as the effect thereof will be
that all such holders will be treated equally.
8.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
-193-
<PAGE>
If to Company: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Purchaser: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any holder of any Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 EXPENSES. The Company and the Purchaser shall each bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
-194-
<PAGE>
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]
-195-
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASER"
WIRELESS SOLUTIONS, RETIX,
a California corporation a California corporation
By: By:
------------------------------------- --------------------------
Title: Title:
---------------------------------- -----------------------
-196-
<PAGE>
EXHIBIT F
LIST OF PRODUCTS
WIRELESS DATA BUSINESS UNIT
PRODUCT LIST
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS SERVING APPLICATION
CD/SRVG-A1/1 MD-IS Serving Application for SUN $40,000 $10,000 30 days
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
CD/SRVG-A1/4 MD-IS Serving Application for SUN $60,000 $15,000 30 days
SPARCstation Models 10 and 20 with
up to 4 processors running Solaris 2.3
CD/SRVG-A2/2 MD-IS Serving Application for SUN $70,000 $17,500 30 days
SPARCserver 1000 with up to 2
processors running Solaris 2.3
CD/SRVG-A2/8 MD-IS Serving Application for SUN $105,000 $26,250 30 days
SPARCserver 1000 with up to 8
processors running Solaris 2.3
CD/SRVG-A3/2 MD-IS Serving Application for SUN $125,000 $31,250 30 days
SPARCcenter 2000 with 2 processors
running Solaris 2.3
CD/SRVG-A3/8 MD-IS Serving Application for SUN $225,000 $56,250 30 days
SPARCcenter 2000 with up to 8
processors running Solaris 2.3
CD/SRVG-A3/16 MD-IS Serving Application for SUN $325,000 $81,250 30 days
SPARCcenter 2000 with up to 16
processors running Solaris 2.3
</TABLE>
-197-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HOME APPLICATION
CD/HOME-A1/1 MD-IS Home Application for SUN $40,000 $10,000 30 days
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
CD/HOME-A1/4 MD-IS Home Application for SUN $60,000 $15,000 30 days
SPARCstation Models 10 and 20 with
up to 4 processors running Solaris 2.3
CD/HOME-A2/2 MD-IS Home Application for SUN $70,000 $17,500 30 days
SPARCserver 1000 with up to 2
processors running Solaris 2.3
CD/HOME-A2/8 MD-IS Home Application for SUN $105,000 $26,250 30 days
SPARCserver 1000 with up to 8
processors running Solaris 2.3
CD/HOME-A3/2 MD-IS Home Application for SUN $125,000 $31,250 30 days
SPARCcenter 2000 with 2 processors
running Solaris 2.3
CD/HOME-A3/8 MD-IS Home Application for SUN $225,000 $56,250 30 days
SPARCcenter 2000 with up to 8
processors running Solaris 2.3
CD/HOME-A3/16 MD-IS Home Application for SUN $325,000 $81,250 30 days
SPARCcenter 2000 with up to 16
processors running Solaris 2.3
CD/HOME-E3/8 MD-IS Home Application for Sequent $225,000 $56,250 30 days
Symmetry 5000 Model SE60 with up
to 8 processors running DYNIX/ptx
MD-IS CO-LOCATED SERVING AND
HOME APPLICATION
CD/SVHM-A1/1 MD-IS Serving & Home Application $80,000 $20,000 30 days
for SUN SPARCstation Models 10
and 20 with a single processor
running Solaris 2.3
CD/SVHM-A1/4 MD-IS Serving & Home Application $120,000 $30,000 30 days
for SUN SPARCstation Models 10
and 20 with up to 4 processors
running Solaris 2.3
CD/SVHM-A2/2 MD-IS Serving & Home Application $140,000 $35,000 30 days
for SUN SPARCserver 1000 with up
to 2 processors running Solaris 2.3
CD/SVHM-A2/8 MD-IS Serving & Home Application $210,000 $52,500 30 days
for SUN SPARCserver 1000 with up
to 8 processors running Solaris 2.3
</TABLE>
-198-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
CD/SVHM-A3/2 MD-IS Serving & Home Application $250,000 $62,500 30 days
for SUN SPARCcenter 2000 with 2
processors running Solaris 2.3
CD/SVHM-A3/8 MD-IS Serving & Home Application $450,000 $112,500 30 days
for SUN SPARCcenter 2000 with up
to 8 processors running Solaris 2.3
CD/SVHM-A3/16 MD-IS Serving & Home Application $650,000 $162,500 30 days
for SUN SPARCcenter 2000 with up
to 16 processors running Solaris 2.3
ACCOUNTING SERVER APPLICATION
CD/ACTS-A/S Accounting Server Application for a $97,500 $24,375 30 days
single SUN SPARC platform running
Solaris 2.3.
CD/ACTS-A/D Accounting Server Application for a $149,500 $37,375 30 days
single or dual SUN SPARC platform
running Solaris 2.3. Includes an
X.400 MTA.
CD/ACTS-A/M Accounting Server Application for $195,000 $48,750 TBA
multiple SUN SPARC platforms
running Solaris 2.3. Includes an
X.400 MTA.
CUSTOMER ACTIVATION SYSTEM
CD/CASA-A/S Customer Activation System $95,000 $23,750 60 days
Application for a single SUN SPARC
platform running Solaris 2.3.
</TABLE>
-199-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILITY
SYSTEMS
MD-IS HIGH AVAILABILITY SERVING
APPLICATION
CD/SVGH-A1/1 MD-IS High Availability Serving $50,000 $12,500 30 days
Application for SUN SPARCstation
Models 10 and 20 with a single
processor running Solaris 2.3 in a
high availability configuration.
CD/SVGH-A1/4 MD-IS High Availability Serving $75,000 $18,750 30 days
Application for SUN SPARCstation
Models 10 and 20 with up to 4
processors running Solaris 2.3 in a
high availability configuration.
CD/SVGH-A2/2 MD-IS High Availability Serving $87,500 $21,875 30 days
Application for SUN SPARCserver
1000 with up to 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A2/8 MD-IS High Availability Serving $131,250 $32,813 30 days
Application for SUN SPARCserver
1000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/2 MD-IS High Availability Serving $156,250 $39,063 30 days
Application for SUN SPARCcenter
2000 with 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/8 MD-IS High Availability Serving $281,250 $70,313 30 days
Application for SUN SPARCcenter
2000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/16 MD-IS High Availability Serving $406,250 $101,563 30 days
Application for SUN SPARCcenter
2000 with up to 16 processors
running Solaris 2.3 in a high
availability configuration.
</TABLE>
-200-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HIGH AVAILABILITY HOME
APPLICATION
CD/HOMH-A1/1 MD-IS High Availability Home $50,000 $12,500 30 days
Application for SUN SPARCstation
Models 10 and 20 with a single
processor running Solaris 2.3 in a
high availability configuration.
CD/HOMH-A1/4 MD-IS High Availability Home $75,000 $18,750 30 days
Application for SUN SPARCstation
Models 10 and 20 with up to 4
processors running Solaris 2.3 in a
high availability configuration.
CD/HOMH-A2/2 MD-IS High Availability Home $87,500 $21,875 30 days
Application for SUN SPARCserver
1000 with up to 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A2/8 MD-IS High Availability Home $131,250 $32,813 30 days
Application for SUN SPARCserver
1000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/2 MD-IS High Availability Home $156,250 $39,063 30 days
Application for SUN SPARCcenter
2000 with 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/8 MD-IS High Availability Home $281,250 $70,313 30 days
Application for SUN SPARCcenter
2000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/16 MD-IS High Availability Home $406,250 $101,563 30 days
Application for SUN SPARCcenter 2000
with up to 16 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-E3/8 MD-IS High Availability Home $281,250 $70,313 30 days
Application for Sequent Symmetry 5000
Model SE60 with up to 8 processors
running DYNIX/ptx in a clustered
configuration.
</TABLE>
-201-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HIGH AVAILABILITY SERVING
AND HOME APPLICATION
CD/SAHH-A1/1 MD-IS High Availability Serving & $100,000 $25,000 30 days
Home Application for SUN
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
in a high availability configuration.
CD/SAHH-A1/4 MD-IS High Availability Serving & $150,000 $37,500 30 days
Home Application for SUN
SPARCstation Models 10 and 20
with up to 4 processors running Solaris
2.3 in a high availability configuration.
CD/SAHH-A2/2 MD-IS High Availability Serving & $175,000 $43,750 30 days
Home Application for SUN
SPARCserver 1000 with up to 2
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A2/8 MD-IS High Availability Serving & $262,500 $65,625 30 days
Home Application for SUN
SPARCserver 1000 with up to 8
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A3/2 MD-IS High Availability Serving & $312,500 $78,125 30 days
Home Application for SUN
SPARCcenter 2000 with 2 processors
running Solaris 2.3 in a high
availability configuration.
CD/SAHH-A3/8 MD-IS High Availability Serving & $562,500 $140,625 30 days
Home Application for SUN
SPARCcenter 2000 with up to 8
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A3/16 MD-IS High Availability Serving & $812,500 $203,125 30 days
Home Application for SUN
SPARCcenter 2000 with up to 16
processors running Solaris 2.3 in a
high availability configuration.
</TABLE>
-202-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILITY ACCOUNTING
SERVER APPLICATION
CD/ACTH-A/S High Availability Accounting Server $124,500 $31,125 30 days
Application for a single SUN SPARC
platform running Solaris 2.3 in a high
availability configuration.
CD/ACTH-A/D High Availability Accounting Server $186,500 $46,625 30 days
Application for a single or dual SUN
SPARC platforms running Solaris 2.3
in a high availability configuration.
Includes an X.400 MTA.
CD/ACTH-A/M High Availability Accounting Server $243,500 $60,875 TBA
Application for multiple SUN SPARC
platform running Solaris 2.3 in a high
availability configuration. Includes an
X.400 MTA.
CD/ACTH-E/D High Availability Accounting Server $186,500 $46,625 30 days
Application for a single or dual
SEQUENT SYMMETRY 5000
platform running DYNIX/ptx in a
clustered configuration. Includes an
X.400 MTA.
</TABLE>
-203
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILTY CUSTOMER
ACTIVATION SYSTEM
CD/CASH-A/S High Availability Customer Activation $118,750 $29,688 60 days
System Application for a single SUN
SPARC platform running Solaris 2.3
in a high availability configuration.
M-ES PROTOCOL BUNDLE
CD/MESP- A bundling of the relevant CDPD M- $35,000 $5,250 30 days
SOURCE ES protocols (MDLP, SNDCP, MNLP
and MNRP) in portable source form.
Includes license for RSA encryption
software.
Per Unit Royalty
0 to 50,000 $5.00
50,001 to 100,000 $4.00
100,001 to 200,000 $3.20
200,001 to 500,000 $2.50
500,001 to 1,000,000 $1.75
1,000,000 plus $1.00
</TABLE>
-204-
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS ROUTER HARDWARE
RX7550/SVG Five slot MD-IS Router Chassis for $11,500 $805 30 days
Mobile Serving Function CDPD
applications, with support for
redundant loadsharing power supply
option. Includes chassis and single
400W 110/230V power supply.
RX7550/HOME Five slot MD-IS Router Chassis for $11,500 $805 30 days
Mobile Home Function CDPD
applications, with support for
redundant loadsharing power supply
option. Includes chassis and single
400W 110/230V power supply.
PRX50-1 Redundant Power Supply $2,000 $219 30 days
RMP7705/2-8 Routing Management Processor $4,250 $298 30 days
FP7710/2-8 Forwarding Processor $3,250 $219 30 days
10B5-1 10BASE5 Ethernet Interface Card $600 $53 30 days
10B2-1 10BASE2 Ethernet Interface Card $600 $53 30 days
10BT-1 10BASET Ethernet Interface Card $600 $53 30 days
10BT-12 10BASET 12 Port Hub Interface Card $1,650 $115 30 days
FDDI7715 FDDI Interface Module $10,000 $875 30 days
V35-1 V.35 Interface Card $1,000 $88 30 days
X21-1 X.21 Interface Card $1,000 $88 30 days
RS232-1 RS(232 Interface Card) $1,000 $88 30 days
RX7500M Manual $150 - 30 days
RM7550 Rackmount Kit $150 - 30 days
</TABLE>
-205-
<PAGE>
EXHIBIT G
RETIX DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 3 of the
Master Agreement (the "AGREEMENT") by and between Retix and Wireless Solutions.
The Section numbers in this Disclosure Statement correspond to the Section
numbers in the Agreement; however, any information disclosed herein under any
Section number shall be deemed to be disclosed and incorporated into any other
Section number under the Agreement where such disclosure would be appropriate.
Any terms used in this Disclosure Statement shall have the meanings defined for
them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Wireless
Solutions.
-206-
<PAGE>
EXHIBIT H
RIGHTS AGREEMENT
This Rights Agreement (the "AGREEMENT") is entered into as of May 31,
1996, by and among Wireless Solutions, a California corporation (the "COMPANY")
and Retix, a California corporation, which is purchasing shares of Preferred
Stock of the Company pursuant to the Preferred Stock Purchase Agreement of even
date herewith (the "PURCHASE AGREEMENT").
In consideration of the mutual promises and covenants hereinafter set
forth, the parties agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable
upon conversion of the Preferred Shares (the "CONVERSION SHARES") and (ii) any
Common Stock issued or issuable in respect of the Preferred Shares or Conversion
Shares or other securities issued or issuable with respect to the Preferred
Shares or Conversion Shares upon any stock split, stock dividend,
recapitalization or similar event or any Common Stock otherwise issued or
issuable with respect to the Preferred Shares or Conversion Shares; PROVIDED,
HOWEVER, that shares of Common Stock or other securities shall only be treated
as Registrable Securities (1) if and so long as they have not been (A) sold to
or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, or (2) if
with respect to any Holder all shares of the Company's capital stock then held
by Holder may not be sold in any single three month period without registration
pursuant to Rule 144 promulgated under the Securities Act.
"HOLDER" shall mean any person holding Registrable Securities
and any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"PREFERRED SHARES" shall mean an aggregate of 17,000,000 shares
of Preferred Stock issued pursuant to a Preferred Stock Purchase Agreement dated
of even date herewith between the Company and Retix.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
-207-
<PAGE>
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"RETIX" shall mean Retix, a California corporation, and any of
its successors, transferees or assigns.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (except as provided by Section 1.9).
"INITIATING HOLDERS" shall mean Retix or any transferees of
Retix under Section 1.14 hereof who in the aggregate are Holders of not less
than fifty percent (50%) of the Registrable Securities.
1.2 RESTRICTIONS. The Preferred Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Holders will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares and the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with legends in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
-208-
<PAGE>
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SAID ACT."
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities in
order to implement the restrictions on transfer established in this Section 1.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "NO ACTION" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "NO ACTION"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which a Holder which is a corporation distributes Restricted
Securities after six (6) months after the purchase thereof solely to its
majority-owned subsidiaries or affiliates for no consideration, or (c) in any
transaction in which a Holder which is a partnership distributes Restricted
Securities after six (6) months after the purchase thereof solely to partners
thereof for no consideration, provided that each transferee agrees in writing to
be subject to the terms of this Section 1.4. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act.
1.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the anticipated aggregate offering price, net of underwriting
discounts and commissions, of which would exceed $10,000,000 and the offering
price to the public of which would be at least $5.00 per share, the Company
will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
-209-
<PAGE>
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice from
the Company; PROVIDED, HOWEVER, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(3) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a) in any 12 month period, such
registration has been declared or ordered effective and the securities offered
pursuant to such registration have been sold; or
(4) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5) and this paragraph, the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders. In the event that the Holders of
Registrable Securities wish to join in the request of the Initiating Holders
made pursuant to this Section 1.5(a), the provisions of Section 1.6 of this
Agreement shall govern the ability of such Holders to join in such request.
-210-
<PAGE>
(b) UNDERWRITING. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders (which managing underwriter shall
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 1.5, if the managing underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Initiating Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Initiating Holders at the time of
filing the registration statement; the provisions of Section 1.6 shall govern
the ability of the Holders of Registrable Securities not held by the Initiating
Holders to participate. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within thirty (30) days after receipt of such
written notice from the Company by any Holder, but only to the extent
-211-
<PAGE>
that such inclusion will not diminish the number of securities included by the
Company or by holders of the Company's securities who have demanded such
registration.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration or exclude them entirely. The Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting pursuant to piggyback registration rights similar to this
Section 1.6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities held by other holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 REGISTRATION ON FORM S-3.
(a) If any Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered for
the offering on such form; PROVIDED, HOWEVER, that the Company shall not be
required to effect more than two registrations pursuant to this Section 1.7 in
any twelve (12) month period. The Com-
-212-
<PAGE>
pany will (i) promptly give written notice of the proposed registration to all
other Holders, and (ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within thirty (30) days after receipt of such written notice from the Company.
The provisions of Section 1.5(b) shall be applicable to each registration
initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act, (ii)
during the period starting with the date sixty (60) days prior to the filing of,
and ending on a date six (6) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective, or
(iii) if the Company shall furnish to such Holder a certificate signed by the
president of the Company stating that, in the good faith judgment of the Board
of Directors, it would be seriously detrimental to the Company or its
shareholders for registration statements to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a single period not to exceed one hundred twenty
(120) days from the receipt of the request to file such registration by such
Holder or Holders.
1.8 SHELF REGISTRATION.
(a) Retix shall be entitled to demand, at any time, that the
Company secure the effectiveness of a "shelf" registration statement under Rule
415 under the Securities Act with the SEC, for the sale by Retix of all of the
Registrable Securities held thereby. Prior to demanding any such registration,
Retix shall first consult with the Company for a period of at least 30 days
otherwise, concerning the need for such registration in light of Retix's ability
to sell freely all of the shares of Common Stock issuable upon conversion of the
Securities in the United States public markets under Rule 144 or otherwise.
(b) Following such consultation, whether to demand such
Registration Statement shall be at the sole discretion of Retix, and the Company
shall take all action necessary to comply with such demand. The Company
represents and warrants that on the date the Registration Statement becomes
effective, the Registration Statement will comply in all material respects with
the applicable requirements of the Securities Act and the rules thereunder; on
the date of its effectiveness the Registration Statement (including any
documents incorporated by
-213-
<PAGE>
reference therein) will 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 made therein not misleading, provided, however, that no
representation is made by the Company with respect to written information
furnished to the Company by or on behalf of Retix specifically for inclusion in
the Registration Statement; and the final prospectus contained in the
Registration Statement, if not filed pursuant to Rule 424(b), will not, and on
the date of any filing pursuant to Rule 424(b), such final prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, provided, however, that no representation is made by the Company
with respect to written information furnished to the Company by or on behalf of
the Retix specifically for inclusion in such prospectus. The Company will
promptly: (A) notify Retix when the Registration Statement is declared
effective; and (B) notify Retix of any stop-order or similar proceeding by the
SEC or any state securities authority.
(c) The Company hereby covenants and agrees that (A) no other
holder of the Company's securities (including convertible securities) other than
transferees of Retix is entitled to or shall be hereafter given the right to
participate in any registration under this Section 1.8 whether by the exercise
of a demand or "piggyback" registration right and (B) no other registration
statement covering any other holder's securities shall be declared effective or
maintained in effect during such time as the Registration Statement shall be
effective.
(d) The Company shall promptly prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement and keep the Registration Statement effective
until all the Registrable Securities have been sold pursuant thereto or until
Retix is able to dispose of its entire remaining ownership interest in the
Registrable Securities in the United States public markets in a single
transaction under Rule 144 without invoking clause (e)(1)(ii) of Rule 144. The
Company shall provide a transfer agent, registrar and CUSIP number with respect
to all securities registered by such Registration Statement.
(e) The Company shall furnish to Retix with respect to the
Registrable Securities registered under the Registration Statement such number
of copies of prospectuses and preliminary prospectuses and supplements in
conformity with the requirements of the Securities Act and such other documents
as Retix may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares by Retix.
(f) The Company shall use its best efforts to register or
qualify the Registrable Securities covered by such Registration Statements under
such other securities or blue sky laws of such jurisdictions as Retix shall
reasonably request and do any and all other acts or things which may be
necessary or desirable to enable Retix to consummate the public sale or other
disposition in such jurisdictions, provided that the Company shall not be
required in
-214-
<PAGE>
connection therewith or as a condition thereto to qualify to do business or file
a general consent to service of process in any such jurisdictions.
(g) In accordance with Section 1.10 below, the Company shall
bear all expenses in connection with the procedures set forth in this Section
1.8 and the registration of the Registrable Securities pursuant to the
Registration Statement, other than broker's commissions or discounts, transfer
taxes, and fees and expenses, if any, of counsel or other advisors to Retix.
1.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless (i) such new
registration rights, including standoff obligations, are on a pari passu basis
with those rights of the Holders under this Agreement, or (ii) such new
registration rights, including standoff obligations, are subordinate to the
registration rights granted Holders under this Agreement.
1.10 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5, 1.6 and 1.8 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the
Holders of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses. Unless otherwise stated, all other Selling Expenses
relating to securities registered on behalf of the Holders and all Registration
Expenses incurred in connection with any registration pursuant to Section 1.7
shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
1.11 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days or until the distribution described in the registration
statement has been completed; and
-215-
<PAGE>
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
1.12 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein 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, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder, controlling person or underwriter and
stated to be specifically for use therein. The indemnity provided under this
Section 1.12(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if the Company has defended such matter and
if such settlement is effected without the Company's consent, which consent
shall not be unreasonably withheld.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state
-216-
<PAGE>
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, persons, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section
1.12 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.13 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.14 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
-217-
<PAGE>
(c) So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.15 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 1.5, 1.6, 1.7 and
1.8 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with any transfer or assignment of Registrable Securities
by a Holder (together with any affiliate); PROVIDED, that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company, and (c) such transferee or assignee
(i) is a wholly-owned subsidiary, constituent partner (including limited
partners), shareholder, parent, child or spouse of such Holder or is Holder's
estate, or (ii) acquires from such Holder the lesser of (a) 50,000 or more
shares of Restricted Securities (as appropriately adjusted for stock splits and
the like) or (b) all of the Restricted Securities then owned by such Holder.
1.16 STANDOFF AGREEMENT. Each Holder agrees in connection with any
registration of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; PROVIDED, that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.
1.17 TERMINATION OF RIGHTS. The rights of any particular Holder to
cause the Company to register securities under Sections 1.5, 1.6, 1.7 and 1.8
shall terminate with respect to such Holder following a bona fide firm
underwritten public offering of shares of the Company's Common Stock registered
under the Securities Act (provided the aggregate offering price, net of
underwriting discounts and commissions, exceeds ten million dollars
($10,000,000)) at such time as such Holder is able to dispose of all its
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants in one three-month
period pursuant to the provisions of Rule 144; PROVIDED, that such Holder holds
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants constituting less
than 1% of the outstanding voting stock of the Company. The rights to cause the
Company to register securities under Section 1.5, 1.6, 1.7 and 1.8 shall
terminate in any event five (5) years after the closing of the foregoing public
offering.
-218-
<PAGE>
2. MISCELLANEOUS.
2.1 ASSIGNMENT. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
2.2 THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties to this Agreement,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
2.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California in the United States of
America.
2.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
2.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to the Company: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
2.6 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
2.7 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived with the written consent of the Company and the Holders of at
least a majority of the outstanding Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event
-219-
<PAGE>
that an underwriting agreement is entered into between the Company and any
Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
2.8 EFFECT OF AMENDMENT OR WAIVER. The Holders and their successors
and assigns acknowledge that by the operation of Section 2.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
2.9 RIGHTS OF HOLDERS. Each Holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
2.10 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
[SIGNATURE PAGE FOLLOWS]
-220-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
WIRELESS SOLUTIONS
By:
------------------------------------
Title:
---------------------------------
HOLDERS:
RETIX
By:
------------------------------------
Title:
---------------------------------
-221-
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is made as of May 31, 1996 by
and between Wireless Solutions, a California corporation (the "DEBTOR") in
favor of Retix, a California corporation (the "SECURED PARTY").
RECITALS
The Debtor and the Secured Party are parties to a Loan Agreement of even
date with this Agreement (the "LOAN AGREEMENT") pursuant to which the Secured
Party shall be making a Loan (as defined therein) to the Debtor. The parties
intend that the Debtor's obligations to repay the Loan to the Secured Party be
secured by all of the assets of the Debtor.
NOW, THEREFORE, in consideration of the Loan to be made by the Secured
Party to the Debtor and for other good and valuable consideration, the Debtor
hereby agrees with the Secured Party as follows:
1. DEFINED TERMS. The following terms shall have the following
meanings:
"CODE" means the Uniform Commercial Code as from time to time in
effect in the State of California.
"COLLATERAL" means the property described on EXHIBIT A to this
Agreement.
"EVENT OF DEFAULT" means Debtor's failure to pay or discharge the
Obligations in full in accordance with the terms of the Notes.
"OBLIGATIONS" means the unpaid principal amount of, and interest on,
the Notes and all other obligations and liabilities of the Debtor to the Secured
Party which may arise under the Notes.
"NOTES" means the Debtor's promissory notes issued pursuant to the
Loan Agreement.
2. GRANT OF SECURITY INTEREST. To secure the Debtor's prompt, punctual,
and faithful performance of all and each of the Debtor's Obligations to the
Secured Party, the Debtor hereby grants to the Secured Party a continuing
security interest in-and to the Collateral.
3. COVENANTS. The Debtor covenants and agrees with the Secured Party
that, from and after the date of this Agreement until the Obligations are paid
in full:
(a) OTHER LIENS. Except for the security interest granted hereby,
the Debtor is the owner of the Collateral and will be the owner of the
Collateral hereafter acquired free from any adverse lien, security interest or
encumbrance (other than purchase money security interests
-222-
<PAGE>
that will be discharged upon Debtor's payment of the purchase price for the
applicable property), and the Debtor will defend the Collateral against the
claims and demands of all persons at any time claiming the same or any interest
therein. No financing statements covering any Collateral or any proceeds
thereof are on file in any public office.
(b) FURTHER DOCUMENTATION. At any time and from time to time, upon
the written request of the Secured Party, and at the sole expense of the Debtor,
the Debtor will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens
created hereby. The Debtor also hereby authorizes the Secured Party to file any
such financing or continuation statement without the signature of the Debtor to
the extent permitted by applicable law. A reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
(c) INDEMNIFICATION. The Debtor agrees to pay, and to save the
Secured Party harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any governmental authority applicable to
any of the Collateral or (iii) in connection with any of the transactions
contemplated by this Agreement.
(d) MAINTENANCE OF RECORDS. The Debtor will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.
(e) RIGHT OF INSPECTION. The Secured Party shall at all times have
full and free access during normal business hours, and upon reasonable prior
notice, to all the books, correspondence and records of the Debtor relating to
the Collateral, and the Secured Party or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and the Debtor
agrees to render to the Secured Party, at the Debtor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
(f) COMPLIANCE WITH LAWS, ETC. The Debtor will comply in all
material respects with all laws, rules, regulations and orders of any
governmental authority applicable to the Collateral or any part thereof or to
the operation of the Debtor's business; provided, however, that the Debtor may
contest any such law, rule, regulation or order in any reasonable manner which
shall not, in the reasonable opinion of the Secured Party, adversely affect the
Secured Party's rights or the priority of its liens on the Collateral.
(g) PAYMENT OF OBLIGATIONS. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no
-223-
<PAGE>
such charge need be paid if (i) the validity thereof is being contested in good
faith by appropriate proceedings, (ii) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (iii) such charge is adequately reserved against on the
Debtor's books in accordance with generally accepted accounting principles.
(h) LIMITATION ON LIENS ON COLLATERAL. The Debtor will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien or claim on or to the
Collateral, other than the security interest granted hereunder and the security
interests described in Section 3(a) above, and will defend the right, title and
interest of the Secured Party in and to any of the Collateral against the claims
and demands of all other persons.
(i) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, provided however that Debtor will be allowed to
grant licenses to its software products and related documentation in the
ordinary course of business and to establish or provide for source code escrows
in connection therewith, and to dispose of any tangible fixed assets of
individual net book value of less than $5,000.
(j) FURTHER IDENTIFICATION OF COLLATERAL. The Debtor will furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request, all in
reasonable detail.
4. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Debtor hereby appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Debtor and in the name of the Debtor or in its own name, from
time to time in the Secured Party's discretion so long as an Event of Default
has occurred and is continuing, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all instruments which may be necessary or desirable to accomplish the purposes
of this Agreement, and, without limiting the generality of the foregoing, the
Debtor shall grant the Secured Party the power and right, on behalf of the
Debtor, without notice to or assent by the Debtor, to do the following, so long
as an Event of Default has occurred and is continuing:
(i) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral;
(ii) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party or as the Secured Party shall direct;
-224-
<PAGE>
(iii) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become due
at any time in respect of or arising out of any Collateral;
(iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
enforce any right in respect of any Collateral;
(v) to defend any suit, action or proceeding brought
against the Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action or
proceeding described in subsection;
(v) above and, in connection therewith, to give such
discharges or releases as the Secured Party may deem appropriate;
(vii) to assign any patent right included in the Collateral
of Debtor (along with the goodwill of the business to which any such patent
right pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Secured Party shall in its sole
discretion determine; and
(viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and the Debtor's expense,
at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve or realize upon the Collateral and the
Secured Party's liens thereon and to effect the intent of this Agreement, all as
fully and effectively as the Debtor might do.
The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney shall be a power coupled with
an interest and shall be irrevocable.
(b) NO DUTY ON SECURED PARTY'S PART. The powers conferred on the
Secured Party hereunder are solely to protect the Secured Party's interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be responsible to the
Debtor for any act or failure to act hereunder, except for its own willful
misconduct or gross negligence.
5. PERFORMANCE BY SECURED PARTY OF DEBTOR'S OBLIGATIONS. If the Debtor
fails to perform or comply with any of its agreements contained herein and the
Secured Party, as provided for by the terms of this Agreement shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Secured Party incurred in connection
with such performance or compliance shall be payable by the Debtor to the
Secured Party on demand and shall constitute Obligations secured hereby.
-225-
<PAGE>
6. REMEDIES. If an Event of Default has occurred and is continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Debtor or any other person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Secured Party shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Debtor, which right or equity is hereby waived or released.
The Secured Party shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Secured Party hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Secured Party may elect, and only after
such application and after the payment by the Secured Party of any other amount
required by any provision of law, need the Secured Party account for the
surplus, if any, to the Debtor. To the extent permitted by applicable law, the
Debtor waives all claims, damages and demands it may acquire against the Secured
Party arising out of the exercise by the Secured Party of any of its rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 5 days before such sale or other disposition. The Debtor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Party to collect
such deficiency.
7. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL. The
Secured Party's sole duty with respect to the custody, safekeeping and
preservation of the Collateral, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Secured Party deals with
similar property for its own account. Neither the Secured Party nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Debtor or otherwise.
8. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect the Collateral are irrevocable and powers coupled
with an interest.
-226-
<PAGE>
9. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 10(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default under the Notes or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
10. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Debtor and the
Secured Party, provided that any provision of this Agreement may be waived by
the Secured Party in a written letter or agreement executed by the Secured Party
or by telex or facsimile transmission from the Secured Party. This Agreement
shall be binding upon the successors and assigns of the Debtor and shall inure
to the benefit of the Secured Party and its successors and assigns.
(b) GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
(c) SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
(d) KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
(e) BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10(a),
their respective successors and assigns.
-227-
<PAGE>
(f) HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
(g) NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Debtor: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Secured Party: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
(h) COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
(i) LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
(j) DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
[SIGNATURE PAGE FOLLOWS]
-228-
<PAGE>
IN WITNESS WHEREOF, the Debtor and Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
"DEBTOR"
WIRELESS SOLUTIONS,
a California corporation
By:
---------------------------
Title:
-------------------------
"SECURED PARTY"
RETIX, a California corporation
By:
--------------------------
Title:
------------------------
-229-
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Debtor in
and to the following:
(a) All goods and equipment now owned or hereafter acquired, including
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Debtor's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Debtor and Debtor's Books relating
to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Debtor's books relating to the foregoing;
(f) All copyrights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor devices, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
-230-
<PAGE>
EXHIBITS J AND K - TRANSFERRED ASSETS & LIABILITIES
WIRELESS SOLUTIONS, INC.
STATEMENT OF TRANSFERRED ASSETS AND LIABILITIES
AS OF 5/31/96
5/31/96
-------------
CASH $ --
ACCOUNTS RECEIVABLE, NET OF RESERVES (50,000.00)
OTHER RECEIVABLES --
INVENTORIES --
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,893.43
INTERCOMPANY RECEIVABLES --
TOTAL CURRENT ASSETS (44,106.57)
MACHINERY AND EQUIPMENT 224,019.63
FURNITURE AND FIXTURES --
BUILDINGS --
LEASEHOLD IMPROVEMENTS --
TOTAL PROPERTY AND EQUIPMENT 224,019.63
ACCUMULATED DEPRECIATION (93,621.75)
NET PROPERTY AND EQUIPMENT 130,397.88
OTHER ASSETS --
TOTAL ASSETS $ 86,291.31
ACCOUNTS PAYABLE $ 48,863.88
ACCRUED WAGES 57,386.00
DEFERRED REVENUE --
OTHER ACCRUED LIABILITIES 1,165.51
INCOME TAXES PAYABLE --
CURRENT PORTION-LTD --
TOTAL CURRENT LIABILITIES 107,415.39
LONG TERM DEBT --
DEFERRED RENT --
TOTAL LIABILITIES $ 107,415.39
231
<PAGE>
The enclosed unaudited Statements of Transferred Assets and Liabilities of
Retix's wireless data business unit's U.S. operations include all of the
tangible and recorded intangible assets as well as known liabilities recorded as
of May 31, 1996, in all material respects, except as noted below. The enclosed
Statements of Transferred Assets and Liabilities have been prepared in
accordance with past accounting policies and practices of Retix consistently
applied, however, such statement does not contain any footnotes which may be
required to be in conformity with generally accepted accounting principles
("GAAP"). Subsidiary financial records and corresponding detail schedules are
on file at Retix's principal corporate offices and are available via written
communication with the chief accounting officer of Retix. Except as disclosed
below, the enclosed Statements of Transferred Assets and Liabilities reflect the
assets and liabilities transferred from Retix's wireless data business unit to
Wireless Solutions, Inc., as of May 31, 1996 as contemplated by the Master
Agreement:
ACCRUED VACATION - The enclosed Statements of Transferred Assets and
Liabilities excludes liabilities associated with vacation accruals of wireless
data business unit employees as of May 31, 1996 as contemplated by the Master
Agreement.
BONUSES/COMMISSIONS - Bonuses/commissions potentially due under certain
employment contracts and commission plans have been excluded from the enclosed
Statements of Transferred Assets and Liabilities as final determination of
eligibility by such wireless data business unit employees has not occurred as of
May 31, 1996. Any such amounts, if earned, are not expected to be significant.
UNDISCLOSED LIABILITIES - The enclosed Statements of Transferred Assets and
Liabilities reflect accrued and absolute liabilities of Retix's wireless data
business unit as of May 31, 1996. In addition, commitments and other
potentially contingent liabilities which relate to Retix's wireless data
business unit are contemplated to be transferred to Wireless Solutions, Inc., in
accordance with the Master Agreement, and may not be disclosed on the enclosed
Statements of Transferred Assets and Liabilities. Such undisclosed liabilities
include among other items:
OPERATING LEASE commitments for office facilities and equipment used in the
execution of Retix's wireless data business unit business. Such facilities
include approximately 12,000 square feet of the facility at 4640 Admiralty
Way, Marina del Rey, California. Operating leases commitments in
connection with equipment includes photocopiers, postage machines, test
equipment and certain computer equipment.
INTERCOMPANY ACCOUTS - Certain intercompany note and other interco operating
accounts require final reconciliation upon completion of the carve-out of
Retix's wireless data business unit from Retix's consolidated financial
statements and may require adjustments to the enclosed Statements of Transferred
Assets and Liabilities of Wireless Solutions, Inc., as of May 31, 1996.
(continued)
232
<PAGE>
INTELLECTUAL PROPERTY , CONTRACTS AND OTHER INTANGIBLES - As contemplated by the
Master Agreement, all trademarks, trade names, copyrights, technology and other
intangible property as well as contracts (customer and vendor) and capitalized
software development costs that are used in the business of Retix's wireless
data business unit are to be transferred to Wireless Solutions, Inc., subject to
a Grant-Back License Agreement. Such items are not reflected on the enclosed
Statements of Transferred Assets and Liabilities of Retix's wireless data
business unit as of May 31, 1996 and the rights and obligations related to such
transfer to Wireless Solutions, Inc., is addressed elsewhere within the Master
Agreement.
CAPITALIZATION - Wireless Solutions, Inc., is capitalized through the issuance
of 17,000,000 shares of the Company's Preferred Stock at $1.75 per share to
Retix as contemplated by the Master Agreement.
STOCKHOLDER'S NET INVESTMENT - Certain cash and investment accounts require
final reconciliation upon completion of the carve-out of Retix's wireless data
business unit from Retix's consolidated financial statements. Such final
reconciliations may require adjustments to record Retix's investment in the
wireless data division to reflect the historical operating results of the
business unit.
233
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
DATED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000880458
<NAME> RETIX
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 8,857
<SECURITIES> 9,529
<RECEIVABLES> 5,486<F1>
<ALLOWANCES> 0
<INVENTORY> 2,665
<CURRENT-ASSETS> 28,174<F2>
<PP&E> 2,597<F3>
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,368
<CURRENT-LIABILITIES> 9,503
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 18,638
<TOTAL-LIABILITY-AND-EQUITY> 32,368<F4>
<SALES> 15,771
<TOTAL-REVENUES> 15,771
<CGS> 5,588
<TOTAL-COSTS> 18,443<F5>
<OTHER-EXPENSES> (312)<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,360)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
<FN>
<F1> IS NET OF ALLOWANCES
<F2> INCLUDES $1,637 IN PREPAID EXPENSES AND OTHER CURRENT ASSETS
<F3> IS NET OF ACCUMULATED DEPRECIATION
<F4> INCLUDES $4,002 IN LONG TERM OBLIGATIONS
<F5> INCLUDES $12,855 IN OPERATING EXPENSES
<F6> INCLUDES INTEREST INCOME, NET.
</FN>
</TABLE>
